Olli Rehn, the Finnish commissioner-designate for the key economic and monetary affairs position on the European Commission

Public finance problems in Greece and some other European Union (EU) member states hit by the financial crisis, are posing “a very serious challenge” for the euro, Olli Rehn, the Finnish commissioner-designate for the key economic and monetary affairs position on the European Commission, told members of the European Parliament at a confirmation hearing on Monday. Rehn said Estonia is likely to be the next country to join the 16-member state  Eurozone.

Rehn promised to use “all instruments” to help member states restore their finances and come into compliance with the terms of the Stability and Growth Pact, which sets out the main economic compliance rules for members of the Eurozone.

“We need to put more rigour into the application of the Stability and Growth Pact,” Rehn said, calling for greater economic coordination among the EU’s 27 member states.

Rehn did not support calls for more effective sanctions for non-complying states but suggested using “incentives” to encourage them to move toward compliance and “broader surveillance”.

Rehn, is currently enlargement commissioner and will take over the economic role from Joaquín Almunia, who has been nominated for the high-profile trade role.

“We really have to focus on economic growth and job creation,”Rehn told MEPs, noting his top priorities.

Rehn was questioned by several MEPs about the fragile situation in Greece.

”The problem in Greece concerning the excessive deficit and the rapidly rising public debt is a very serious one, especially for Greece, Greek citizens and taxpayers. Of course, it also has potential spillover effects for the whole Eurozone,” Rehn said.

He said he expected the Greek government to present a “comprehensive plan” in the coming days to demonstrate how it would reduce its deficit. “The Greek government is aware of the seriousness of the problem,” he said.

The Finn said he had an open mind when asked about the idea of issuing a common eurobond to fund infrastructure projects in the EU.

Rehn also said Estonia is likely to be the next country to join the Eurozone.

"Estonia is rather close, but we will have to ensure that all the rules are respected, that the (EU) treaty is respected, and we will return to this matter in the coming spring," Rehn said.

Estonia, with a population of 1.4 million people, won its independence in 1991, after the collapse of the Soviet Union, but has been struggling to overcome the financial crisis, which hit its region hard.

Estonia sees adoption of the euro as a means of boosting foreign investment.

European Parliament summary of hearings:

An EU co-ordinated exit strategy from the crisis establishing healthy public finances in the member states are both essential to ensure a sustainable basis for economic recovery in Europe. This was the gist of economic affairs commissioner designate Olli Rehn's message in his hearing with the Economic and Monetary Affairs Committee.

During the three hour hearing, MEPs questioned Rehn on issues ranging from the EU2020 strategy, the suitability of existing and recently proposed policy coordination instruments, the challenges stemming from the future enlargement of the Eurozone, the current situation of Greece’s public finances and the EU’s role in developing a more balanced global macro-economic order.

Mr Rehn said his mission as economic affairs commissioner would be "to do what citizens expect of us in these times of crisis: provide future perspectives for jobs and prosperity, growth and stability".

Exit strategies and healthy public finances

Jean-Paul Gauzès (EPP, FR) asked how Mr Rehn would approach the double objective of ensuring an exit strategy and bringing about healthy public sector accounts. Mr Rehn argued these cannot be considered as mutually exclusive goals because although deficits need to be reduced growth, is dependent on investment.

Vicky Ford (ECR, UK) argued that taxes needed to be reduced for the private sector to be more involved in research investment. Mr Rehn agreed, but also said that tax systems need to be fair and support the development of society.

Policy co-ordination instruments and supervision

Many MEPs raised the issue of improved co-ordination and supervision. Udo Bullmann (S&D, DE) asked how Mr Rehn envisaged ensuring better co-ordination among the member states on economic policy. The Commissioner Designate replied that he would use Lisbon Treaty tools to step up co-ordination in the Euro area and deepen preventive surveillance.

Werner Langen (EPP, DE) asked about the suitability of the Stability and Growth Pact and how it could be strengthened. Mr Rehn reiterated that the Pact is the right mechanism to return to stability and that together with the Treaty rules,it would ensure that member states conform. He added that Greece will be the first test for these mechanisms.

Godfrey Bloom (EFD, UK) asked what lessons the Commissioner Designate would take on board from the crisis. Mr Rehn replied the crisis made clear that it will be essential quickly to adopt the micro- and macro- prudential financial supervision package. He also recommended stronger supervisory capacity at the EU level.

EU 2020 strategy for growth

Sylvie Goulard (ALDE, FR) remarked that the EU's 2020 strategy for growth must be based on mechanisms which are binding, in contrast to those of the Lisbon strategy. Mr Rehn noted that the Lisbon strategy lacked ownership, but said that with the new Treaty in force, new instruments can be used to reach the EU 2020 targets..

Jürgen Klute (GUE/NGL, DE) asked about the role of the state as an economic player. According to Mr Rehn, the state must be there to facilitate innovation, investment in education and the take-up of green technologies, all key elements in the EU 2020 strategy.

Eurozone enlargement

Several MEPs asked about Eurozone enlargement. Arturs Krišjănis Karinš (EPP, LV) asked about the timetable. Mr Rehn confirmed that the next country to join the zone will most probably be Estonia, and stressed that all timetables are dependent on the rules laid down in the Treaties.

Olle Schmidt (ALDE, SE) inquired whether Sweden could still stay out of the Eurozone. Mr Rehn replied that it is up to the Swedish people to decide on the issue.

International economic order

Turning to the EU's place on the international scene, Wolf Klinz (ALDE, DE) asked about Mr Rehn's programme for dealing with the EU's differences with the US.  Pascal Canfin (Greens/EFA, FR) asked for Mr Rehn's views on China's proposal for reform of the monetary system.

Mr Rehn said the EU has worked well with the US particularly through the G20 and that more discussion is needed with the US but also with China on balancing the macro-economic situation.  With regard to the monetary system proposal, Mr Rehn found the fact that China is willing to engage in multilateral co-ordination interesting and promising.

Commission hearings website