Debate: Commission communication on the Review of the economic governance
Date: MONDAY, 10 FEBRUARY 2020
Speaker: Paolo Gentiloni
Language: EN

I think that the targets of this debate are very clear. We have, on the one side, to preserve our stability and nobody should discuss this. On the other side, we have to relaunch our growth and nobody should ignore this. The Commission’s Communication gives a clear and honest assessment on the functioning of these rules in the last ten years. The rules were created as a response to a deep economic and financial crisis and, after ten years, I think we can give a clear picture of how these rules have been functioning.  I think we had good results, first of all, in better coordination of fiscal policies, both on timing and on their content, among Member States, through the Semester and the whole surveillance process. Second, we were able to reduce our deficit—to—GDP ratio. I remember that in 2011, only three countries were respecting the rules on deficit—to—GDP. In the last assessment, not a single country was not respecting these rules. Third, I should say that all Member States that received financial assistance were able to return to the market, with enormous difficulties from a social point of view, but they have, at least, returned to the market. After good results, we have also had mixed results in our ten years’ functioning. First of all, I would say, on the reduction of debt, yes, debt was reduced from an average of 90% to an average of 80%, and this could be a satisfactory level if we consider other global economic players. The United States has 115% debt and Japan has 240% debt. But we know that, in this average reduction, we were not able to reduce high debt in several countries, so the discussion is still open. There were also mixed results because of the complexity of these rules. Complexity could also be an intelligent way to deal with problems but, if complexity is too complicated, in the end, it reduces ownership and confidence from Member States and stakeholders towards our rules.  Finally, we had clear shortcomings, first of all, because we were reducing our public investments. Our public investments are not yet at the level they were 20 years ago. Second, because we were not able to reduce surpluses in countries with a high level of surpluses, and, third, because, in general, we had pro—cyclical fiscal policies during this period and monetary policy is now at its lower bound. If we are not able to have anti—cyclical policies, this creates constraints in our general economic situation. So, good results, mixed results and shortcomings. What next?  I think we live in a very different economic world from the one from ten years ago. We were able to overcome the deep crisis and we had several years of stable growth in all Member States. We have now been in a period of slower growth for a couple of years. The picture for the next months, and perhaps a few years, is characterised by uncertainty, uncertainty for internal reasons – I think we all saw the bad results in the last quarter of last year in some important European economies – and uncertainty due to external factors: trade relations that are not solved, Brexit, which is an open debate, and the consequences of the coronavirus. It is obviously too early to assess them, but for sure they contribute to this uncertainty. In these uncertain times, I think we need a framework capable of avoiding what economists call a ‘low for long’ situation: a long situation of low growth, low inflation, low interest rate. This could be inconsistent with the strategy that we have in the green transition and in the digital transition. For this reason, the debate we are opening is very important, and we will define the scope and the conclusions of this debate during the next months in this process. In conclusion, I would particularly underline two key words. One is ‘investments’. We have to find ways to facilitate investments, especially those connected to the strategy of the Green Deal, which President von der Leyen rightly calls our new growth strategy. Second is ‘simplification’. To promote simplification of these rules is also to promote their ownership. I think that to facilitate investment and make our rules simpler is something that should not divide our discussion into different camps, but is something on which we should work together to find a solution.