Brussels, 09/01/2012 (Agence Europe) - After lunch on Monday 9 January in Copenhagen with Danish Prime Minister Helle Thorning-Schmidt, the president of the European Council, Herman Van Rompuy, sounded the alarm for a general mobilisation against the economic recession which is once again threatening the eurozone. He stated that the EU needed to set in place an “anti-recession strategy”. This dossier, together with the agreement on the new budgetary pact, will be on the agenda of the informal meeting of the European Council on Monday 30 January. Van Rompuy also expressly welcomed the recent drop in the euro exchange rate, which should provide a shot in the arm for exports of the countries which use it, thus helping to stave off recession.
“It is a very difficult time in Europe and we know that big decisions have to be taken within the next six months and we are very committed to working closely together”, said Helle Thorning-Schmidt, adding that she and Van Rompuy had discussed the three next European Councils (30 January, 1-2 March, 28-29 June). The economic and financial situation and the employment situation in Europe feature high on the agenda, Van Rompuy stated. Financial stability is a common concern, not only for the countries of the eurozone, but for all EU countries, he added. Amongst other things, he recommended ambitious budgetary consolidation measures in the countries on the receiving end of an aid programme and which are suffering from the situation on the markets, and for tougher economic governance.
Van Rompuy said that “the new fiscal compact treaty”, decided on by the European Council on 9 December, would be signed by early March. “We will finalise politically the text in January. We will finish the work on the crisis mechanisms.”
The new tools of the European Financial Stability Fund (EFSF) will be operational by the end of this month. These will be overseen by the European Central Bank (ECB). The Treaty on the European Stability Mechanism (ESM) will enter into force in July 2012. The European Council will also shortly assess (in March 2012, according to the agreement of 9 December) whether the size of the ESM (set at €500 billion for the EFSF/ESM) is adequate.
The debt crisis must be resolved, but one of the key objectives will be to restore economic growth, said Van Rompuy. “We must avoid a recession; we need to mobilise all our energy for this at Union level and, most importantly, at the level of the member states”, the president of the European Council explained. This strategy must be broad and effective. Most economists expect monetary union to go through a short phase of recession over the winter, defined by at least two consecutive quarters showing a drop in gross domestic product (GDP). The question is whether the zone can avoid an extended phase of recession, which would make its job in fighting the debt crisis harder.
Van Rompuy presented three principles for action under this anti-recession strategy: - (1) as far as possible, make sure that budgetary cuts do not affect drivers for growth. Budgetary consolidation is vital, but should not affect structural economic growth, Van Rompuy warned. He called for certain investments (energy infrastructure, research and innovation, education and trade) to be safeguarded; - (2) reinforced growth is needed, by stimulating supply and reinforcing demand. As regards demand, he said that reinforcing confidence in the eurozone will strengthen consumer confidence, which is key to enhancing private consumption. He recommended exploiting new markets and new trade opportunities, in order to “stimulate foreign demand and export”. He said that recent developments in euro exchange rates “could help” in this context. The euro fell in Asia on Monday morning to $1.2666, its lowest level since September 2010. Van Rompuy also pointed out that the EU is negotiating bilateral agreements with India, the countries of Latin America and, “I hope”, soon with Japan and Indonesia. As regards supply, Van Rompuy argued that more use should be made of the potential of the single market in the products, services, energy and digital economy sectors, and there should be a more effective mobilisation of all the financial resources of the EU to feed into the smooth functioning of our economies; - (3) stimulating employment. Van Rompuy said that we should focus on all aspects of the labour market, supply and demand in jobs, youth employment and lifelong learning. We should also make use of the potential of “green” jobs and support flexible labour markets.
Thorning-Schmidt stated that the 26 member states of the EU concerned will discuss the new budgetary pact at the European Council on 30 January (all except the United Kingdom, which has observer status, the Danish prime minister pointed out). We should also discuss growth and employment, she said, stressing the importance of youth employment. “We should not simply consolidate our economies and improve budgetary discipline, we must also discuss employment, particularly youth employment, which is becoming an enormous problem”, she said. Van Rompuy went on to state that the European Council of June 2012 would discuss dossiers related to justice and home affairs (JHA), such as the Schengen area. (LC/transl.fl)