Ladies and gentlemen,
It is an honour for me to speak to so many of you about European integration. Poland is the right place for this topic. Your country played a historic role in bringing down the Iron Curtain. Pope John Paul II was a leading actor in uniting our divided continent. For this, he was awarded the Charlemagne Prize in 2004. Today, Poland is still at the heart of Europe. Donald Tusk, the Polish President of the European Council, is convincing evidence of that fact. Unifying Europe is a topic that has long been very close to my heart.
It is particularly close now that I manage the European Stability Mechanism. The ESM provided the rescue loans to the countries that ran into trouble during the euro crisis. We provided a crucial contribution in rescuing the euro. Today, Europe is a relevant player next to other global powers such as the U.S., Japan, and China. But where the European economy represented 32% of the global economy in 1970, that share now stands at 23%. By 2050, it is projected to be just 9%. Now imagine what the numbers look like for individual countries! Europe risks losing relevance on the global stage, unless we join forces. And despite the many doomsayers, I argue that the EU and the EMU are unprecedented historic successes.
The single currency is one of its main achievements. Exchange rate costs of some €20 to 25 billion per year have disappeared. The single market works much better with the euro. Monetary policy is determined by conditions in all 19 member states – and not just by the domestic situation in Germany, as was effectively the case until 1998. At the height of the crisis, the survival of the euro was widely questioned. But the EMU countries provided financial solidarity to members that needed it. The programmes of the EFSF and ESM were the biggest of their kind that the world has ever seen. My institution wasn’t the only one that played a role.
The European Central Bank, the European Commission, and national governments also played their part. Europe has come out of the crisis stronger than before. Let me first look at that progress achieved in making our union more robust. My own institution, the ESM, is a good example. It’s a firewall to protect countries if they lose market access. We have a lending capacity of €700 billion. During the last five years, we have disbursed €255 billion to five countries. That’s about three times the amount the IMF lent out globally in the same period. We are one of the biggest issuers of euro-denominated bonds. Without 2 the ESM, some countries would probably have been forced to leave the euro.
That would have had dramatic and unpredictable consequences both in financial markets and for the economy. Countries borrowing from the ESM need to implement unavoidable reforms – often painful – in return for their emergency financing. As a result, they have reduced unsustainable fiscal deficits and restored competitiveness. This approach is working. The Irish economy grew by 7% last year. Unemployment was cut in half. Spain had more than 3% growth, and strong employment gains. The ESM helps countries return to debt sustainability. Our paid-in capital is above €80 billion, which gives us a very strong credit rating.
This means our funding costs are low, currently below 1%, and we pass these on directly. The IMF charges three to four times more. Our favourable rates lead to substantial budget savings for programme countries. The Greek budget, for example, saves around € 8 billion every year because of it, or 4% of Greek GDP. A second achievement after the crisis is the strengthened economic policy coordination and surveillance in the euro area. Let me mention in particular the new Macroeconomic Imbalances Procedure. Countries have also given the Commission additional powers to enforce our new rules, and I do encourage Brussels to make good use of this.
page source http://www.esm.europa.eu/index.htm
