HIGHLIGHTS-Barroso's policy speech to the European Parliament

STRASBOURG, France, Sept 7 (Reuters) - Following are highlights of European Commission President Jose Manuel Barroso’s policy speech to the European Parliament on Tuesday. [nLDE6860GH]

“The economic outlook in the European Union today is better than one year ago, not in the least as a result of our determined action. The recovery is gathering pace, albeit unevenly within the Union. Growth this year will be higher than initially forecast. The unemployment rate, whilst still much too high, has stopped increasing. Clearly, uncertainties and risks remain, not least outside the European Union.”

“We must use the next 12 months to accelerate our reform agenda. Now is the time to modernise our social market economy so that it can compete globally and respond to the challenge of demography. Now is the time to make the right investments for our future.”

“And we need to tackle severe macro-economic imbalances, especially in the Euro area. That is why we have made proposals early on to detect asset bubbles, lack of competitiveness and other sources of imbalances.”

“Sound government finances and responsible financial markets give us the confidence and economic strength for sustainable growth. We need to move beyond the debate between fiscal consolidation and growth. We can have both.”

“We have proposed to protect people’s savings up to 100,000 euros. We will propose to ban abusive naked short selling. We will tackle credit default swaps. The days of betting on someone else’s house burning down are over. We continue to insist that banks, not taxpayers, must pay up front to cover the costs of their own risks of failure. We are legislating to outlaw bonuses for quick-wins today that become big losses tomorrow. As part of this approach, I am also defending taxes on financial activities and we will come with proposals this autumn.”

“We will also go further on regulation. Initiatives on derivatives, further measures on credit rating agencies and a framework for bank resolution and crisis management will soon be before you. Our goal is to have a reformed financial sector in place by the end of 2011.”

“We should also explore new sources of financing for major European infrastructure projects. For instance, I will propose the establishment of EU project bonds, together with the European Investment Bank. We will also further develop Public Private Partnerships.”

“Where we are already punching our weight is the G20, the forum where the key economic global players address common challenges. When President Van Rompuy and I go to Seoul in November and represent the European Union, we want to see concrete results: Further progress in global economic coordination. More stable and responsible financial markets and agreement on reform of international financial institutions. More effective global financial safety nets. More progress on a G20 development agenda.”

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reporting by David Brunnstrom