Yet again, European citizens returning from summer vacations are facing tough conditions. Unemployment, excessively high public debts and a still weak financial system has resulted in a slowdown of the economic activity in all EU member states.
To tackle the crisis, the EU has put in place a comprehensive strategy for growth, including structural reforms, fiscal consolidation at an appropriate pace, regulatory reform and crisis management measures.
There is no controversy about whether Europe needs a pragmatic growth strategy parallel to sound fiscal consolidation. Nevertheless, the situation in the public finances in many Member States makes it crucial to focus on reforms that contribute to higher growth and employment. Growth must not be a pretext for running up more debts but instead come from innovation, productivity and better targeted investments.
What Europe needs is smart growth policies with well-designed reforms that stimulate demand, improve competitiveness and contribute to fiscal consolidation. It is necessary to focus on productivity-increasing reforms that are crucial to improve competitiveness and ensure long-term economic growth.
Our countries have all gone through tough structural reforms during the last decades. We have come out stronger as a consequence:
• Sweden and Finland went through a number of reforms to come out of the crises in the 90’s. Structural reforms contributed gradually to increased growth and, along with the long-term reliable budget policy, were thus part of the explanation for lower interest rates based on regained market confidence.
• German governments reformed the labour market and invested in innovation and education to further increase its competitiveness. These reforms have given Germany a solid ground to meet the external shocks of the current economic crisis.
• Lithuania, Latvia and Estonia experienced dramatic drops in GDP in 2009, but have proven that it is possible to overcome the debt crises, increase competitiveness and return to growth. As the result of tremendous fiscal consolidation efforts, structural reforms and efficient use of EU structural funds, GDP increased in the Baltic States last year with 6-8 per cent.
Smart growth policies should aim at creating open economies with a vibrant exchange of goods, services, capital, knowledge and the workforce. To complete the Single Market, especially by creating a digital single market, and to further liberalise trade are thus crucial factors to get the European growth engine up to speed again.
Progress has been made, but a fully functioning internal market for services could add a further €140 billion to EU GDP. In addition, the free trade agreements that are currently being discussed, for example with Japan and USA, could add a further €150 billion to EU GDP.
Smart growth is growth from innovation and increased productivity, paving the way for high employment. Against this background, we urge Member States to act with determination with a view to fostering smart growth.
Audronius Ažubalis, Minister for Foreign Affairs, Lithuania, Michael Link, Minister of State, Germany, Birgitta Ohlsson, Minister for EU Affairs, Sweden, Urmas Paet, Minister for Foreign Affairs, Estonia, Edgars Rinkēvičs, Minister for Foreign Affairs, Latvia, Alexander Stubb, Minister for European Affairs and Foreign Trade, Finland