Eurogroup – Athens, 1 April 2014 – Olli REHN, Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Let me begin with some words on the economic outlook. In fact, the picture has not changed substantially since I presented the Commission’s Winter Economic Forecast on 25 February. We continue to project growth in the euro area of 1.2% this year and 1.8% next year, driven by a gradual strengthening in domestic demand, an easing of deleveraging and fiscal consolidation needs and on the back of improving confidence.
The Commission’s economic sentiment indicator for the euro area rose again in March and is now clearly and firmly back above its long-term average. The February unemployment data that has just been published earlier today shows that joblessness is falling in the majority of Member States with some of the sharpest improvements being recorded in Ireland, Latvia and Portugal. This shows that the strong implementation of economic reforms set out in the programmes can lead to a real turnaround in job creation.
The financial market situation in Europe remains stable and the positive long-term momentum is continuing. This is being supported by sustained accommodative monetary policy, expectations of continuing economic recovery and confidence in the positive effects of the banking union. Nevertheless we need to focus on strengthening the recovery for the sake of stronger growth and job creation and thus it is essential to maintain the momentum of economic reforms now.
To minimise risks to the economic recovery, it is very important to create the right conditions for economic stabilisation in Ukraine, in order to also help stabilise the political situation in the country. I reported to the Eurogroup that the Commission has been working intensively to prepare swiftly a package of macro-financial assistance for Ukraine. A staff level agreement has been reached by the IMF which will, I understand, soon be presented to the Executive Board for approval. This would also allow for a first disbursement to be made in parallel and swiftly to Ukraine by the EU because our MFA (macro-financial agreement) is conditioned to be parallel to that of a standby arrangement by the IMF.
It is in the essential interest of Ukraine and Europe to maintain peace and stability in our continent. This financial aid will help stabilise the worsening financial situation in Ukraine and will therefore be one vital part of achieving a political solution to the crisis.
In fact the, role that Europe can play in supporting the development of Ukraine is illustrated by the difference of growth performance of Ukraine and Poland over the past two decades. On this, I want to show you one slide because it is extremely telling of the diverging growth paths between Poland and Ukraine. In other words, whereas the two countries started at quite similar income levels in the early 1990s, today Poland’s per capita national income at purchasing power parity is about two and a half times that of Ukraine. Of course, many factors have affected these divergent growth paths but it is crystal clear that Poland’s steady course of institutional reform to unleash a growth potential and to ensure a rule of law as well as the political and economic integration with the EU have been key drivers of investment and growth.
For Ukrainians, the Association Agreement with the European Union came to symbolise this difference. It became seen as a chance to enter this story of being left behind and it was not the EU that instigated the street demonstrations that led to the fall of the corrupted old guard. We wouldn’t even have been able to do so, but it was the European way of life, the better civil liberties, the better legal protection, the better living standards, that were behind these events. And that’s why Ukraine and Ukrainians must have the right to determine their own future, including closer political and economic ties with the EU, the benefits of which are very clear for the citizens of Ukraine. Let me underline that the European Union is not making Ukraine choose between Europe and Russia. Instead, our view, is that it should be possible for Ukraine to develop closer economic and political ties with the European Union and maintain good neighbourly relations with Russia. But of course, it takes two to tango.
Finally, concerning Greece, I want to endorse what Jeroen said as regards the Eurogroup’s decision. We all know how difficult this adjustment has been and how great are the challenges faced by many Greek citizens still today. I would like to take this opportunity of being here in Athens to acknowledge the great efforts made by Greece over the past four years to repair the public finances and build a more sustainable model for growth and job creation.
There was no easy way to resolve the problems confronting Greece in 2010, given the scale of economic imbalances that had built up, over so many years. But what we can say is that European solidarity and Greek determination came together to ensure that a far worse outcome was avoided.
Today, the Greek economy is stabilising and we expect a return to growth and a gradual recovery in employment starting this year. To strengthen this recovery and boost job creation, it will be essential for Greece to continue to embrace economic reforms, maintain sound public finances and facilitate targeted investments. The European Commission will continue to stand by Greece and support Greece in creating the conditions for sustainable growth, as we have until now through the programme and through technical assistance provided by the Task Force for Greece.