PEDRO SOLBES AB Ekonomi ve Mali İşler Komiseri EU Commissioner Does the EURO-AREA Need More Economic Policy Co-ordination? The substantial improvement of the Union's public finances is one of the key achievements of EMU and a key pillar in our economic policy co-ordination. Contrary to suggestions that fiscal discipline would weaken after the launch of the euro, Member States have kept their commitments and pursued fiscal consolidation over the last two years. But success is putting our current system of co-ordination to a test. It is therefore in my view now the right time to reflect on how to refine our system of economic policy management. EMU is unlike any other current or historical monetary arrangement. A single monetary policy is combined with decentralised fiscal policies to respond to different realities:EMU members are different in size, economic structure, degree of economic development and political and social preferences. With enlargement this diversity will increase. EMU is giving additional impetus to the process of economic integration within the European Union, notably through tighter trade links and increasing financial integration. This reinforces the (positive and negative) spill-overs associated with Member States' economic policies. Their effectiveness can be enhanced by taking them fully into account through co-ordination. A particular case for co-ordination in the EMU policy-making framework exists for ensuring that the mix of fiscal and monetary policies is right both at MemberState and at the euro area level; they should be compatible and mutually supportive. Even if the individual spill-over effects were small in size the potential aggregate effect of fiscal policy behaviour in a number of countries could affect the euro-area as a whole. Therecent debate on the Irish case has focused on negative spill-overs. Let me say however that the argument holds both ways, i.e. that responsible behaviour by a Member State can have positive spill-overs. Economic theory also points to the risk of free-rider behaviour; in an EMU environment: one country can take a "wait and see" approach and leave it to other countries to take responsible action within a euro-area framework. In more extreme cases systemic risk spill-overs could also appear. There is therefore every reason to be vigilant at this early stage of EMU. All these arguments point to the need for greater co-ordination among Member States in order to ensure the appropriate mix (i) of monetary and fiscal policies, and (ii) ofmacroeconomic and structural policies. Let there be no misunderstanding. I am not calling for centralised economic governance of the euro-area with a uniform policy response to economic challenges. Far from it. However, for a decentralised approach to economic policy to work in EMU, economicpolicy co-ordination must lead to concrete policy action and deliver in terms of commitments made. There must be real substance to economic policy co-operation with a realistic account taken of the euro area dimension of national policy actions. Markets are now looking for a tangible demonstration that we can manage diversity. They need reassurance that: 1. there exists a common and transparent analytical framework for analysing economic policy challenges and devising policy responses; 2. adequate account is taken of the implications for the euro area of national budgetary policies; 3. Member States are committed to respecting the rules and to meeting agreed budgetary goals and economic reform objectives. In my view the Treaty provides us with the necessary instruments to fulfil our ambitions provided that we make full use of their potential. The Stability and Growth Pact, originally conceived to manage "crisis" with strict fines for irresponsible behaviour, has become our instrument for budgetary surveillance. The Commission's proposals on how to improve the quality of public expenditure, to promote more employment-friendly tax and benefit systems and to prepare for the challenges of the ageing population are now being introduced in the budgetary surveillance process and dominate the public debate at national and European level. This is an extremely positive development. But what is equally important is the gradual evolution of the other key instrument inEMU economic policy-making: the Broad Economic