Press Advisories

12. 3. 2009 9:02

Financial crisis, energy and climate change the big issues at European Council

Debate between MEPs, Czech deputy prime minister Alexandr Vondra and Commission President José Manuel Barroso.

The European Council of 19-20 March, which will focus on the financial crisis, energy security and climate change, was the subject of a debate between MEPs, Czech deputy prime minister Alexandr Vondra and Commission President José Manuel Barroso. The majority of MEPs agreed that solidarity among Member States was crucial to solving the economic crisis and that protectionism must be avoided. MEPs adopted a series of reports and resolutions in response to the economic crisis.

Council Presidency

Opening the debate, Mr Vondra first looked at the financial crisis, saying "We have avoided a meltdown of the financial system" and "the top priority now is the restoration of credit flows to the economy. We also need to do more "to improve the regulation and supervision of financial institutions", not only to prevent future crises but to bolster consumer and market confidence.

Swift adoption of legislation such as the Solvency II Directive (on insurance), the revised Credit Requirements Directive (on banks) and the UCITS Directive (on unit trusts) would help, although further reform would be needed. Moreover, with Member States' budget deficits growing fast, "Restoring confidence also requires governments to give a clear commitment to sound public finances, fully respecting the Stability and Growth Pact".

Recovery programmes, structural reform, no protectionism

With the financial crisis now affecting the real economy, Member States have each launched their own recovery programmes but, he stressed "they are coordinated, and are based on common principles defined in the European Recovery Programme agreed last December. This is important if we are to ensure synergies and avoid negative spill-over effects". The European Council will assess the state of implementation of the Programme. As far as the Community part of the Recovery Programme is concerned, the Presidency hopes the summit will agree to finance energy and rural development projects.

In addition to short-term measures, "structural reforms are more urgent than ever" and "The renewed Lisbon Strategy remains the right framework within which to promote sustainable economic growth, which will in turn lead to the creation of new jobs", a key issue as unemployment rises. EU leaders would look at ways the Union can help mitigate the social impact of the crisis, and this will also be the focus of the special summit in May.

Mr Vondra stressed that "We will not protect jobs by creating barriers to foreign competition" and "Protectionism is clearly not the right answer". "More than ever, our companies need open markets, both internally, within the Union, but also at global level". This led him to the G20 Summit, which takes place on 2 April in London. "The European Council will establish the Union's position in advance of the G20 Summit" he said. "We want this Summit to be ambitious. We cannot afford it to fail."

Energy security

Energy security would be the other major item on the summit agenda, said the minister. The Presidency will seek an agreement on enhancing the Union's energy security in the short, medium and longer term, based on the Commission's Second Strategic Energy Review.

Urgent steps must be taken to launch infrastructure projects to enhance energy interconnections. Legislation on oil and gas stocks must be adapted to ensure that Member States act with responsibility and solidarity and, in the longer term sources, suppliers and supply routes must be diversified. He also hoped the legislation to create a fully fledged internal market for electricity and gas would be completed before the European elections.

Climate change

Preparations for the Copenhagen Conference on climate change would also be discussed at the summit, with the aim of helping achieve a comprehensive agreement in Copenhagen next December.

Eastern Partnership

Lastly, the European Council would launch the Eastern Partnership, designed to promote stability and prosperity on the whole continent. A bilateral dimension, adapted to each partner country, would lead to the negotiation of Association Agreements, possibly with free trade areas, while the multilateral track would provide a framework for tackling common challenges such as democracy, good governance, economic integration and energy security.

European Commission President

Job losses test Europe's social model", said Commission President José Manuel Barroso, stressing that the economic crisis must be faced, by families, workers, and businesses and citizens, with the help of the EU and its Member States, working together.

The recovery plan agreed by EU Ministers in December 2008 provides an "unprecedented budget stimulus", equivalent to 3.3% of GDP, he continued, citing €6.2 billion in structural funds to come in 2009, in addition to the € 5 billion already earmarked for recovery plans.

Next week's Council must make progress in four areas - financial market reform, investing in the real economy, supporting employment, and working through the G-20 forum to strengthen the international financial architecture, said the President.

Parliament's Ferreira report on the European Economic Recovery Plan, Andersson report on employment policy guidelines and Kirilov report on investing in the real economy would provide an important input to the summit, he said.

Looking beyond the Spring Council, to the May employment summit, the President stressed the need to "use these two months wisely", by involving MEPs and social partners in debate on how to help people through the crisis, so as to ensure that Europe emerges from it quicker and stronger.

