These are tough and trying times for Europe and its citizens. Following an unprecedented financial crisis, the global economy has deteriorated sharply, leading to rising unemployment, increased protectionist tendencies and growing economic uncertainty. Under the leadership of the French and Czech European Union presidencies, the EU has acted decisively to avert a financial meltdown. But given the scope of the challenges we face, much remains to be done.
When Sweden takes over the EU presidency next month, the economic and financial affairs of Europe will be among our priorities. Our first economic objective will be to manage the EU’s efforts to combat the downturn. Our starting point will be the current agenda for growth, competition and employment. Two challenges stand out: restoring the functioning of, and confidence in, financial markets, and countering the negative impact on employment and growth. To address the first of these issues, we need to continue working on the design and implementation of schemes to restore credit supply. This is imperative if the EU is to return to sustainable growth in the short term.
We will also have to tackle the further dramatic increase in unemployment that we know will occur. We therefore welcome the European Commission’s recent proposal to retrain workers and help them start their own businesses. Active labour market policies will be particularly significant in maintaining employability, not least to prevent the re-emergence of protectionist pressures. How we meet the labour market challenge today will largely determine the growth potential of the EU. Preventing unemployment becoming entrenched is therefore crucial.
Strengthening financial market supervision and regulation is our second main objective. We must heed the lessons of the financial crisis and make every effort to reduce the risk of similar problems recurring and harming future generations. Initiatives to establish a new structure for European financial sector supervision, as proposed by the de Larosière report and most recently the Commission, aim to enhance the ability to detect threats to financial stability. We will seek political agreement on these.
A third important objective relates to the long-term sustainability of public finances in member states. The current downturn has put significant pressure on national budgets, with increasing deficits and escalating debt. We are concerned that budgetary discipline was not observed in the good times; the results are clear now.
Budgetary discipline and sound public finances are essential to foster economic growth. Furthermore, we need to formulate a strategy on how member states can start to reverse their large deficits, in line with the stability and growth pact, and prepare to meet future demographic challenges.
The Swedish presidency will also involve preparations for the Lisbon Strategy on economic development after 2010. It is clear that Europe needs a revitalzed strategy for sustainable growth and full employment – a strategy to transform our Union into an economy that will reap the benefits of globalization. Specifically, this means making work pay, promoting investment in human capital and research, advancing external and internal openness, and further improving the environment for business and innovation. The positive impact of greater labour force participation on growth and welfare must also be emphasized, especially in the case of women, whose employment rate is currently on average 14 percentage points below that of men in the EU. Greater access to affordable childcare and tax systems favouring labour market entry will boost the employment of women. Most importantly, the successful implementation of the Lisbon strategy requires more efficient benchmarking and evaluation, and robust institutional frameworks underpinning increased productivity and long-term growth.
We look forward to pursuing this economic agenda during the Swedish presidency, with our fellow EU governments, the Commission and the European parliament. It is an ambitious programme but, with hard work and strong political will, progress can be made. Together we can restore the basis for growth and stability in Europe and bring hope and prosperity to its citizens.
This article was originally published in the Financial Times on Friday, June 5th and was republished by The Local with permission from the Prime Minister’s Office.