by Calculated Risk on 5/18/2012 09:13:00 PM

Remarks from Herman Van Rompuy, President of the European Council prior to the G8 summit:

This G8 summit comes at a time of significant challenges to the world economy, and for Europe in particular. As far as Europe is concerned, my message is straightforward: we are determined to stay the course. We will pursue our comprehensive strategy to decrease deficit and debts, and to return to growth and job creation, based on structural reforms, investments and trade. The European Council will discuss a pro-active growth agenda on the dinner on May 23 and we will finalize it on the European Council on 28-29 of June. In that respect it should not be forgotten that in aggregate terms growth in the Euro area is positive and picking up, while our external balances with the rest of the global economy are in equilibrium.

Recently, we have raised our firewalls and increased our contribution to the International Monetary Fund; we have also strengthened economic governance, recapitalised banks and provided ample bank liquidity through the European Central Bank. This week, finance ministers of the EU also made further significant progress in putting into European law the international Basel 3 agreements. We will do whatever is needed to guarantee the financial stability of the euro zone.

In parallel, most EU countries are engaged in very ambitious reforms to ensure debt sustainability, raise productivity and improve competitiveness. This is particularly the case in Spain - where the Government has embarked on a set of comprehensive reforms - and in Italy, as also positively recognized by the IMF after its consultation with Rome this week. I am confident they will succeed.

As regards Greece, I do not hide my concern about the current political uncertainty. Greece is a member of the EU and the Euro zone and this membership implies solidarity and responsibility. The Euro zone has shown considerable solidarity, supplying nearly € 150bn in loans to Greece so far. Alongside this support the EU is developing a huge effort to help reviving the Greek economic potential.

We do not question Greece's sense of responsibility and are hopeful that the next Greek government will act in accordance with the country's engagement and its European future. Continued reform is the best guarantee for the Greek economy and for a future of the Greek people in the euro area.

The long awaited "growth agenda" will finalized in late June. Most likely too little, too late.

I'm not sure what Van Rompuy means by "aggregate growth in the Euro area is positive and picking up". According to Eurostat, "GDP remained stable in both the euro area1 (EA17) and the EU271 during the first quarter of 2012, compared with the previous quarter". Flat line isn't growth.

Although Van Rompuy expressed "concern" about Greece, he also said the EU will "do whatever is needed to guarantee the financial stability of the euro zone". It is important to remember that these guys are committed to the euro - and they will not give up easily.