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Macro Economics Committee CEEP: Speaking note for MEDPOL

Date

17 Feb 2010

Sections

Social Europe & Jobs

Madam Chair,

It is an honour for me to be here and present CEEP’s position. Mr. Cederschiöld, our
president, is unfortunately unable to attend.

 

As you know, CEEP represents public employers and providers of services of general interest
which account for over a quarter of the EU economy. Most of its Members’ activities are key
to delivering the EU 2020 Strategy on the ground.

 

CEEP fully supports the EU 2020 objectives.

 

In relation to the structural reform pillar, it particularly welcomes the emphasis laid on a
high-quality infrastructure which is indeed a pre-requisite for competitive economies as well
as inclusive societies.

 

However, two elements should be added:

 

• The first is about delivering EU 2020. A good deal concerns public or semi-public
investment and services of general interest, and the role of providers should be more
elaborated.
• The second is about lessons to be learnt from the current crisis. Regulatory and
supervisory absenteeism has allowed the financial sector to nearly wreck the global
economy. Sound governance should therefore be a horizontal reform priority, not
just one for the financial sector.

Finally, we wonder whether, under given arrangements, there will be sufficient means
for implementing the Strategy, even if there is more EU money. In fact, by next year, the
fiscal consolidation requirement in the 27 Member States will have grown to about five
times the entire EU-Budget.

 

In relation to the second pillar of EU 2020, the macro-economic pillar, CEEP shares the
rationale behind the recently defined “exit strategy”, including the sequencing of steps.

 

(No doubt, the decision to take the fiscal exit rapidly, essentially over the period 2011-13,
has been the appropriate answer to a scenario of spiralling debt and soaring risk premia.)

 

However, CEEP is deeply concerned about how the strategy will actually work out, for the
following two reasons:

 

1. It involves the most ambitious consolidation effort in EU history.
The average consolidation gap at EU level is now at 9 % of public expenditure. This
implies discretionary tightening equivalent to about 15 % of EU spending, spread
essentially over the period 2011 to 2013. In some Member States, the consolidation
gap is 20 % or 30 % of spending.

2. This is not a “normal” recession, but one which leaves consumer and investor confidence seriously damaged. Therefore it will not be a normal recovery. Nor is the
crisis over, as recent developments inside and outside the Eurozone indicate. The
outlook remains subdued while some countries are in outright depression.
Unemployment is expected to rise fast.

 

CEEP therefore considers that without compensatory measures impacting on the short term,
the collateral damage would be enormous, however sensibly the exit strategy may be
implemented.

 

Coming to terms with the macro-economic policy dilemma of a twin record – budget
imbalances and unemployment - will shape the Union’s future even more than structural
reform, important though it is.

 

Therefore the same ingenuity which has made it possible to rescue the financial sector and
to stabilise our economies should now be applied to avoid that fiscal, economic and political
risks all rise in parallel.

 

The recently created “Marguerite 2020” Fund is a first step. A well-designed action plan
should follow. It should have a sufficiently large scale and involve fiscally neutral measures
to support demand, invest in our economies and instil confidence into consumers and
investors.

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