"Europe has to find its strength in cohesion and practical solidarity", he stressed.

Political group speakers

The leader of the EPP-ED group, Joseph DAUL (France) said next week's EU summit must "send specific signals" about "Europe's strength and determination" to tackle the problems it faced. Europe already had its successes in the form of the social market economy and the euro. Now it must say No to protectionism and a fortress Europe, and ensure it stayed open to the world.

Solidarity was also crucial. Our fellow citizens sometimes asked "what is Europe for?". Now was the time to show it was "a Europe of solidarity". Each of the 27 governments must resist the temptation to go its own way.

Innovation, with massive investment in the knowledge economy, including environmental technology, would be important for economic recovery, as would the removal of regulatory barriers to the internal market in these areas, said Mr Daul. Lastly, he repeated that his group favoured "a market economy with rules" and he urged that the demagogues and rabble rousers be ignored.

"We've been hearing this stuff for months - cut-and-paste texts may make a great speech, but the crisis is deepening, people are losing jobs and we have to deliver", said Martin SCHULZ (PES, DE) for the Socialist Group, adding that €40 billion in value has "gone missing" in recent months, and "our economies are on the brink of collapse".

Mr Schulz welcomed Mr Barroso's commitment to support "solidarity" among Member States, within and beyond the Euro area, but stressed the need to put it into practice "right now" - inter alia by acting on rules to govern hedge funds, private equity and top executive salaries. "Bankers think that now they have been bailed out, they can carry on as usual", but the answer to this is "no", said Mr Schulz. Bankers were bailed out with taxes paid by restaurant waiters, drivers, and airport luggage handlers, and simply allowing them to carry on as before would be tantamount to "class warfare from above", he added, challenging the EPP-ED to vote against tax havens and in favour of solidarity.

Graham WATSON (ALDE, UK) began by pointing to the 'string of reports' produced by the European Parliament on improving the economy, which have provided the Member States with a 'bridge across the river of recession' which the Council now needs 'to cross without fear'. He emphasised that the underlying message of today's EP reports in this area is 'jobs, jobs, jobs' and that flexicurity, public investment in Research and Development and the rapid transition to the knowledge economy are the foundations of a healthy economy.

He continued by stating that "it was not the Lisbon strategy that brought hardship to our kitchen table, but rather, it is the Member States which ignored it." Referring to climate change, Mr Watson pointed out that it will not stop as the economy slows and that "recession must not mean inaction." He argued that the Council knows that "the ravages of recession will return without root and branch reform of the financial system." Financial institutions, he said, should be regulated robustly with a European financial authority to oversee the system. Europe, he said should be "strong in mind and fleet of foot", ready to reform and ready to accept that the current stimulus package will not be enough. He concluded by arguing that the Council, Commission and Parliament need to work together, "preventing procedure getting the better of purpose." The time has come, he said, for fundamental reform.

Cristiana MUSCARDINI (UEN, IT) began by asking whether the Council is going to freeze derivatives or at least going to propose such a thing at world level and suspend their marketing. She pointed out that, in the now nationalised banks, these derivatives are still a drag on the balance sheet and that more vigilance means that we have not just to revise the system of banking supervision, but also to meet new costs for the SMEs and the unfair competition that arises from beyond our border.

Ms Muscardini went on to point out that the Council has still not decided to stop this by introducing a labelling system, which is the only way to protect producers and consumers without protectionism. She concluded by stating that in order to help companies, SMEs not only need to be offered credit lines, but that they also need to be given faster access to mobility.

Rebecca HARMS (Greens/EFA) pointed out that this is the fifth debate in the European Parliament about the successes and failure of the Lisbon strategy and asked how is it that we can underline how important a successful strategy is each year and "yet now, suddenly, we have woken up to the great crisis falling down upon us." She stated that last year, the Parliament called on the Commission "to guarantee the stability of the financial markets, because the signs of crisis were already there, but there was no response."

Ms Harms argued that the Commission and national governments believe that they can get away without laying the foundations of a new banking system, "but if they don't do that, we're not going to get out of this crisis." She referred to the issue of climate change as being 'equally important" and concluded by stating that "if you look at the plans in place at European level, you can see that it is a case of fine words and not much action."

