Mission Chiefs have returned to Athens. The aim of the mission remains to conclude the first review of the programme as soon as possible. Friday's Eurogroup in Amsterdam will be a good opportunity to take stock of progress...President Dombrovskis.

Brussels, 19 April 2016                        European Commission - Speech

'State of play of the economy' - Remarks by Vice-President Dombrovskis

I wanted to use the opportunity following the IMF/World Bank Spring Meetings in Washington to update you today on the state of play of the economy.

In Washington, we had an opportunity to discuss the IMF's view of the global economy.The IMF's World Economic Outlook forecasts that the modest cyclical euro area recovery will continue in 2016 and 2017, but the Fund revised its projections downwards. The downward revision reflects the weaker-than-expected global outlook. The IMF noted that weakening external demand will be partly compensated by lower energy prices, a modest fiscal expansion, and supportive financial conditions. We broadly agree with this overall assessment and let me add that regarding the growth in Europe, the risks are on the downside, although we do not expect major changes on our macroeconomic scenario when we are updating our forecast in early May. Potential growth is expected to remain weak, as a result of crisis legacies, aging effects, and slow total factor productivity growth. We broadly agree with this overall assessment.

During the spring meetings in Washington, there was a broad consensus that monetary policy alone cannot solve structural problems of our economies, so we need a renewed commitment to structural reforms. Speaking in Washington, we also welcomed progress made in the fight against tax evasion and look forward to taking the discussions forward in Amsterdam. The Commission has just addressed an information note on our proposals in this field.

Finally, in Washington, we also held constructive talks on Greece. Mission Chiefs have returned to Athens. The aim of the mission remains to conclude the first review of the programme as soon as possible. Friday's Eurogroup in Amsterdam will be a good opportunity to take stock of progress.

Let me remind you of our own upcoming procedures as regards European Semester. We are now expecting Member States to submit their National Reform Programmes and their Stability Programmes for euro area countries and Convergence Programmes for non-euro area countries later this month, by the end of April. The Commission will then issue its spring economic forecast in early May.

Based on these programmes, on our forecast and on the final 2015 fiscal data from Eurostat, the Commission will assess later in May each Member State's obligations under the Stability and Growth Pact. We will also present our proposals for a new set of country-specific recommendations, outlining the key challenges to be addressed in each Member State.

Let me provide some remarks in the context of the Post-Programme Surveillance Report for Portugal which was published yesterday. The Commission's position is well known. It is also reflected in the country report published on 26 February and it remains broadly valid. 

What was published yesterday is a report from a staff mission in Lisbon, as part of the so-called "post-programme surveillance". Such missions are foreseen in the EU legislation for all Member States having exited financial assistance programmes.

On the fiscal situation, yesterday's report confirms the Commission's Opinion of 5 February, which says that based on the Commission's 2016 winter forecast and its assessment of the additional measures announced by the Portuguese Government on 5 February, the Commission considers that the government's plans are at risk of non-compliance with the provisions of the Stability and Growth Pact. There is nothing new here.

On the reforms, the challenges are also known. In particular rigidities remain in the labour and product markets and the wage setting system should be improved to ensure that wages move in line with productivity gains. This was already said in the country specific recommendations addressed by the Council to Portugal in July 2015.

I would like to take this opportunity to clarify a few things on the banking sector. First of all, the role of the Commission: The Commission does not impose solutions on Member States when it comes to banks in difficulties. This is a choice of the relevant authorities and is regulated in the EU bank recovery and resolution directive. However, if a rescue operation involves State support measures, the Commission must make an assessment under EU State aid rules and certain conditions may apply. These rules apply to all Member States and regardless of the nationality of the banks. A final word on non-performing loans: As we have mentioned in several Country Reports for Portugal in the context of the European Semester, this is a very important issue which is weighing on the banks possibility to finance companies and support growth. It is not for the Commission to decide how Portugal eventually decides to address this matter, but we are certainly at the disposal of the Portuguese authorities to help identify appropriate solutions.

Let me conclude by saying that for Portugal as for all Member States, there is a process in place. Member States are expected to present national programmes these days, which This will be the basis for our assessment later in May.

Thank you.

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