WIREDGOV

Speech given yesterday by Commissioner Gentiloni at the Romanian Business & Investment Roundtable.

Good morning.   

We all know here in bustling Bucharest that not far across the border, bombs continue to be dropped. So while we look with hope to the talks beginning in Istanbul, we know that civilians continue to be killed. And thousands of Ukrainians continue to flee for their safety in neighbouring countries, including here in Romania.

This is not just an attack on Ukraine. It is an attack on all the values we hold dear – democracy, freedom and the rule of law.

The war will inevitably have an impact on the European economy and aggravate the challenges we were already facing.

Rising energy and food prices are putting further pressure on consumer prices. In February, inflation climbed to 6.2% in the EU27 and 7.9% in Romania. We can expect these rates to go further up still.

Disruptions in supply chains worsened, both in terms of access to raw materials and price hikes.

And higher uncertainty is of course affecting confidence. And this could make our forecast, our estimates, even worse than they are now.

Member States will be impacted differently, depending on their exposure to Russian gas or to this very large influx of refugees.

Romania, for example, is less reliant on Russian energy than other countries in Europe. But it has already taken in more than half a million – indeed almost 600,000 – Ukrainian refugees, with an extraordinary effort of solidarity. Providing assistance will likely weigh on already strained public finances.  

It is still too early to estimate the impact of the war on the European economy. But it is increasingly clear that the 4% growth we had forecast for the EU just two weeks before the invasion – 4.2% for Romania – will have to be revised downwards.

Just by how much, depends on the evolution of the war and on our common policy response. We need to ensure that the recovery is not derailed and that this crisis does not increase divergence in the EU.

The suspension of our fiscal rules decided during the pandemic will give governments this year the budgetary leeway to address the immediate challenges of this crisis.

Another way to keep the recovery on track is to move forward with the national recovery and resilience plans.

For most Member States, including Romania, implementation of these plans has been underway since late last year. A number of crucial investments and reforms are planned for this year and next. And we must not lose sight of these goals.

Romania has put forward an ambitious plan, worth over 12% of GDP. If implemented in full, it could raise GDP by an estimated 2-3% by 2026 – with the economic impact of structural reforms delivering an even greater boost to GDP over the medium-term. So this opportunity must not be missed. And I'm very happy that in the meetings I had yesterday with Minister Câciu and other ministers I saw that there is a strong commitment to implement this plan.    

If our national and EU policy responses remain fully coordinated, if we remain ready to adjust as needed, and if we continue to deliver on what we have agreed, I believe we can ensure that the recovery is not fully derailed.

The war in Ukraine is a wake-up call for Europe to strengthen its autonomy. All the globalisation framework will change. We are not looking for protectionism but for stronger autonomy in strategic sectors, in particular in energy and defence.    

Ninety percent of the gas we consume in Europe is imported, and Russia provides almost half of those imports.  

Earlier this month, the Commission announced a bold plan to cut demand for Russian gas by two thirds before the end of the year.

The first goal is to make sure energy prices remain affordable. Prices were already soaring before the war, since last year. Businesses and low income households are feeling the squeeze.

We encouraged Member States to use a wide range of measures to cushion these price hikes, such as tax exemptions or subsidies. And they are doing this.

The second goal is to ensure security of supply. We need to secure sufficient storage for next winter and diversify our gas supplies. We are already engaging with a host of countries to increase imports of Liquefied Natural Gas.

Finding alternatives to Russian gas will help in the short-term. But let me be crystal clear: the best way to meet our long-term energy needs is to diversify our energy sources and end our reliance on fossil fuels altogether.

The EU is already a global leader in this respect. We have targets for climate neutrality by 2050 and a 55% reduction of CO2 emissions by 2030.

Given the current situation, we need to do more, and we need to do it faster. 

If we succeed, we will have reduced our dependencies, kept prices in check, secured alternative supplies and provided a decisive push to meeting our climate targets.   

The war in Ukraine also marks a turning point for Europe's security and defence policy.

Positions held for decades shifted in a matter of days.

For the first time, the EU agreed to provide one billion euros in arms and other equipment to a country under attack.

At the recent summits in Versailles and Brussels, EU leaders committed to bolster our defence capabilities, pledging to :

• increase defence expenditure.
• develop joint procurement of defence; and
• increase investments in defence technologies.

Boosting our defence capabilities will require major investments in our industrial and technological base.

These investments come on top of those to deliver on the green transition, for which we will have to mobilise according to our estimates a additional 520 billion euros each year.

Such investments are crucial to increase our autonomy in these strategic sectors.

Financing them will require a supportive framework of fiscal rules and potentially new joint funding mechanisms at European level. 

Ladies and gentlemen,

Two years since the start of the pandemic, we are again at a historical crossroads.

For years, Putin has sought to sow divisions within our societies and undermine our model of Western liberal democracy.  

His latest aggression, however, has badly backfired: the EU is more united than ever. And our relationship with our partners and allies is stronger than ever. Together with our allies, we have agreed on the toughest sanctions ever approved. And countries that Moscow considers within its orbit – not just Ukraine, but Georgia and Moldova too – have applied for EU membership.

We will continue to support Ukraine during its darkest hour.

At the same time, this crisis is an opportunity to shape the EU's future direction.

If we maintain the same unity and ambition that we have shown during the pandemic, I am confident that a new Europe can be born out of this crisis. A stronger, greener, fairer Europe. A Europe that lives up to the aspirations of its citizens.

Thank you, Mulțumesc.