Jiří MAŠTÁLKA (GUE/NGL, CZ) pointed out that the reform programme was agreed in 2005 and that in 2009, "we have a financial crisis and poverty." He referred to the level of unemployment in the EU and argued that "the situation shows that the policy so far has failed" and that "a new approach has to be found at the spring summit" which will focus on the quality of jobs, environmental conditions, better conditions in the work place, etc. Mr Mastalka concluded by stating that "we need, for example, to see that when conditions are not fulfilled, finance is not received from the EU. We need to see not just solidarity, but obedience to the rules."

Nigel FARAGE (IND/DEM, UK) of the for the Independence and Democracy group, called into question the idea of European solidarity and open borders in the face of the economic crisis.

He stated that "we cannot sign a blank cheque to bail out the countries of Eastern Europe. We don't have the money, economically the plan is quite unsound but most important of all, it is politically unacceptable to the tax payers in France, and Britain and Germany that we should do so."

Jana BOBOŠÍKOVÁ (NI, CZ) said that the Council should support the idea of Europe without borders as it is the only way out of the economic crisis. However, she rejected the views of the previous speakers that it is a time to fund environmental policies.

"We should reject the Commission plan to fund renewable energies, because economic history and theory shows very clearly that this will not give economic growth back nor will it slow down growth in unemployment. It will simply worsen the crisis and create inflation."


Reports and resolution adopted

Economic rescue plans need EU-level coordination

National economic rescue plans may harm Europe's global competitiveness if they are not well coordinated at EU level, says the European Parliament in a report adopted on Wednesday.

Stimulating the EU economy and its competitiveness and making financial markets function again are essential to avoid mass unemployment and create new jobs, according to the report drawn up by Elisa Ferreira (PES, PT), and approved by , on the Commission's European economic recovery plan.

MEPs are concerned that differences between national measures in response to the economic and financial crisis could hamper the functioning of the common market and thus weaken EU's role as a global actor.

Urgent steps to release EU funds, a better financial supervision system, a new global financial regulatory framework and restriction to tax havens also figure among the reports recommendations.

Tackling the effects on real economy

Guaranteeing minimum living standards for all EU citizens is one of priority targets for action at EU level, according to MEPs. The EP calls for the adoption of adequate and urgent measures to support an active labour market and social inclusion.

A real European Pact for Employment should also be agreed to safeguard jobs, according to the Parliament. Members support the Commission's initiative to bring forward European Social Fund spending and to facilitate access to the European Globalisation Adjustment Fund.

Access to credit for individuals and firms, especially small and medium-sized enterprises, has to be guaranteed, says the report, and this justifies exceptional public expenditure. MEPs suggest EU governments should set incentives and sanctions to achieve this goal.

An agreement on concrete measures to fight unemployment and boost job creation at the European Council of 19 and 20 March is expected by MEPs.

More effective supervisory system

The European Central Bank's role should be enhanced, says the Parliament, enabling it to monitor the financial stability of the Euro area and involve it in supervision of the EU banking sector.

Rescue plans for banks should not be unconditional, according to the approved text, which suggests requirements on monetary incentives, provision of credit, restructuring of the sector and protection of social policy terms in return for the help the banks receive.

Member States should consult and coordinate on economic policies

To ensure better coordination, the EP calls for the establishment of binding rules for national governments to consult each other and the Commission before taking major economic policy decisions.

In fact, the approved text also calls for a Community-wide approach to ensure Community solidarity. To achieve this goal, MEPs suggest the Commission to tighten available instruments for the stabilisation of affected Member States, including the stabilisation of the exchange rates.

MEPs are concerned that the European Economic Recovery Plan amounts only to €30 billion (0.2% of European GDP), while the remaining €170 billion is supposed to come from Member States' own initiatives. They therefore call for a new strong initiative at EU level to avoid risks of conflicts between the different national actions. At the same time, the EP stresses the responsibility of each Member State to ensure fiscal discipline and to continue investment and structural reforms.

Finally, to ensure flexibility of the Community response to a crisis, the EP reiterates its call for the strengthening the European budget and the reassessing its size and its structure.

Support for sanctions against tax havens

The EU should adequate legislation to restrict the business of tax havens, say MEPs. The Parliament also expresses its support to the decision of the G20 to take actions against these jurisdictions and agree on a series of sanctions.

A new global financial regulatory framework?

The EU should lead negotiations in international bodies - such as the G20, the International Monetary Fund and the Financial Stability Forum - to implement new rules on international financial markets, say MEPs. The aims should be to strengthen the international supervisory system.

Stability and Growth Pact: flexibility and prudence

The flexibility provided by the revised Stability and Growth Pact allows national governments to adopt policies to address the recession, say MEPs. Nevertheless, they point out that Member States' decisions have to be compatible with medium term budgetary targets and long term Lisbon Strategy goals for a more competitive economy.

