Mrs. Merkel. Good afternoon. It gives me great satisfaction to see Mariano Rajoy here with us today, as President of the new Spanish Government, on his first official visit to Berlin. We have known each other for a long time, in the European People's Party, as well as through other contact and exchanges.
Today we have looked at two main areas: on the one hand, we agree that relations between Spain and Germany are very friendly, very close and there are very close ties in many areas, not only through the European Union but also through our joint responsibility as members of NATO. We also have the same conviction that sanctions against Iran should be toughened.
There are thus many points of cooperation between Germany and Spain, but of course the main subject of our talks has been the situation in Europe and in the Eurozone, as well as the economic situation.
The President of the Government informed me of the programme of measures in Spain. Mariano Rajoy has presented the measures undertaken by the Spanish Government. For my part, I should say that we are hugely grateful for this and we are following it with deep respect. Sometimes these steps are not at all easy and we thus wish the Government every success in all the efforts that it is making at the moment.
On behalf of Germany, I have told him that we are united in Europe, but we are also united in the Euro. We seek a stable and successful Euro, and this can only happen if each and every one of us is successful. That is why it is so important that next Monday, at the European Council, we conclude the fiscal agreement; but it is also important that this extraordinary Council tackles growth and employment. Each country will present its proposals and we will compare the most positive experiences with the most negative experiences. I believe that if Europe wants to convince, that means that the European citizens see a little ray of hope both at a European level and also at a personal level. And this is above all true for young people, the majority of which are unfortunately on the dole in Spain.
But I am optimistic after this meeting and I am convinced that there will be very good cooperation between us. We will have a very fluid exchange of experiences and learn from each other. That is why we once again welcome you here to Berlin, and I look forward to positive and close cooperation.
President of the Government. A very good afternoon. I would like to start by thanking Angela Merkel for the warm welcome she gave us, to me, as President of the Spanish Government, and to those who have accompanied me here.
It is not the first time that I am here in Germany, and it is far from the first time that I have coincided with Angela. As she just said, we have known each other for a long time through the European People's Party, I have also had the opportunity to be here on other occasions and today we have spoken about matters that affect the governance of our two countries.
I would like to indicate, and I believe that there is general consensus on this matter, that Spain thinks that the Euro is good for everyone and that the Euro should be maintained. The Euro has been a gamble for our country, for Spain, and hence, since we believe, as we did before, that it is good for Europe, then I will reiterate this as many times as needs be.
At the coming European Council, which will take place in Brussels, we will indeed talk about growth and employment, and we will also speak about Treaties and about budgetary discipline.
The economic policy that Spain is going to implement, and that is starting to be implemented, coincides substantially with what is being proposed and what will be debated next Monday.
We have a major national objective of economic growth and job creation. To that end, we are going to commit firstly to budgetary discipline and containing the public deficit, secondly to structural reforms and thirdly, we also want dissuasive mechanisms for some of those problems being raised by the current debt crisis in Europe.
As regards the public deficit, we have already taken an initial decision to reduce the public deficit by 1.5% of our Gross Domestic Product: or 15 billion euros. Tomorrow we will approve a Budgetary Stability Act which will introduce discipline, not only for Central Government but also for the autonomous regions and local councils. This Act will set limits on the issue of public debt and the public deficit, and the obligation to fix a ceiling on expenditure for all public authorities. There will also be a system of sanctions, as in the European Union, for those in breach.
Finally, in the next quarter, in reality in this quarter, in the month of March, we will approve the General State Budget where we will continue making our efforts to reduce the public deficit, principally because we believe in that. I was a member of a government which, when it came to power, saw how the Spanish accounts had a public deficit of seven and a bit percent, and when we left power there was budgetary balance.
Hence, I repeat, we will make an effort to reduce our public deficit and, as you would expect, we will support the Golden Rule that will be debated next Monday at the European Council, among other things because it is already contained in our Constitution.
Secondly, we believe that to make Europe grow it is not enough to simply control the deficit; whilst it is a necessary condition it is not enough, and we all need to make structural reforms.
Yesterday, and I say this with great satisfaction, there was a salary agreement in Spain for the next three years: in 2012, salaries will not rise more than 0.5%, in 2013 not more than 0.6% and in 2014 not more than 0.6%. There is practically no revision in terms of inflation and for the first time ever salaries do not depend directly on inflation. I would like to say, once again, that the trade unions and business associations have risen to the circumstances and that the decision they have taken is positive for Spain, it is positive for the general interests of Spain and it is one more foundation in establishing a solid basis for the purposes of achieving a swift recovery for our country.
