FRANKFURT (MNI) – The following is the second part of the text of
the introductory statement at the quarterly hearing before the Committee
on Economic and Monetary Affairs of the European Parliament in Brussels:

Governments can enhance the credibility of fiscal consolidation by
strengthening national budgetary frameworks and implementing structural
reforms to increase potential growth. In this context, I welcome the
European Commissions initiative for a Europe 2020 strategy and the
stronger role of the Eurogroup in multilateral country surveillance
which is overdue. At the same time, it is important that fiscal
surveillance under the Pact remains a process of its own right and that
the fundamental principles of the Treaty and the Pact are fully
preserved.

A successful exit from the strong fiscal expansion in the wake of
the recent crisis will require ambitious measures and a strong political
will regarding implementation. I am confident that European fiscal
policy makers will succeed in restoring the sustainability of public
finances. The adjustment efforts undertaken by the Irish government and
more recently by the Greek government can be seen as promising first
steps in the upcoming consolidation process. Policy responses to
imbalances

One of the main drivers of the financial crisis were the large
global external imbalances. These imbalances implied massive capital
inflows into deficit countries. Those inflows had partly been financed
by the issuance of financial instruments, whose value was shattered in
the turmoil. The imbalances reflected a lack of medium-term orientation
towards stability and sustainability of macroeconomic policies in key
deficit and surplus economies. The euro area did not contribute to the
build-up in global imbalances. Its current account has remained close to
balance over the years.

The crisis has induced a partial reduction in global imbalances,
but this correction appears to be largely cyclical. Some important
structural factors that led to unsustainable imbalances remain largely
in place. A risk that unsustainable global imbalances might re-emerge in
the period ahead can therefore not be ruled out. Ruling it out would
require rigorous policy adjustments in key deficit and surplus
economies.

The G20s decision to create a process of mutual assessment of its
members macroeconomic and structural policies is fundamental in this
respect. To be successful, this process requires that peer surveillance
is executed fairly and without complacency, and that the countries and
economies concerned have the will and the operational capacity to change
their domestic policies accordingly. These are necessary conditions to
pave the way for a better functioning of the global economy. The euro
area can enter this process from a positive standing, given its
medium-term orientation in monetary, fiscal and macroeconomic policies.

Let me conclude by recalling that macroeconomic imbalances are not
only confined to the global level but also appear within the euro area.
These imbalances remain a challenge, largely reflecting a lack of
adjustment in a number of Member States. It remains indispensable that
the countries concerned bring their monitoring of cost competitiveness
indicators, their structural reforms, and their fiscal consolidation
efforts more into line with the principles and rules underlying the
functioning of monetary union. This would allow euro area economies to
reap fully the macroeconomic benefits of EMU.

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