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04 September 2015

European Council: Speech by Eurogroup President Dijsselbloem

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The main topics of the speech were Greece and the importance of convergence for the EMU's smooth functioning.

Speech by Eurogroup President Jeroen Dijsselbloem at the Finance in Dialogue event in Alpbach, Austria

[...] Greece is in many respects lagging behind the positive outlook for the Eurozone. Almost all countries are leaving the crisis behind. Eurozone-averages on growth, employment and deficits have all improved and continue to do so. Only a year ago the eurozone was considered a liability to the global economy, now it is one of the stronger regions internationally. [...]

The potential growth in the eurozone is not high enough, our capacity to adjust and compete is not good enough. In order to strengthen our monetary union economically and politically we need to restart the convergence-machine. [...]

Now it's time to restart the convergence process in order to strengthen the eurozone.  

It's no coincidence that per capita GDP development is expected to be above the eurozone average in countries without economic imbalances. [...]

It's a legitimate question whether the lack of convergence is a problem for the eurozone as a whole. Does the discrepancy in income levels put the monetary union in jeopardy? Can the eurozone survive despite diverging member states? Maybe it can. But it would be difficult to stop public support from unraveling either directly or indirectly because of increasing economic differences. Public support is the basis for our work on achieving sustainable growth and preserving the European social model. In the Eurogroup we are very aware that the EMU's existence is justified only as long as people are convinced it enables them to build a prosperous life. Without that support, the union has little in the way of foundations.   

There are of course other, more economic arguments for fostering convergence. Let me mention three I see as especially compelling.

Firstly, within the euro area business-cycle symmetry seems to be higher for countries with comparable income levels. This increases the effectiveness of monetary policy. Secondly, the policies that stimulate convergence in our union also strengthen the resilience of its member states to economic and financial shocks. And thirdly, our internal market makes it possible for the eurozone as a whole to benefit from a higher real income in individual member states.  [...]

The tax burden on labour is a good example of an area in which we have a lot to gain. As you know, the tax wedge in euro area member states is among the highest in the world. This reduces the incentive to find a job and to hire new staff. Shifting the tax burden away from labour will boost growth, external competitiveness and employment. [...]

As mentioned, we've reiterated the importance of convergence for the EMU's smooth functioning in the Five Presidents' report.

Stepping up economic policy coordination in the eurozone requires political ownership. It should be a concerted effort, in which the member states wave the baton as much as the European Commission. I will promote these discussions in the Eurogroup to help identify the policy areas which are essential for real convergence. [...]

After a period of crisis management the Eurozone has come out of the crisis in a strong way. The situation in Greece has not damaged the recovery path of any of the other countries. We have build a new fiscal policy, the ECB has done “whatever it takes”, we have realized in record-time a banking union which has made a successful start. Now we must deal with our structural issues. To become once again a leading economic region.

Full speech

© European Council

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