We are delighted to provide you with a transcript of the Keynote Address delivered by Peter Kažimír, Minister of Finance of the Slovak Republic

 

Future, the entire Europe is talking about it.

About the future of the Union, of the Eurozone, future of trade, investments and last but not least future of finances.

A crystal ball would come in handy…that is not going to happen.

We need to do it the old-fashioned way… work things out.

Every single European country has its vision of the future. I believe, that the only way forward is to embrace this diversity, listen and make things happen, quickly if possible. Time, is a precious commodity.

We have created expectation and thanks to favourable political winds a window of opportunity has opened for us.

This window, however, has started to close – European reconstruction works are, unfortunately, not up to speed. A join road map for Europe, promised by France and Germany by the end of this year, is still in the air. And because we’re still waiting for a government to be formed in Germany, the odds are not good.

Is it possible that we have overestimated our capacities? Again? I hope not.

My humble suggestion would be to squeeze the maximum out of the current momentum and harvest low-hanging fruits – complete the banking union tomorrow, transform the European Stability Mechanism and keep drawing Europe’s future architecture – institutions, rules, carrots and sticks.

My position is well known on this.

I see the future of Europe in a more integrated European union, with the Eurozone as the core and the engine of that integration. What we need to achieve is a more resilient, better functioning Eurozone with a clear strategic direction.

I’m aware that the Eurozone-outs might be fed up with such statements, but we won´t have a prosperous Europe without a prosperous Eurozone.

It´s simple math/common sense really. With UK gone, the Eurozone countries take up around 85% of the EU GDP.

I understand and support engagement of non-eurozone countries in these discussions, they are vital but at a later stage. First things first… we need, within the eurozone family, take a sober look at things. Clarity of the club’s rules, rather than financial incentives, is the right way to go when luring the outs in.

Some things are not that complicated – like implementation of structural reforms and exercise of fiscal discipline. That’s the basic homework.

Subsequently, on the back of sustainable public finances and sound economic outlook, we can move on towards the smart integration of eurozone.

Fortunately, we don´t lack ideas and the discussion is rather dynamic. Our common goal is to take lessons from the past and complete what’s missing, preparing for the next storm now, while sailing in calmer waters.

Time for visions is now, let’s get to work.

There are several things we need to do in that respect:

  • complete the Banking Union – in order to break the bank sovereign nexus once and for all;
  • get the Capital Markets Union up and running – to enhance private risk sharing and provide businesses with greater choice of funding;
  • build a fiscal capacity – to compensate the loss of national monetary policy with a shield against asymmetric shocks;
  • improve our fiscal rule-book – to make our fiscal rules simpler and more predictable;
  • we need no-bailout rule and sovereign debt restructuring, even if some big players feel no love for that
  • design a smart and fair enforcement mechanism for these rules
  • and finally, LET’S BE REALISTIC, open-minded.

This is my vision of a complete, prosperous and stable eurozone. Many of you may disagree on some, or even all of its aspects. It´s natural that our views differ, but for the European project to survive and thrive, we need to compromise. It’s quite simple really.

We need delivery, no doubts about that. But we need to keep dreaming about the end-game.

When all this is clarified it will be much easier to debate the post-2020 financing of Europe, the role and capacity of the European budget – facing a major evolutionary phase with the UK leaving and cohesion policy redefined.

A narrow minded vision, let call it openly “Net contributors contra net receivers”, set us back in every conversation about the EU finances.

It’s time to move past that. Let’s focus on quality, rather than quantity.

New era is coming, marked by a shrinking EU budget. There could be a silver lining for the entire European Union, a natural necessity to boost efficiency of budget resources, add additionality – like financial instruments.

The increasing use of financial instruments in recent years, particularly after the launch of EFSI, is encouraging. This is the future. However, there’s still work to be done to make these instruments used more widely.

Let me be clear here, grant financing still has its merits, however, where possible it should be blended with other instruments.

Our homework is to learn how to use finances more intelligently: wherever there is value in it, blend-in private funds and use the private sector know-how to achieve public policy goals. To succeed we need to cut the red tape and further support public and private sector in designing projects.

When it comes to conditionality, my answer is yes, why not, but there needs to be a carrot for every stick. Implementing reforms takes courage as well as political capital.

The same goes for reforming the EU.

So, let’s break through all this “political ice”. What’s been in place for decades has to change and I’m confident we can deliver that.

 

Peter Kažimír is the Finance Minister of the Slovak Republic