Rehn: EU should heed voter resistance to tougher rules

The European Union should heed voter resistance to tougher rules on how nations manage their economies, outgoing EU Monetary Affairs Commissioner Olli Rehn said.

“I would be quite cautious of going beyond the current state of rigor of economic governance, because in order to make real serious progress, sustained progress of economic reforms, you need the support from your people,” Mr Rehn said.

Mr Rehn also renewed his call to follow through on existing commitments. High unemployment rates, especially among younger citizens, “can seriously dent our growth potential for some time to come,” he said in remarks to the Brussels branch of the European Movement Ireland organisation.

Less than a year after emerging from its longest-ever recession, the euro area is still battling with unemployment close to record levels. Fringe parties seized on the EU’s handling of the debt crisis as they won about 30% of the vote in May 22-25 elections to the European Parliament. Mr Rehn also won a seat in the EU assembly.

The Finn defended his message of ongoing fiscal consolidation, saying it shouldn’t conflict with efforts to boost output. Countries with high tax burdens are limiting their economies, he said.

“I don’t think the right message is we need to shrink,” Mr Rehn said. “We need to shift resources from the public sector.”

Current low borrowing rates can’t be counted on. “Markets may today view us rather favourably, but we know all too well that this can change suddenly and dramatically.”

For Ireland specifically, changes are needed on labour market policy, legal services and the healthcare sector, Mr Rehn said.

He also endorsed EU efforts to crack down on tax evasion, such as the probe announced yesterday of tax arrangements in Ireland, the Netherlands and Luxembourg.

“We have to continue to act intensively against tax fraud, against tax evasion and against excessive tax planning,” Mr Rehn said. “This was a very clear message from the people in this election.”

Rehn said his home nation and Ireland share a common history of republicanism, foreign-policy neutrality and other characteristics, such as influence from “a rather difficult eastern neighbour.” For Finland, this neighbour may have been “even more difficult,” Rehn said. “We have a bear on the eastern side of our border that is no teddy bear.”

— Bloomberg