The Latvian presidency of the EU council coincides with a period of slow growth and low inflation in the EU. Real GDP growth in 2014 is likely to be 1.3 per cent, before gradually accelerating to 1.5 per cent and two per cent in 2015 and 2016. Over the coming months, inflation is expected to remain low and increase gradually to one per cent in 2015 and 1.6 per cent in 2016. Promotion of growth will be a key goal in economic and financial policy for the presidency.
The investment package will be one of the most important tools in this regard, and our expectations are high. The commission has promised to come up with a proposal to establish the European fund for strategic investment by January. To make the fund operational by mid-2015 as planned, we will need to adopt the relevant legislation in a very short period of time. This plan will be one of the main tasks of the Latvian presidency, and we are committed to achieving the best result possible. The member states have already voiced a broad agreement on the issue, and we expect that this will be reinforced at the European council level.
If so, we will have a solid basis for the necessary legislation. I would like to hope that establishing the European fund for strategic investment as one of the key tools for promoting growth is broadly in line with the vision of the European parliament. The project can only see the light of day if and when we come to an agreement. However, it is clear that the fund is not a magic wand. The path to growth also requires favourable conditions for private investments, removal of legal bottlenecks that impede them, and structural reforms.
"The Latvian presidency of the European council coincides with a period of slow growth and low inflation in the EU. Real GDP growth in 2014 is likely to be 1.3 per cent, before gradually accelerating to 1.5 per cent and two per cent in 2015 and 2016"
The European semester - the EU's annual cycle of economic policy guidance and surveillance - is one of the means for promoting reforms. We will try to implement the proposals to improve this phase and the quality of discussion on structural reform. In particular, we support the idea of making the country specific recommendations more focused and the targets more realistic. More efforts should be made towards strengthening the national ownership of this process with better involvement of national parliaments and social partners.
The promotion of structural reforms through country specific recommendations might not always be sufficient, because some reforms are expensive and their implementation might be difficult without breaching the stability and growth pact. Therefore, we need to discuss to what extent the pact can encourage structural reforms that require substantial public investments.
I would support incentivising structural reforms by applying the articles which allow for a temporary deviation from the medium term objective for budget deficits or an adjustment path. However, this can only be done in cases where the implementation of reforms has a direct long-term positive budgetary effect, including the raising of potential sustainable growth. Only then will we have a verifiable impact on the long-term sustainability of public finances. Currently, this provision has been used in very limited scope and its broadening, in our view, is necessary and justified. At the same time, we think it is important to maintain the credibility of the stability and growth pact, and any watering down of rules is not in EU interests. Moreover, we expect to have a thorough discussion in the Ecofin council on these matters during our presidency.
The EU budget has a high priority in our agenda and we will pay particular attention to the revision of the multiannual budget, whose adoption has been delayed. To reach an agreement in time, all parties will have to make a collective effort with a constructive approach. If we do not, we will put at risk the implementation of cohesion, rural development, and internal security funds, which form the basis for growth by promoting investment in many member states.
"I would like to hope that establishing the European fund for strategic investment as one of the key tools for promoting growth is broadly in line with the vision of the European parliament"
Speaking of the EU budget, the most urgent issue in this regard is the adoption of the EU budget for 2015 - the delay of which is very worrying. Yet we have to remind ourselves that the problem of unpaid claims has been accumulating for at least four years, and it cannot be solved overnight. But, I am sure that with the right attitude, it will be possible in the years to come.
I welcome the achievements of the Italian presidency, particularly the implementation of a single global standard for the automatic exchange of tax information. It is a big step forward in tackling tax evasion. The next task, in order to implement the directive of administrative cooperation, is to reach an agreement on the savings taxation directive during the Latvian presidency. We have to ensure that the automatic exchange of information on various incomes across different legislations is done on the widest range of incomes. And we have to continue our work on the parent-subsidiary directive in order to resolve situations where large organisational schemes are used for aggressive tax planning.
Overall, we will do all that we can to prevent stagnation. Close cooperation between the parliament and the council is key to achieving good results.