Remarks by Commissioner Paolo Gentiloni at the press conference on the European Semester Autumn Package - Hoofdinhoud

The European Semester is the traditional exercise of coordination of our economic policies. Today, we take another step forward. We are bringing environmental sustainability fully into the picture alongside our other priorities of ensuring fairness, boosting productivity and preserving macro-economic stability.

Because when we say the European Green Deal i is our new growth strategy - we mean it.

Fundamental to this new growth strategy is the integration of the UN's Sustainable Development Goals into the European Semester. I want to be very clear on the fact that this is a process. With this communication we are in some way in a transition. It is a process, but the basis of the process are already in this document.

You will see this change already in the next round of country reports that we will publish in February. I want these to feature a strengthened analysis of sustainability challenges in each Member State.

Then you will see how the SDGs in the European Semester will be elements to be developed alongside the social pillar and the macroeconomic surveillance mechanism.

The recommendation we have adopted today for the euro area reflects this new vision for environmental and social sustainability, as well for the digital transition and the EU i's global role.

This recommendation provides precise direction for policies affecting the euro area as a whole. Because we need to stop thinking of the euro area as 19 separate economies, but as one economic entity in need of much greater policy coordination.

Of course, coordination does not mean uniformity. The challenges facing euro area countries remain very diverse. This is clearly reflected in our call for Member States with current account deficits to boost competitiveness and reduce external debt; and for those with large current account surpluses to support wage growth and foster investment.

Similarly, and this is another familiar message, we call on Member States with high public debt levels to reduce them - and for those with fiscal space to use it to further boost high-quality investments. We make a specific call to euro area Member States to support a fair and inclusive transition towards a competitive green and digital economy through tangible and intangible investment, both public and private. The review of our fiscal governance next year is clearly relevant for the former, the completion of the Capital Markets Union for the latter.

In case of a worsening outlook - and this is where the coordination part comes in - the euro area as a whole should have a supportive fiscal stance.

We also call on all euro area countries to support and implement EU actions to combat Aggressive Tax Planning and address a race to the bottom in corporate taxation.

All countries also need to strengthen their education and training systems and boost investment in skills, while pursuing other reforms to make labour markets more inclusive. The green and digital transitions are a tremendous opportunity that we must seize. But we all know they will also pose a big challenge for a great many workers. This recommendation is our way of saying to them: we are on your side. Nicolas will say more on these issues in a moment.

I would also like to stress the importance of our recommendation related to the completion of the Banking Union and the Capital Markets Union.

Ambitious progress on the European Deposit Insurance Scheme is key to ensuring that we have a truly balanced package when it comes to deepening the Economic and Monetary Union. This in turn is crucial in order to strengthen the international role of the euro and to project Europe's economic interests globally.

These policy actions are urgent in order to rebuild trust and to provide a boost to confidence in the euro area.

Lastly, let me say a few words on the Alert Mechanism Report. This report identifies those countries that have, or that may have, macroeconomic imbalances which could pose a risk to stability.

The good news is that we are not proposing any in-depth reviews for new countries. Our report concludes that the same 13 Member States which underwent an in-depth review one year ago should again be analysed. These are Bulgaria, Croatia, Cyprus, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Romania, Spain, and Sweden.

Risks to macroeconomic stability continue receding on the back of ongoing economic growth. But vulnerabilities persist: debt levels remain too high and some emerging trends require careful monitoring. Let me mention a few of these specifically.

Though the euro area's current account surplus has come down very slightly, it was still over 3% of GDP in 2018. This surplus remains the largest in the world, and is estimated to be around double the level suggested by economic fundamentals.

Unit labour costs have kept growing strongly, especially in central and eastern Europe and the Baltic countries, and to a lesser extent in the euro area.

Private sector debt reduction has continued, but its pace has eased, especially as regards household debt. In some countries, private debt burdens have increased where they were already high. In a few countries, high public debt ratios are not declining.

The banking sector is stabilising but challenges remain in a number of countries, where banks have relatively low capitalisation and profitability and relatively high ratios of non-performing loans. The outlook of ‘low-for-long' interest rates and weakening growth is adding to those challenges.

Lastly, house prices have continued growing at high rates and more countries risk become overvalued.

And with that I will hand the floor to Nicolas.