Parliament's role in the recovery plan

Ms Ferreira's report represents MEPs' main political reaction to the Commission's recovery plan. Some of the proposed spending plans require a legislative framework which will need to be adopted under the co-decision procedure. Changes to the EU budget for 2009 will also need backing from both the Parliament and the Council in order to be enacted.

Spring 2009 European Council in relation to the Lisbon Strategy

In adopting a resolution on the Lisbon Strategy with 579 votes in favour, 94 against and 21 abstentions, MEPs consider that it is time to create the low-carbon economy that has the potential to transform the world and ensure European prosperity and international competitiveness for decades to come. MEPs consider that it is time to stimulate innovative industries, with the capacity to bring new growth to Europe. MEPs in particular say action is needed on tax havens, greater support for the most venerable and solidarity for Central and Eastern Europe.

Top priority - protect citizens from the effects of the crisis

Parliament stresses that the European Union's top priority must be to protect its citizens from the effects of the financial crisis as they are most strongly affected whether as workers, members of households, or entrepreneurs. The House takes the view that many workers and their families are or will be hit by the crisis and that action needs to be taken to help stem the loss of jobs and to help people return rapidly to the labour market, rather than face long-term unemployment. MEPs expect the EU Spring Council 2009 to agree on clear guidance and concrete measures to safeguard employment and create job opportunities.

Most venerable need more

The House takes the view that Europe should pursue a common fundamental goal: to create employment opportunities and thus prevent mass unemployment. Parliament considers that this goal should therefore determine the magnitude and components of the European Economic Recovery Plan. MEPs consider that solidarity is indispensable with a view to ensuring that the European Economic Recovery Plan and accompanying measures have the most positive impact on labour markets in Europe. Parliament stresses the need for additional efforts to support the most vulnerable groups in society.

Tax havens - action needed

Parliament says that it supports the decision of the European members of the G20 at the end of February in Berlin, to take 'definitive actions against tax havens and uncooperative jurisdictions', by agreeing on a toolbox of sanctions as soon as possible, which has to be endorsed at the London summit. MEPs recommend that the EU adopt at its own level the adequate legislative framework with appropriate incentives towards market players to refrain from making business with these jurisdictions. The House underlines how convergent approaches globally are essential to tackle this issue.

Central and Eastern Europe need support

MEPs underline that the crisis is having extremely negative economic and social consequences in many of the new Member States, substantially slowing their convergence with the EU-15. The House expects, furthermore, spill-over effects, affecting the euro and the economies of the euro-zone. MEPs call, therefore, for strong European solidarity measures, to protect the eurozone and strengthen the internal consistency of the European Union, in particular with a view to stronger support for the economies of Central and Eastern Europe, especially by adapting the structural funds and the Globalisation Fund for these countries, as well as special support from the EIB with regard to new innovative financial instruments. Parliament points to the importance of European unity in the times of economic crisis when the economic downturn also threatens European common values. Parliament calls, therefore, for the more attentive and careful actions of the Commission in direction of the new Member States.

Employment: a priority for the next Summit of EU leaders, MEPs say

Investment in the fight against climate change, measures towards the most vulnerable groups and in the field of education and training must be key elements in employment policy. Employment should be a priority issue to the March Spring Summit of EU leaders, MEPs say, calling for a European Employment Initiative.

Employment growth has weakened in several Member States by mid-2008. The economic downturn is expected to continue throughout the first half of 2009 and to have a profound impact on labour markets developments with EU development falling by 3.5 million jobs. The unemployment rate in the EU (7.0% in 2008) is expected to increase to 8.7% in the EU in 2009 (from 7.5% to 9.2% in the Euro area) with a further increase in 2010, states the report of Jan Andersson (PES, SV), adopted by 609 votes in favour, 60 against and 27 abstentions.

"The crisis is coming reality for people. Unemployment is higher and there are more social consequences. Employment should be at the top of the EU agenda", said the Chair of the Employment and Social Affairs committee during the debate on Lisbon Strategy for employment and growth.

Measures in the field of climate change, education and training

At the Spring Summit of EU leaders which will take place on 19 March, MEPs call on the Commission and the Member States to tackle employment as a priority issue by putting proposals for a European Employment Initiative, in a resolution proposed on behalf of the Employment and Social Affairs Committee and adopted by 548 votes in favour, 74 against and 31 abstentions.