We will propose two further major structural reforms in February, with the dual objective of economic growth and job creation. The first is the labour reform. We know that this is a difficult decision but we are going to take it on. Spain has an unemployment rate among young people that is absolutely unacceptable and hence measures will be taken to improve this situation, measures will be taken to improve collective bargaining, internal flexibility and new models of employment contracts; all this with the fundamental aim of creating jobs in Spain. This is undoubtedly the most important problem facing Spain.
There will also be a restructuring of the financial system in February, demanding the valuation of real estate assets in accordance with their real value and demanding more provisions and additional capital; all with the objective of returning credit to Spain and establishing a financial system that never again generates losses.
In short, we are proposing an economic policy that substantially coincides with what is being proposed at a European level, and hence we support this and we will be at the forefront in all these matters, principally in terms of budgetary consolidation and structural reforms.
I would like to say that this afternoon I will circulate to the President of the Council, as well as through the habitual procedures - I firstly conveyed this to Mrs. Merkel - certain proposals that we are going to make in addition to others already made by Germany and France in the European Union and which we believe can help to improve certain things in the EU as a whole.
We are going to propose that surplus EU funds be applied to programmes dedicated to job creation; in other words, that surplus funds can be used to this end. We will propose this and we will ask for it to be debated on Monday.
We are also going to ask for a debate to be opened up on the capitalisation system similar to what has traditionally be known as the 'Austrian model'; in other words, that each person who works dedicates a part of his contribution towards unemployment, to prepare a small 'parcel' that can be transferred upon changing jobs. I believe that it would be positive if this were done at a Europe-wide level, because this would also help to foster mobility.
Finally, we are also going to propose that those financial entities that received public aid receive remuneration which, in my opinion, should be harmonised for all those countries in the EU that have provided public aid. In other words, we do not believe that those financial entities that receive public aid, and hence taxpayer's money, should receive remuneration that exceeds what is fair, logical, sensible, reasonable and respectful to the interests of the people.
In short, I would once again like to thank Mrs. Merkel. I am very pleased and very satisfied to be here. Spain is a nation with well-known ties to Germany, as a member of NATO and through our own permanent representation on the Commission. There are many Spaniards living in Germany and many German living in Spain. We have trade relations which are fundamental for Spain and also important for Germany. And many Germans visit Spain on holiday each year. I bumped into Mrs. Merkel herself not long ago in the Canary Islands, when I was on my election campaign, a campaign which, by the way, we won and where our popularity rose by twenty-eight points on the islands, which isn't bad, although we did start from a very low base.
Ladies and gentlemen, thank you very much for attending and we are ready to take question; at least I am.
Q. A question for President Rajoy and for Chancellor Merkel. Has Mr. Rajoy proposed to Chancellor Merkel the need to revise the deficit objectives for Spain and for other European countries, given the dreadful economic outlook? And you, Chancellor, would you be prepared to revise these objectives if there were agreement with the other European partners, if the negative forecasts for growth and employment being announced by all institutions are finally confirmed?
As regards austerity measures, some issues have already been raised; but yesterday, at the Forum in Davos which you, Mrs. Merkel opened, some experts, such as Soros and Roubini, were emphasising that austerity will only further depress the Spanish and European economy; some are even talking about economic suicide. Given these appalling economic and employment outlooks in Spain and in other countries, do you feel that now is the time to re-examine these stimulus policies or do you feel in some way isolated because all the experts or other countries are looking to re-examine this but you aren't?
President of the Government. No, I haven't proposed that. The only thing I said is that the Government of Spain is committed to reducing its public deficit.
I am absolutely convinced of the need to reduce the public deficit and to not spend beyond one's means. Last year the public authorities spent ninety billion euros more than they took in as revenue. I don't like that way of operating and hence, I will take my decision to move towards budgetary stability, deficit reduction and a reasonable level of debt, because I believe in that. That seems the most sensible and reasonable thing to me.
It is true that we are starting off in difficult circumstances and it is true that we need to reconcile the deficit reduction with making policies that stimulate growth and employment. That is why we need reforms and that is why I have proposed, and I have reiterated this here, that we will carry out a labour market reform and financial system reform; subsequently, we will pass an Entrepreneurs Act in Spain and following that a reform of the energy system in order to become more competitive and to help make energy cheaper, and following that a reform of professional training.
