SPEECHES AND STATEMENTS

Speech by President Rosen Plevneliev at The State of the Union Conference 2013, held in Florence, Italy

Ladies and Gentlemen,

Dear friends,

Thank you for the opportunity I have been provided to speak in front of you and share some thoughts about our Union and the way we navigate through turbulent times.
It has been five years since the crisis began and it is unlikely to end any time soon. It started as a financial, it grew into a political, a social and ultimately into the most difficult one to solve – a debt crisis and crisis of trust and confidence.

The complexity of this crisis makes it unique in our most recent history. There is no simple solution, there is no ready-to-use recipe. We need to find the answers…on the move with limited time and resources available. We act as politicians, but we also act as crises managers.

We have on our radar screen today many structural deficiencies and imbalances in the economic and financial architecture of Europe and the Member States - irresponsible financial practices, unsustainable levels of public debt, low competitiveness on the national and regional level - the list is long. But how did it all happen? When? We are talking about and preaching for growth today, but we had been growing so strongly for decades until 2007 by more than 3 % a year on average in Europe, in my country by even 6 % a year. What are the lessons learned from this period of strong growth? The First lesson is: When you grow, make sure you build reserves for a soft landing in future crises. My grandmother used to tell me “In good days, my boy, save money for bad days”. But many banks, families and governments have consumed on a maximum, without building up any reserves. This was not the case in my country, as we have learned from a very strong financial crises that hit us in 1997 and we have constantly put efforts into reducing our public debt from 105 % in 1997 to 16 % of GDP today and building up a fiscal reserve. That has helped a lot in the bad times after 2008. Here is another lesson from the strong growth period until 2007: When you grow, make sure you make a progress too. Bank portfolios were expanding rapidly, but at the end was it a progress? Did they make a real profit or a virtual one? Real estate prices in Germany for 10 years went up by 18 %, in Ireland by 180 % - 10 times higher. When the crisis hit, the German real estate market was stable, the Irish was falling from the 10th floor. Some countries and sectors were growing on a sustainable base while some others inflated greatly. In order to make a progress, they had to fall, to reach a stable ground so that they can grow again.

Every crisis teaches us lessons. The Lessons learned are no guarantee that another crisis won’t hit, but they help a lot to soften the blow we suffer next time.

To wrap up the reasons for our problems today: the way you grow programmes the way you fall afterwards. Europe has lived and grown on a credit for way too long. European families, companies, mayors, regions, governments, states have spent for decades more than they have produced. And now they need to rebalance. It takes time. That’s all about sustainability – after eating too much, you go on a diet. After eating too much for decades, you go on a very long diet. That’s healthy and sustainable.

So there is a lot of work to be done and it is painfully hard, but we should keep moving forward.  There is no quick and easy solution but there are wrong and right decisions. Over the last few years the EU adopted important reforms. Member States and the European institutions agreed on a number of measures to reform European economies - reinforcing economic governance and budgetary discipline at the national level, building a stronger banking sector in Europe, increasing competitiveness, promoting economic growth and employment.

But implementing reforms takes time and achieving positive results takes even longer. And when you are running out of time and people start losing patience, it can be really difficult. Many European governments have already paid a heavy price. But no matter how hard it is, we should not give up. What we have achieved for the last few years should not be neglected. In 2013 we will continue to deliver on our strategic priorities for a stable and integrated Europe!

There is an ongoing debate about growth and austerity. I don’t like the word austerity but I like very much the word fiscal discipline. Let me be clear: fiscal discipline is not an objective in itself, it is a prerequisite for sustainable growth. Some declared that the era of austerity is over, but the era of fiscal discipline should continue. 

Growth doesn’t just happen. There is no magic formula to all of us. Brussels can’t just serve  us growth on a silver plate. Before you grow, you need to create the potential to grow – which means reforms. We should implement custom-made reforms on the national level to help our economies. What may help one member state to restore growth won’t necessarily work for another.  But we all need a sound basis to build upon. That’s where financial discipline combined with smart policies for competitiveness and employment is unavoidable! It is a common knowledge that once the foundation is stable, the structure can grow high and it will hold! If you grow on pump, without building stable fundaments, you will fall heavily sooner or later.

You cannot create lasting growth simply by printing money or running up more debt. You have to gradually put in order what isn’t in order, an European Finance Minister said and he is right. Some impatient politicians see more debt as an answer. They suggest that the debt-ridden continent needs to stimulate growth at all costs – even including more debt.  Others object by saying that abandoning the efforts to stabilize the deficits will lead to renewed pressure on the euro. Interest rates have remained reasonably low for the past six months, but that could change very quickly, with uncontrollable consequences for heavily indebted governments. And they are right.

Here is another important lesson from the crisis – you cannot live for decades on a credit. At some point someone has to pay the bill.  We had better make sure it is not our children who pay the bill. Which makes so important that the culture of stability and the culture of responsibility will dominate on all levels in Europe today.

The financial and economic crisis has continued much longer than expected and leads to dramatic  social consequences.  Frozen income and growing cost of living combined with a high unemployment rate, contribute to a difficult social situation for million of citizens throughout Europe and in my country. Today the most important issue for the national governments and the European Union is to regain the trust of those who are disillusioned and need help. Many citizens have the feeling that solidarity in Europe is a unilateral thing, public support for reforms is dramatically declining, many citizens believe that there is too little leadership and ability to act and that the EU gets lost in the bureaucratic details and does not work enough on important matters such as employment, competitiveness or environment. This is not true but we can do better. Targeted programs to support SMEs, link universities and business, educational and administrative reforms combined with e-government solutions, investing in infrastructure and energy efficiency will do well for all and bring definitely positive results.