The Parliament stressed the necessity to invest in the fight against climate change, to ensure sufficient incomes with special regard to the most vulnerable groups of society, in particular women and young people. MEPs ask the Commission to launch initiatives and present proposals with respect to these goals in time for the forthcoming Spring European Council.

They also recall that investment in research, education, active labour market policies, childcare and incentives for private investment must be a key element in employment policies.

A rigorous implementation of the Employment guidelines

The Employment guidelines are part of the Lisbon Strategy for growth and jobs. They are set for a three year period (2008-2010) and present common priorities to the Member States national employment policies. MEPs stress the urgency of a rigorous implementation of the employment guidelines, and based on the lessons learnt from the economic crisis, point out the need for a review and update of the economic and employment policy tools, such as the Integrated Guidelines and the Stability and Growth Pact.

The European Social Fund and Globalisation Adjustment fund as instruments

The Commission must be prepared to take exceptional measures including the widening of access to the European Globalisation Fund to support workers in a wider range of situations and a temporary opening of the European Social Fund to support employment preservation measures. Those two instruments should be used immediately to finance actions in the field of lifelong learning.

Regional development: faster funding for economic recovery

Faster, more flexible funding for regional policy projects will help EU economic recovery and stimulate the economy in the short, medium and long term. But faster funding must not lead to looser monitoring of implementation, said the European Parliament today.

Proposed changes to make EU structural fund grant payments more flexible, to meet the needs of "extraordinary economic circumstances" should "boost the economy and provide support, especially to people hit by the crisis". They are "parallel and complementary to" the European Economic Recovery Plan. However, flexible funding measures must not breach EU competition rules or social and environmental protection standards, says the own-initiative report by Evgeni Kirilov (PES, BG) with 508 votes in favour and 30 against and 52 abstentions.

The changes (to structural fund regulations 1083/2006, 1080/2006 and 1081/2006) aim to improve cash flow and liquidity in the Member States, facilitate the use of financial engineering instruments to fund projects, and expand support for energy efficiency investments in housing. Over 65% (€230 billion) of cohesion policy funding is earmarked for investment in the four priority areas of the EU growth and jobs strategy – people (jobs), business, infrastructure and energy, and research and innovation.

Faster, more flexible funding

Proposals permitting faster, more flexible payments, lump sum and flat rate payments should accelerate project implementation, particularly for infrastructure, energy, environment, and European Social Fund projects, says the report.

MEPs also welcome a Commission plan to increase advance payments, so as to get funding to projects earlier and reduce the need for bank loans. However, they also urge banks to "make full use of facilities granted to them to maintain lending to the economy and pass on key interest rate reductions to borrowers".

Playing by EU rules

The Commission and Member States must ensure that measures to make structural funding faster, simpler and more flexible "do not diminish their responsibility to control implementation", says the report, adding that Commission approval for Member States management control systems is "crucial for speeding up programme implementation".

The Commission is also urged to monitor Member State measures, so as to "ensure that these do not violate free market competition, social standards and the implementation of Community environmental and climate protection requirements".

Matching national funds

The report also calls on Member States and regional and local authorities to "secure their contributions, as required by the co-financing rules, so that funds allocated by the EU structural funds can be fully exploited".

Backing business, creating jobs

The report calls for "decisive action to support the demand side of the economy, as well as measures to assist SMEs, social economy enterprises, and local and regional authorities", to safeguard "key investment and infrastructure projects. It also calls on Member States to make "wide use of structural funds to secure job creation and to promote SMEs, entrepreneurship, and professional training".

Financial engineering

The report encourages Member States to "explore synergies" between cohesion funding and other EU sources of funding (such as the R&D framework programme) as well as the European Investment Bank and the European Bank for Reconstruction and Development. It also urges them to simplify SME access to EU financial engineering instruments such as JESSICA (cities), JASMINE (micro-credit) and JEREMIE (micro to medium enterprises).

Energy efficiency of housing

Parliament welcomes a proposal that investments in energy efficiency, energy interconnections and renewable energies in the housing sector should be eligible for European Regional Development Fund funding urges Member States and regions to make comprehensive use of this forthcoming new possibility.

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J. M. Barroso

José Barosso, předseda Evropské komise

"The recovery plan agreed by EU Ministers in December 2008 provides an "unprecedented budget stimulus", equivalent to 3.3% of GDP, he continued, citing €6.2 billion in structural funds to come in 2009, in addition to the € 5 billion already earmarked for recovery plans."