I am absolutely convinced that these four years in Spain will be the 'economic reform years' and a time to prepare the future for many, many years to come. And I am also convinced that neither the reduction of the public deficit nor the structural reforms will show any signs of effect in the next three to six months. This is going to be a tough year and a difficult year; but in the same way as I tell you this I would also like to convey to all Spaniards that we are working for their future and that we cannot govern only thinking about the next twenty-four hours, because that is the worst possible way to make policies and would only serve to deceive the people.
Hence, we are going to work to lay solid foundations for our economy. We know that this cannot be solved in half an hour and that there are no magic wands or miracle solutions, but we are absolutely convinced that a policy of fiscal consolidation, accompanied by a policy of structural reforms is the solution to place us where we want to be: with sustained growth and job creation.
That is my commitment, that is what I believe in and I am pleased that we agree on this with the majority of the European Union countries. But I didn't propose that, not at all.
Mrs. Merkel. Firstly, sound budgets and growth are not poles apart, but rather both are needed in the long term. That is why we will talk about a fiscal agreement on Monday; I believe that with great convergence in a desire to reduce our budgetary deficits; we will also be talking about employment and growth.
Germany and France, at the beginning of 2011, in January 2011, presented the Euro-Plus Pact, in which much was said about reforming the labour market.
One example was the measures that Spain took yesterday, with a great agreement between the trade unions and the employers association. When I became Chancellor in 2005, my predecessor, Chancellor Schröder had carried out a series of highly controversial labour reforms. At the beginning, the unemployment rate didn't drop and there were five million people on the dole.
After two or three years, these labour market reforms took effect and now we have less than three million people on the dole; not because we were lucky but simply because this was the result of these reforms and the investment in innovation and support for small- and medium-sized companies.
That is why I expressly support the Spanish proposal to use the surplus from the Structural Funds and from the Cohesion Funds to stimulate employment, particularly among young people, for their professional training and also to stimulate and drive growth. I believe that we agree perfectly on that matter.
Nobody is saying that saving by itself is the solution. Major reforms are required in the long term, such as the labour reform which Spain is beginning to implement. Nobody is saying that reducing debt by itself is the solution either, because experience shows us that this causes problems with the markets.
We all have demographic problems. Germany as well. The population is ageing and, if we do not manage to create jobs for our young people while at the same time avoiding eternal indebtedness, we are not going to achieve this, and hence in this respect Mariano Rajoy and I are both singing from the same sheet.
Q. Mr. President of the Government, your Minister for Foreign Affairs said a few days ago that Germany always arrives a few minutes late to save the Euro. Have you spoken about that? What did this comment mean?
Madam Chancellor, as regards the fiscal pact, you requested a study on the right to appeal and you said that the European Commission will have to evaluate this. What do you expect from this evaluation?
President of the Government. Your question for me is about my Minister for Foreign Affairs. This matter belongs in the history book; it is over.
Mrs. Merkel. We said that we would like the legal service of the European Council to draft a study in writing to explain to us why it believes that the Commission should not be entitled to a right to appeal. We will evaluate this question and debate it with the Parliamentary groups.
We say that if the Commission has to examine whether a country has incorporated the Golden Rule in its Constitution and it says 'yes' or 'no', then it is logical that if the response is negative that the Commission can bring this action before the European Court of Justice. But it seems that there are now reservations because we are not within the ambit of a European Union treaty but rather a complementary treaty. When we pass our Treaty to the European Treaty then it won't be a controversial matter.
So, the concern is that the Commission may obtain new powers and all the Member States must be in agreement to that end.
Firstly, we will see the legal assessment of whether the Commission of a Member State should bring the action. I don't see this as a major problem.
Q. I wanted to ask President Rajoy if he could explain to us the proposal on how European fund surpluses would be used to create jobs. What could this mean for Spain as regards investment in employment?
And for Mrs. Merkel, I would like to ask her whether, after hearing the labour reform that Mr. Rajoy explained to her, she considers that this is heading in the right direction and no longer considers that employment legislation, as she said in an interview, is one of the main causes for unemployment in Spain.
