03 May 2012

László Andor: The key challenges of the crisis

Mr Andor said that the worsening situation reflects the predominant focus in the last two years on fiscal consolidation and internal devaluation, which has had a negative effect on aggregate demand. "We need an alternative approach, a new jobs-centred approach."

Austerity without growth is doomed to fail

Along with medium-term fiscal consolidation, financial sector repair and structural reforms, which will take a while to have an impact, we need to explore all avenues that can bring sustainable growth.

The high level of Member States’ debt was not among the main causes of the financial and economic crisis. It was rather a factor which made them more vulnerable and less able to respond when the crisis hit.

In the eurozone, other important sources of vulnerability were the deficiencies in the institutional design of the Economic and Monetary Union and the absence of mechanisms for counter-cyclical transfers between euro area countries or, initially, even emergency rescue mechanisms.

Since the crisis erupted, Europe has been trying to address these design flaws to some extent, although there remains a long way to go.

Some Member States have a larger fiscal room for manoeuvre than others, but it is clear that overall the fiscal room for manoeuvre is not enormous, so I am not suggesting we can just spend our way out of this depression.

But we must put the search for growth and jobs on a par with a concern for fiscal discipline and sound governance. That is why the EU’s strategy to turn Europe into the sort of continent that Europeans want to live in by 2020 is all about smart, sustainable and inclusive growth and how to achieve it.

Today’s varied but generally bleak economic outlook and the record high unemployment call for a closer focus on employment and growth priorities and determined action by the EU and the Member States. And we urgently need to take a fresh look at this.

The "Employment Package" which the Commission adopted two weeks ago responds to this urgency. This package identifies the most effective ways and tools for a job-rich recovery, and should be at the core of a future EU Growth Agenda which EU leaders will be discussing in the coming weeks.

Full speech

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