Danuta Hubner in the European Parliament

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The mechanisms of the economic governance , May 19, 2010

Strasburg

Prof. Danuta Hübner
European Parliament Plenary session
19 May 2010, Strasbourg

There is little doubt about the seriousness of the current crisis and the cost of use of unprecedented policy methods is very high.

The task of regulators and policy makers is to undertake actions that would allow both to restore equilibrium shattered by market failure but to correct failed government policies. This is being done but it is still to be seen how fast and through what policy measures EU member states will return to their paths of growth.

More regulation is not a guarantee for avoiding the risk of recurrent crises. It can even lead to less transparent markets and a more crisis-prone environment. As we have chosen the path of more regulation, it should go hand in hand with increased simplicity and reduced complexity of financial markets.

What is also clear is that fiscal and monetary policies are not substitutes for structural reforms. Structural reforms have to address underlying weaknesses of the European economy, sharply growing debts and deficits, ageing, highly probable new surge of inflation, risks generated by climate change policies, low productivity and lack of competitiveness. With less public money at the European and at national levels, more will have to be done. Hence, the efficiency of using public money will have to be higher. Business-friendly regulatory environment, efficient government, non-distortionary taxes, high labour participation rates, especially among women, good education system, research and innovation - all that constitutes a minimum core package of measures to bring growth, jobs and competitiveness.

Without doubt, the European winning strategy has to be based on fiscal tightening, but its focus should be innovation - the only way to boost productivity and growth in a sustainable way.

The European Commission and the European Parliament, should regain their strategic role, and go for brave European solutions. Both citizens and markets need more Europe.

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