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Mr. Rajoy. In relation to the first matter, logically the main objective of our country for the coming years is to create jobs and to grow economically because that is the basis for well-being and wealth in Spain, at the same time as maintaining public services, such as healthcare, education and the pension system.
All the resources that we can devote to creating jobs, at a time when the situation obliges us to control our budget, will be well received. Hence, using any resources that arise from surplus European funds could be very useful for us.
I can't tell you at this time what is the exact figure, but the amount is significant. Neither can I say what this will mean in terms of employment, but I can tell you that if, for example - it is only an example, not something that will necessarily take place - we establish certain deductions for companies, for the self-employed or for those who start to contract workers, or certain subsidies for people who start to contract young people, in addition to a change in the model of employment contracts, all these resources could be very useful. In the same way, this could be very useful in terms of professional training to enable people to acquire greater knowledge, more experience and be better prepared for the labour market.
This is something fundamental for us, because it is our basic objective; I repeat, to create more and more jobs, and that is why we have proposed this for debate on Monday.
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Mrs. Merkel. As regards the Structural Funds and Cohesion Funds, I only wish to say the following: Germany is willing to be very flexible to see what most helps in this situation.
In the past, we were also truly satisfied when we saw that not all the funds had been spent, because they were then returned to our national budgets, but in light of the situation in which Europe finds itself, the most important thing is for these funds to be best taken advantage of and that they reach the people. That is why we are going to support everything that helps SMEs, new hirings and the creation of jobs.
Secondly, the new Spanish Government is carrying our these reforms in which I believe right now and, through the experience acquired here in Germany, and not that long ago either, this will provide a significant contribution to job creation. That is why I believe that what the Government is doing is correct. I know that it is hard sometimes, for example, and the following is a real case: if people who have been working in a specific area, as happened in Germany and they receive an offer from a different sector, perhaps at age 35 it is not always easy to learn a new trade. But, at the end of the day, that helps and the message is that the more people in work, the greater the revenue for the State.
This major problem doesn't exist with the deficits because with a high unemployment rate it is very difficult… This gets out of hand and that's why I believe that the Spanish Government is truly doing this the right way. And I hope that those many young people who do not receive unemployment benefits can take advantage of these measures. We also have to invest in research and development and have modern companies. This will be one of our work priorities in the European Union and I believe that we will receive a lot of cooperation.
Q. Mr. President of the Government, you expressed your support for an increase to the European Stability Mechanism. I would like to know if you have changed your mind after your meeting with the Chancellor, who doesn't want to increase it.
And for Madam Chancellor, a question about Greece. The European Union Finance Commissioner stated that more funds would need to be made available to help bail out Greece.
Mrs. Merkel. More public funds from whom?
Q. From the Members States of the Eurozone to bail out Greece. Mr. Rehn has proposed that not only the banks make significant contributions but also the public sector. Do you feel it is possible that Europe can also help Greece without resorting to contributions from the International Monetary Fund?
President of the Government. The most important and most urgent matter for me at this time is that the Mechanism is definitively implemented and available for use. The Mechanism also undoubtedly acts as a major deterrent; probably the bigger it is the less it will be used. But the most important thing is that we have the Mechanism available and the Mechanism can start to operate.
Aside from that, my position clearly remains the same; but it wasn't the purpose of today's meeting to decide on whether the mechanism was going to have 100 billion euros more or less. What is important is that things in Europe move swiftly; that, when a decision is taken, this decision is implemented as soon as possible and that matters do not drag on indefinitely.
Mrs. Merkel. We are working on the basis that, in principle, we are talking about a voluntary deduction that needs to be negotiated for Greece. The criteria were established in October and the forecasts for growth have changed meanwhile. Hence the finance ministers have asked for the talks to be extended. I believe that is the right path to take and will be the basis for the second package for Greece, in which Greece will also specify its own commitments. Negotiations are underway and I have nothing else to add on the matter.
What is valid for me is last October's negotiations and the work of the 'troika'. We are waiting for the report from the 'troika' and nothing will be done until we receive it. That is the basis on which we will continue working.
In all likelihood we will not receive the report from the 'troika' by Monday, when we hold the next Council meeting. On Monday we will talk about growth and we will try to conclude the fiscal agreement. It will be the finance and treasury ministers who deal with the voluntary restructuring of Greece so that there are no mistaken expectations. We wish to concentrate on the subject of growth; today Spain and Germany have been in full agreement.
Thank you very much.