The end of a year is always a time for taking stock. At the end of 2013, we can look back on the year when the EU started to emerge from recession. Green shoots are appearing – still fragile, but clearly visible.
It is clear that for many European citizens the times continue to be very tough. Nevertheless, as we enter the New Year, there are more reasons for Europeans to feel confident and heartened.
Not long ago, many perceived the break-up of the euro as a real threat. In fact, far from fewer countries using the euro, from January 1, 2014, there will be one more, as Latvia becomes the 18th country to adopt our common currency.
Two years ago, Latvia was just overcoming a very deep recession, supported by an EU-International Monetary Fund programme. Today, it is the fastest-growing economy in the EU.
Another country emerging stronger from a very difficult adjustment is Ireland.
On December 15, the country exited its three-year support programme, having decisively addressed the causes of the catastrophic collapse of its banking sector and real estate market in 2008. In the third quarter of this year, job creation in Ireland reached its quickest pace since 2007.
The examples of Latvia and Ireland are highly significant. They demonstrate powerfully that the strategy Europe has chosen to overcome the crisis is working. In essence, this strategy has followed the approach of extending solidarity in exchange for solidity. Member states in financial difficulties have been supported by the others.
This support is conditional on a serious commitment by those member states receiving it to address their accumulated imbalances, implement reforms and put their finances on a sustainable footing.
The process has been and continues to be very difficult for many citizens. Yet Europe’s support has helped to ensure that the impact of the crisis in countries like Greece or Portugal is far less abrupt and painful that it would otherwise have been.
There are encouraging signs elsewhere in Europe too. Spain will emerge from its financial assistance programme on January 23. Its banking sector is being repaired and important economic reforms are creating the conditions for a durable recovery in growth and job creation.
More broadly, since the summer, an economic recovery has been getting under way in Europe. We expect this recovery to gather speed next year. The latest figures on unemployment show that the trend is turning, and encouragingly, the highest rates of employment growth in Europe in the third quarter were in Ireland and Portugal.
Provided we stay the course of reform, Europe can look forward to a strengthening economic recovery
The Cassandras have been proven wrong. But we can certainly not claim victory yet. In much of Europe, unemployment remains unacceptably high.
There are three keys to emerging from the crisis stronger.
The first is that Europe must continue with structural reforms to create the conditions for reaping the benefits of free trade, enhancing productivity and innovation, and thus sustaining higher levels of economic and social welfare.
Second, Europe needs a well-functioning banking system to support investment and finance the necessary structural change. Fundamental pillars of Europe’s banking union are being put in place. This will ensure that our banks are solid and serve the European economy to support growth and job creation.
And third, we need a sound framework for economic and fiscal policy at European level. This autumn, the Commission for the first time assessed the euro area countries’ draft budgetary plans for 2014 – a major leap forward in economic policy coordination.
We have also been making good use of the other tools that have been put in place since the start of the crisis to coordinate economic reforms. Slovenia is a case in point: eight months ago, the Commission warned that the country urgently needed to get its public finances in order and tackle problems in its financial sector. We concluded in November that its budgetary plan for 2014 was compliant with EU rules, and the result of the stress tests of Slovenia’s banks showed that the country can move forward with the repair of its banking sector without financial assistance.
In short, all the efforts made by Europeans to overcome the crisis are paying off. To be sure, there is no room for complacency, for much remains to be done and more difficult choices and persistence will be required. But provided we stay the course of reform, Europe can look forward to a strengthening economic recovery in the coming year and beyond.
Viviane Reding and Olli Rehn are vice-presidents of the European Commission.