The Prime Minister has written a letter to Swedish Prime Minister Fredrik Reinfeldt on 27 October 2009, ahead of the European Council meeting later this week.
Read the letter
Dear Fredrik
Our meeting this week takes place against the backdrop of rising unemployment and sluggish growth. For all of us restoring strong, sustainable and balanced growth remains the most critical challenge we face.
Otherwise we risk a decade or more of retrenchment, low growth and high unemployment.
So this is an important moment for Europe. We must seize this opportunity to review progress in implementing the growth strategy agreed by the G20 at Pittsburgh and, as President Barroso has argued in his manifesto, show how we - as the world’s largest exporter - can play our part in leading the global economy out of recession.
Through the active co-ordination of our exceptional economic stimulus measures, we succeeded in stabilising financial markets, supporting demand and averting a more severe contraction. Our task now is to build on and deepen this cooperation by restructuring our economies to meet future challenges. If we fail, Europe faces low growth and high unemployment for years to come.
The challenge
The most serious of these challenges will be the risk of much lower world and EU growth as a result of a drop in consumption in the US and other economies, including in Europe. Within the EU, the Commission has noted that current account imbalances have risen to an ‘all-time high’. The gradual reduction of these imbalances could lead to further loss in demand across the EU.
The Commission has forecast that investment will contract by 10% in 2009, with an expected loss of 8!4 million jobs across Europe. At the same time, potential growth in the Euro area has been on a downward trend since 2000, slowing from 2% in 2000 to 1.6% in 2006. As a direct result of the crisis, the Commission now believes that potential growth will be just 0.7% in 2009 and 2010, recovering to only 1.5% in subsequent years. Such an outcome would not be acceptable for Europe - so far from being an engine of world growth, Europe would once again lag behind, damaging the living standards and prosperity of all of our citizens.
Our response
So we must now put Europe on a different course. We need - as a matter of urgency - a new European compact for jobs and growth to tackle the key concerns of Europe’s citizens at the same time as we take steps to reform the effectiveness of our institutions. As we approach the start of a new Commission I believe that Europe’s leaders - the European Council - need to establish for this new Commission a new, explicit and urgent economic mission - based on six central priorities.
The first step is to maintain our stimulus until the recovery is secured. While it is right that we plan our exit strategies now, we cannot put growth and jobs at risk by premature withdrawal of the extraordinary measures we have all put in place.
Second, Europe must focus on creating jobs and equipping our workforce with the skills they need to succeed in the jobs of the future. We need to set an ambitious, yet realistic, target to create 10 million new jobs by 2014, ensuring that 2 million of these jobs are in low-carbon industries. Our objective should be to increase the number of people in employment through the use of flexi-curity measures such as active labour market programmes. And we should make better use of EU funding and EIB lending to invest in our future skills needs. Free movement of labour across Europe must be facilitated by improving information and advice on job opportunities and recognition of qualifications in other EU countries.
Third, we need to support sectors that will deliver future growth in Europe. An EU low-carbon sustainable business strategy would help create a global carbon market, unblock commercialisation of green technologies and channel investment into low-carbon resource-efficient infrastructure. We must do more to support advanced manufacturing, expanding European technology platforms and increasing the use of public-private partnerships at an EU-level. And to fully exploit the potential of the digital economy, we must enable universal access to broadband and encourage greater investment in next generation networks.
Fourth, we need to do more to support Europe’s businesses, including by removing the remaining barriers in the single market. Services hold the key to future growth, so we should further modernise legislation, including business and commercial services, and provide companies with streamlined access to markets. We must enforce the rules of the single market, and support the work of Mario Monti in relaunching the single market as the cornerstone of the EU. To deliver on our pledge to reduce burdens on businesses by 25% by 2012, we must redouble our efforts to regulate more effectively and more rigorously assess impacts of draft legislation.
Fifth, there must be faster progress in opening up global markets to trade. We should continue to work for completion of the Doha Round in 2010. But in the absence of a multilateral deal, we must step up bilateral negotiations, including with India, Canada and Asean, which can complement Doha. The ambitious EU/Korea trade agreement will create up to €19 billion in new export opportunities for EU firms.
Finally, we need to go further in strengthening our banking system. At the G20 Summit in Pittsburgh, Europe led the global effort to agree new global rules to put an end to unacceptable risk-taking in financial markets and to strengthen our financial institutions so that they can play a full role in supporting sustainable economic growth. Europe can and must continue to lead, supporting the development and implementation of new rules on capital and liquidity, ensuring our banks follow new standards for responsible remuneration, and taking further action to clean up bank balance sheets to maintain stability and ensure a resumption of lending. And we must also urgently establish new rules requiring systemic financial firms and supervisers to develop effective recovery and resolution plans. We must also continue our work to strengthen the supervision of financial markets and institutions in Europe, agreeing by December a comprehensive new system of supervision in line with decisions of the June European Council.
Together, these actions constitute a progressive and ambitious compact for strong, sustainable and balanced growth in Europe. Through coordinated and collective action, in Europe and globally, I believe we can ensure a strong recovery that delivers jobs and prosperity well into the future.
I look forward to our discussions.
Yours sincerely
Gordon
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