Two elements stand out when we look ahead to the European Council meeting:
First, Europe needs a new approach to investment, and we will have to concentrate on improving the investment climate in Europe.
And we will have to help our eastern neighbour, Ukraine, stabilise the situation in the East, master the challenges of the winter and pursue the path of reform.
We will have to focus our efforts to successfully implement these objectives. Let me start by making a few remarks on our new approach to investment.
On 28 November, the Commission presented its 2015 Annual Growth Survey, which is part of a comprehensive jobs, growth and investment package. The Commission proposes an integrated approach, built around three main pillars, all of which must act together and must be pursued in joint action of EU-Institutions and Member States to be successful and deliver long-lasting benefits:
o Boosting investment
o Accelerating structural reforms
o Promoting fiscal responsibility by pursuing a responsible growth-friendly fiscal consolidation
Let me go through these points one by one:
First, we need a coordinated boost to investment: generating the right conditions for more and sustainable investment is the first priority for this Commission. Weak investment slows down economic recovery in the short term and hurts growth and competitiveness in the longer run. Investments in Europe are today – on average – 15% below pre-crisis levels and we must take action to change this.
As I mentioned when presenting our Investment Plan to you on 26 November, we will set up a European Fund for Strategic Investment together with the European Investment Bank. The aim is to kick-start a string of public and private investment projects in Europe that would not have happened otherwise.
By its very nature, this new Fund will finance riskier investments, that would not have happened otherwise, and this is why it will particularly benefit countries that have been most hit by the crisis.
The Fund will work in a wide range of areas and chose the financial instrument most suitable for the project in question: From energy interconnectors to broadband, from education infrastructure to innovative SMEs, from renewable energy to high-tech healthcare.
As you will understand, I can certainly not commit to financing of specific projects here and now. All projects have to be screened in light of their economic viability. The list published by the Taskforce on Investments last week contains over 2000 examples. Obviously, not all of these are new, strategic and economically viable. Nevertheless, there are many interesting examples – like infrastructure for energy-connections in Finland, Poland and the Baltic States, reform of school infrastructure in Italy or modernisation of regional hospitals in Belgium, to just mention some examples.
To set up the fund we need one legal act, to be adopted in co-decision. The Commission will put forward a proposal in January 2015 and we count on your support for swift adoption during the spring. The common aim is that the Fund is fully operational by mid next year.
In order to start delivering on the ground as rapidly as possible, we count on the European Investment Bank to be able to start certain activities using its own funds already in the beginning of 2015 and the European Investment Bank has agreed with this idea.
Much has been said about how Member States can contribute to the fund. The new Fund is self-standing. However, its impact would obviously be much greater if Member States contribute to it. Several Member States have signalled their potential interest in doing so and I am now awaiting concrete proposals to this end.
I need not only paroli, I need money.
For my part, I have signalled the Commission’s intention to take a favourable position towards such capital contributions in the context of the assessment of public finances under the Stability and Growth Pact. We will come forward with detailed guidance on this in January.
Let me also assure you that in order to guarantee that projects are chosen on their merits, investment decisions should be based on an independent and expert analysis of the intrinsic merits and economic and social viability of each project.
There will be no sectorial or geographic pre-allocations or ‘quotas’. However, technical assistance will be stepped up so that project promoters and relevant authorities in all countries will be able to present viable and investible projects. And a transparent pipeline of projects will allow all interested parties to access potential projects in a quick and efficient way.
These efforts will be accompanied by concrete proposals to improve the investment environment by removing regulatory barriers in our single market.
Second, we need a renewed commitment to structural reforms. Remember the virtuous triangle I presented to you when tabling the 315 billion EUR Investment Plan: we need to boosting investment, accelerating structural reforms and promoting fiscal responsibility.
There is no contradiction between these. We need these three pillars. Reforms, both at European and national level, and fiscal responsibility are needed to unlock investment, growth and job creation.
Third, despite the progress made, we still need to further pursue responsible growth-friendly fiscal consolidation: the significant adjustments in terms of fiscal consolidation undertaken in recent years have succeeded in reducing deficits and stabilising debt levels in the EU. High debt levels still exist.
I expect the European Council to give the Commission full support for taking forward the implementation of all the elements of the Investment Plan, which I just referred to. I also expect the European Council to agree to double the over-all use of innovative financial instruments under the European Structural Funds for the next programming period. This means a more efficient and intelligent use of public funds and higher impact on the ground.
And I am obviously also looking forward to the Parliament’s continued support.
The new government in Ukraine was elected for its reform agenda.
We have seen an ambitious Coalition Agreement and a bold Government Action Plan We should all welcome the Government’s determination to carry out political and economic reforms.
The Union and its Member States must continue to facilitate and support the Government’s work. The challenges it faces are enormous.
First, it must bring peace to Donetsk and Lugansk. Over the past week, we have seen less violence. But the lull must become a ceasefire. Weapons should be withdrawn from the mine of contact. The peace process should resume.
We must continue to do everything in our power to stabilise the situation in Eastern Ukraine by insisting that all parties implement the Minsk agreement. Second, Ukraine is experiencing a deep recession. This is the result of long standing macroeconomic and structural problems.
In this difficult context the European Union has provided unprecedented financial support. We are about to complete the implementation of our two Macro-Financial Assistance programmes.
A total of EUR 760 million in long-term loans has been disbursed in just the last two months, following EUR 600 million already extended in the summer. Under these programmes, EUR 250 million more can be disbursed early in 2015 if the policy conditions are met.
Ukraine will need more help. The assessment of Ukraine’s financing gap has been completed by the IMF. Ukraine will need USD 15 billion in addition to what is already planned.
The EU can only help within its budget. The relevant EU budget line has been squeezed. There is only a small margin of flexibility for additional financing next year. And if we fully use our margin for Ukraine, we will have nothing to address other needs that may arise over the next two years.
So, we will not be able meet Ukraine’s request for EUR 2 billion. Member States will have to contribute – as the EU is not able to do this – and to give us greater flexibility in the budget.
Third, the Government must secure Ukraine’s energy supply. The “winter package” gas agreement reached on 30 October is being implemented. Ukraine has ordered a first consignment of 1 billion cubic meters of gas, which was prepaid on 5 December. Delivery has begun.
The Commission will continue monitoring the implementation of the agreement and to encourage the Ukrainian Government to order sufficient gas from Russia in January and February.
To deliver in the European Council will also depend on Member States’ readiness to assume responsibility.