"The EU cannot fight the recession with more stimulus," Barroso stressed at the 20th Economic Forum for Central and Eastern Europe in Krynica, Poland, which opened on Wednesday (8 September).
The main topic of debate was "the EU after the Lisbon Treaty," but a large share of the discussion turned to the economic crisis and the European response.
The comments come ahead of a summit of EU leaders on 16 September, which will be dedicated to reforming the bloc's economic governance following the Greek debt crisis.
Barroso recognised that fiscal consolidation is a necessary part of the ''exit strategy'' for the EU member states. ''It is the right way [to go], but it should be growth-friendly,'' he said. When planning budget cuts, it is necessary to take the value of public expenditure into account and while cuts can be made in some areas, others are important investments, he argued.
However, the Commission president stressed that budget consolidation is only a first step and should be followed by structural reforms. Barroso called for the adaptation of European social market economies in view of growing global competition.
EU-level coordination of investment in the ''new drivers of growth'' is an important added value for the Union, he added.
''Don't eat seed potatoes'' was the advice of Nokia boss and former Finnish Prime Minister Esko Aho, referring to the danger of making cutbacks in the education sector. Investment in education needs to be increased, not cut, in times of crisis, he warned.
Estonian 'miracle' helps eurozone entry
At a time of high budget deficits and growing debts, Estonia remains something of an exception. The Baltic country will become the newest member of the euro zone in January 2011, having successfully fulfilled the EU's strict Maastricht criteria – even during the economic crisis.
Estonian President Toomas Hendrik Ilves believes that his country's achievement was helped by sufficient political will and a healthy starting position.
Before the global economic crisis, high inflation was one barrier to Estonia joining the common European currency. But the downturn cooled its overheating economy and a combination of growing unemployment and cuts have slowed the rise in prices, Ilves explained.
More importantly, Estonia managed to establish a comfortable fiscal position and entered the crisis with a surplus budget, fiscal debt of only 7% of GDP and a special crisis fund created from surpluses since 1999 – valued at around 10% of GDP.
Furthermore, the government started to cut expenditure when the first signs of the crisis appeared, Ilves noted. It introduced radical measures a year before any other EU country and made smart cuts, avoiding education and social protection areas. Thanks to this move, the government now enjoys a high public approval rating despite the fall in GDP, rising unemployment and budget cuts, he added.
The president also pointed to a psychological factor that could help explain why Estonians withstood the crisis relatively well. ''After the Soviet period – political terror, deportations and so on – what's the problem with salary cuts?''
Budget coordination
The importance of healthy budgets was also underlined by new Polish President Bronisław Komorowski. He praised the automatic adjustment mechanisms that have helped his country to weather the crisis, as they have prevented an irresponsible budget policy.
Commission President Barroso affirmed his belief that deeper European integration and the completion of the common market offer a way out of the economic recession. He views the fallout of the crisis as a positive opportunity to adopt useful measures for closer economic coordination and cooperation – something that would have been politically unthinkable before.
