The impact of the economic crisis on EU economies has resembled something of a roller-coaster ride over the last few months. No sooner had we got to grips with the mortgage and banking crisis that came to us from across the Atlantic than we were faced with an escalation of the crisis in Greece. A couple of weeks later, Europe and the rest of the world were facing a full-blown debt crisis. Our initial hopes that the crisis in the financial markets would not spill over into the ‘real’ economy were well and truly dashed.

It was therefore natural that the economic crisis was the main topic of the September seminar of the College of Commissioners in the Solvay library. We all agreed that partial measures would not get the EU out of the economic crisis. In the words of one Commissioner: “This approach has reached the end of the road.” The subsequent weeks, unfortunately, confirmed this negative conclusion. The Commission therefore came with a proposal for a roadmap which offered a complex but comprehensive solution to help Europe overcome the crisis. It was clear that the solution to the most pressing immediate problems would be found by focusing on the balance between the trio of Greece, the banks and the European Financial Stability Fund (EFSF). But making sure that we can avoid similar situations in the future means that it is also necessary to improve the management the Eurozone as a whole and to introduce measures that will re-launch economic growth.   

The most recent summit of the Eurozone leaders, after fractious negotiations, nonetheless came up with key answers to all the important questions. After tough negotiations, the financial sector agreed to write-off a large share of the Greek debt, while Member States put forward an increased aid package, which would lower Greek debt to 120% of GDP by 2020 – a proposal that was accepted by international financial institutions.

As regards the health of the banking sector, new recapitalisation requirements were set that must be fulfilled by the summer of 2012. The way in which these requirements must be met was also agreed: banks must use the financial markets to raise the necessary capital, with governments allowed to help if this is insufficient and the EFSF used as the last resort in case of systemic failure. Finally, Eurozone leaders also came to an agreement on boosting its fire power and flexibility.

In order to set the foundations for this strengthening of the Eurozone management, a package put forward by my colleague Olli Rehn will come into force in the first half of December. As far as economic growth is concerned, the Commission plans to draw up and speedily adopt measures to improve the use of the single market.

The reaction of the public, the financial markets and our international partners to the conclusions of the summit was overwhelmingly positive. Markets reacted with an unexpected rise, and there was a sense that Europe had finally found the solution to overcoming its problems. The council conclusions would also send a clear message ahead of the G20 summit, which was expected to focus on more global problems such as improving the balance of monetary relations, strengthening the International Monetary Fund, opening up of markets, and a unified approach to the management of financial regulations within the G20, where the EU advocated the introduction of tax on financial transactions.

The reality was somewhat different. The whole world was shocked by the announcement of the Greek referendum on the eve of the G20, which immediately cast doubt over whether any of the measures agreed at the Euro summit would in fact be implemented. The markets fell sharply and the Eurozone immediately became the central point of world leaders’ negotiations. The positive mood from the previous week evaporated, and was and replaced by drama. Widespread negative reactions underlined that Europe and the rest of the world was rapidly losing patience. The world economy, and with it the majority of European citizens, is suffering directly as a result of the political instability. And while the issue of the referendum was quickly sidelined, the economic and political consequences of the delay will be significant.

When I look ahead to when the dust has finally settled on this financial crisis, I think that one of the most important results will be the speeding up of the discussions on the architecture of the Eurozone and the EU as a whole. For the first time, leaders admitted the possibility that a Eurozone member could go bankrupt and the need for tighter rules on how to deal with ‘problematic’ members. I am convinced that some EU countries, in particular those in the Eurozone, will move towards faster and deeper integration, and on a scale that would have been unimaginable a few years ago. The aim of this integration will be to develop a truly economic union in tandem with the monetary one. This would indeed be possible under Article 136 of the Lisbon Treaty, which covers the individual provisions for those Member States whose currency is the Euro.

It is clear that obligatory integration will not be possible for everyone – not least the slower and less decisive members of the Eurozone.

At the same time, however, I can also imagine that some EU Member States will look to form a different group, focused on strengthening the single market rather than Eurozone integration.  This was indeed already hinted at during the pre-summit General Affairs Council, where the relationship between the 17 Eurogroup members and the remaining 10 Member States was widely discussed. It is my role to represent the Commission in this Council, and in a rather tense atmosphere I had to react to many questions about this EU 17/10 relationship and high expectations of the Commission from Member States with regards to the oversight of strict macroeconomic discipline and the need for further regulations requiring a change in the Lisbon Treaty.

Given the intensity of this debate, which will continue to rumble on in the next two summits, we can safely predict that there will be yet more substantial change ahead for the EU. Impatience in terms of deepening integration within the Eurozone will be very high. But if consensus on this issue proves impossible, the 27 EU Member States may be interested to consider the Eurozone as the politico-economic vanguard, moving at a faster pace towards the goal of closer integration but nonetheless remaining open to new members who are willing to accept the pace and extent of the changes.

Recent economic developments show that that the world needs a strong, united EU in order to maintain a fair global balance. But the EU can fill these expectations only if it becomes more strongly interconnected and deeply integrated. I believe that the current internal and external pressure on the EU will be a key to the creation of a significantly stronger Union.

I am deeply convinced that Slovakia is part of the vanguard, because we are part of the Eurozone, because Slovak citizens have a positive relationship with the EU and because it is vital for the benefit of our national economy. But any new European negotiations will require us to work in partnership with our fellow Europeans, to be fully committed and to have a clear and creative approach that is without prejudices.

The forthcoming election campaign will no doubt provide a platform for the debate about Slovakia’s place in Europe. I hope that it will show that there is a desire for a strong pro-European government which will guide Slovakia through this complicated period. Whether this happens will depend on what kind of Europe our country will belong to, and its role within that European framework.

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