The launching of long overdue structural reforms, opening up product and services markets, reducing the administrative burden for firms and citizens, speeding up the approval procedures, increasing the efficiency of the civil justice, improving the business environment, making the labor market more inclusive and dynamic, restoring the market and the investors’ confidence and developing credible fiscal consolidation programmes with targeted actions to support the economy always make sense.

A key condition for achieving sustainable development of the European economy in the long-term is to address socio-economic differences between member states and to increase the convergence process between European regions. Strengthening the economic, social and territorial cohesion of the EU is a prerequisite for sustainable development in the long-run. Cohesion policy is a pure growth policy and it should be further strengthened.

When resources are limited we should choose our priorities carefully and wisely. We must focus our efforts on a few key areas with potential for growth, employment and competitiveness.

Completing the Single European Market should be one of them. Unleashing its unused potential could contribute significantly to the collective objective of bringing European economies back to recovery.

The EU 2020 strategy is good, but we need to plan further, to widen our focus. We need to set ambitious goals in the field of innovation, education and research that go beyond 2020 so that Europe remains one of the leaders in this tough race for the technologies and products of the future.

Dear friends,

Today we are so focused on fighting the crisis that we sometimes forget what the European Union is all about and even the principles and values that we share and stand up for. In our quest for answers to the economic challenges we shouldn’t lose our moral compass. We should not forget the legacy of the founding fathers.

Yes, we have problems, but we have values. One of them should be the free movement of people and labour. Do all politicians in EU today adhere to this core value of our Union? Unfortunately, the answer is no. Here is an example: Recently we have been observing an active campaign in four member states against Romanian and Bulgarian Roma, blaming them and branding them as social criminals. I will not be surprised if arrogant populists soon propose that we should mark them with a star, like they did with the Jews during World War Two. Haven’t we learned our lessons from the past? Every member state is free to adjust its social system, but if those politicians who ride the high tide of populism and play with people’s concerns succeed by infringing basic human rights and rules of our common market, the European Union will be heavily damaged not because of the Roma, but because of those who are afraid of them.

Tough times require tough decisions. In the 20th century and before when it was difficult, when there was no other decision, we took a political decision.  The Political decision was a symbol of the decision. Unfortunately it is not the same today. Sometimes a political decision is no decision at all, sometimes we delay and shift uncomfortable decisions to the next. A business-like approach, clear action plans, addressing the problems and producing solutions – this is what we need. Today we have to take some important political decisions about the euro as a common currency, about our enlargement process, about the different speeds in Europe, about our budget, but also about our brand, image and our ambition and role in a fast changing and developing world.

Some might think that the Euro is a weak currency, but if we take a look at the exchange rate to the dollar, we get the right answer. The Euro is a successful project, not a matter of survival. The world trusts the euro. We trust it too. We are improving the coordination of our finance, tax, economic, infrastructure, research and science policies. No country wants to leave the currency union and nobody should be forced to leave. Even the mode of thought that it should get better for all, if some Southern European countries leave the currency union is wrong. It’s not good for the Germans and it’s not good for the Southern Europeans. The thesis that the new currency’s devaluation as consequence of withdrawal from the union, will help, is just cynical. The consequence that everything in Greece, Cyprus or any other country will get cheaper is just a mischief. With those countries’ import quota of today, it will take a generation for the domestic industry to adjust the loss of the purchasing power caused by the jump in prices of imported goods. So this is a bad decision, it’s a pure populism.

The difficulties Europe is facing today should not be a valid reason to hinder enlargement process. To continue the EU enlargement process, based on our core values including good neighbourly relations and sharing our common history is the only way to create a region of stability, prosperity and free movement. And that‘s what EU is all about.

During the crisis the brand Europe suffered. But we don’t want to be a symbol of failure or close ourselves in our own troubles, to be divided and weak. The European Union should be more ambitious. It depends on the European Union to be a global player, even the biggest and most influential one. Look at what we have achieved after World War Two. We have witnessed an unprecedented transformation in Europe for peace and prosperity. We gave a unique example for the world to follow. From a continent divided by wars and conflicts to the biggest economy, the best and peaceful place to live on the planet. We have started two projects of historical importance for the world in the last 20 years - the euro as a common currency and spreading democracy east. Twelve countries already joined, Croatia is the next to come, which is a huge success for Europe and an example for the next to follow. Look at the remarkable progress in the Balkans. Fifteen years ago there were bombings, there was a war. Today borders and visa restrictions are falling, highways, railways, bridges, are built to connect and bring people and cultures together. Without the European Union of 27, soon 28 and the common currency, Europe would be divided, countries weak and isolated, the market small and difficult. Every country would be less competitive, every nation less prosperous. So we have achieved a lot, but we are in the middle of our trip and there are problems to be solved. And this is [a - ??????] good news, otherwise it would be boring and too easy for us. Let us adjust wisely our speed and direction and continue this journey to the future of our Union.

Thank you for your attention.