Policy Guidelines (BEPG). This iswhat I call the instrument for the "good times"; the instrument that reaches beyond budgetary policies and allows us to manage the long and, in the past, painful process of modernization of European economy through structural reforms. It is the instrument that provides the basis for regular policy surveillance; it is the instrument that allows us to review thepolicy mix year after year not only for the euro-area and the Union as a whole but also for each Member State individually. Of course any model is as good as its implementation. In our model of economic co-ordination the glue binding policies together is "peer pressure". While it is true that "peer pressure" has served us fairly well to date, there is a case to be made for enforcing it in line with our ambitions. Eurogroup meetings serve this purpose. While the informal nature of the Eurogroup meetings should be preserved in order to allow for frank and political debate among participants, I believe that more communication to the public of our common analysis and the precise commitments agreed in the Eurogroup meetings would benefit the working of the system. To me transparency is a key ingredient in "peer pressure". I also believe that we need increasing economic policy debate at European level in advance of national economic policy decisions. The Commission has demonstrated over the last two years that it is ready to makefull use of the Treaty framework in order to cater for the needs of our ambitious objective: "to reach long-term sustainable growth and employment and make Europe the most competitive economy in the world". The Commission is uniquely placed to carry out objective and neutral analysis, analyze the policy mix in each Member State and the Union as a whole and make ambitious policy proposals. But it is up to the Member States to makethe final decisions. The Spring European Council will provide political guidance for thisprocess. I am looking forward to the Stockholm Summit for Member States to confirm their commitment to the model. PEDRO SOLBES: "EURO BÖLGESİNDE EKONOMİ POLİTİKALARI KONUSUNDA DAHA ÇOK KOORDİNASYONA İHTİYAÇ VAR MI?" Avrupa Para Birliği (EMU), günümüzdeki veya geçmişteki parasal düzenlemelerden çok farklıdır. Bu tek para politikasında, merkezden uzaklaştırılmış mali politikalarla EMU üyelerinin farklı gerçekliklerine, yani farklı nüfus, ekonomik yapı ve ekonomik gelişmedüzeyine sahip ülkelere yanıt vermek amaçlanmaktadır. EMU, daha sıkı ticari ilişkiler vegiderek daha artan mali entegrasyon sayesinde, Avrupa Birliği'nin ekonomik entegrasyon sürecini daha da hızlandırmaktadır. Bu konulardaki politika çerçevesinde koordinasyona gitmenin faydası, hem Üye Devletler, hem de euro bölgesi düzeyinde mali ve para politikaları arasında doğru dengenin kurulması olacaktır. Mali ve para politikaları birbiriyle uyumlu olmalı, birbirlerini desteklemelidir. Ekonomik politikalarda işbirliği, ulusal politikaların euro boyutu gerçekçi bir biçimde ele alınarak hazırlanmalıdır. Günümüzde piyasalar, AB'de ekonomik politikaları analizetmek ve gerekli yanıtları vermek için ortak ve saydam bir analitik çerçeve olduğunu, ulusal bütçe politikalarının euro bölgesi üzerindeki etkilerinin göz önünde bulundurulduğunu, üye devletlerin bu konudaki kurallara uymaya ve bütçe hedeflerine ile ekonomik reformamaçlarına uymaya hazır olduğunu görmek istiyor. Sorumsuz davranışlara çeşitli yaptırımlar getirerek "krizlerle" başa çıkmayı amaçlayan İstikrar ve Büyüme Paktı, bütçenin denetlenmesi için bir araç haline gelmiştir. Komisyonun kamu harcamalarının kalitesini yükseltmek, istihdama daha uygun vergi sistemlerioluşturmak ve gittikçe yaşlanan nüfusun ihtiyaçlarına yönelik hazırlık yapmak konusundaki önerileri, bütçe denetim sürecinde ele alınmakta ve ulusal düzeyin yanı sıra Avrupa düzeyinde yapılan tartışmaların da temelini oluşturmaktadır. EMU ekonomik politikalarının oluşturulmasında önemli bir rol oynayan Genel Ekonomik Politika Kuralları (BEPG), bu politikaların düzenli olarak izlenmesi için bir temel oluşturur ve Avrupa ekonomisinin modernleşmesi sürecinin yapısal reformlar sayesinde gerçekleştirilmesini sağlar. Bu araçlar sayesinde, AB Antlaşmasında belirtilen "uzun vadeli sürdürülebilir büyümeye ve istihdama ulaşmak ve Avrupa'yı dünyanın en rekabetçi ekonomisi yapmak" hedeflerine ulaşılabilir.