Mr. Valdis Dombrovskis:

First I will address the broader question of EU economic policy, including the Stability and Growth Pact, and then I will come to the question on democratic legitimacy. Something that a number of countries have experienced during the crisis, including Latvia, which is the country I know best, Ireland and a number of other countries, is that if they want to pursue contracyclical fiscal policies during the crisis, and that is what has been discussed, they also need to pursue contracyclical policy during the good times, meaning they have the fiscal space or room for manoeuvre in case of economic shocks. Unfortunately, for those countries that had not been doing so before the crisis, there was no fiscal space or room for manoeuvre during the crisis and countries were being shut out of the financial markets. The other question is how a country can finance its debt and deficit. What are the sources of finance? That is where the question of restoring financial stability and the EU rules on restoring financial stability came in.

Regarding the democratic legitimacy of the European Commission and the decision-making, first it must be said that the European Commission has rights and obligations that EU member states with their democratically elected parliaments and appointed governments have delegated to it. It is enshrined in the EU treaty which has been ratified by all EU member states and where the role of the European Commission as a guardian of the treaty is also foreseen. At the same time, it must be said that any decisions that are taken at EU level are Council decisions. When we come up with draft decisions as a European Commission, whether on the fiscal or structural reform side, they are draft decisions and those draft decisions have to be approved by the Council. It concerns fiscal decisions, any other decisions and any legislative proposals. They are called legislative proposals because the Commission comes up with a proposal. It is for co-legislators, the European Council and the European Parliament, to make the binding decisions.

On structural reforms, it is also important not to mix certain elements. Italy is in a preventive arm of the Stability and Growth Pact, as is Ireland. We address country-specific recommendations on structural reforms to member states, but first, as the name suggests, they are recommendations. Second, those proposals, in any case, are endorsed by the Council. That is how the structure works and that is where democratic legitimacy comes from. Its functions are delegated to the Commission by EU member states with their democratic decision-making process.