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Speech by Romano Prodi

President of the European Commission

Turning EU dynamics into policies

on receiving the Business Week Award for 2002

Erasmus University Rotterdam, 18 April 2002

Rector, Dean, ladies and gentlemen,

I am grateful for the chance of addressing you today.

I am also honoured to receive the Business Week Award for 2002. Please accept my sincerest thanks.

It is a pleasure to be here in these surroundings. They must have been familiar to the eminent economist, Jan Tinbergen, who shared the first Nobel Prize for economics.

Jan Tinbergen was a pioneer in many fields. His work was fundamental to econometrics. And to understanding business cycles.

It was fundamental to economic policy too. It was his idea that governments should have at least as many independent policy instruments as policy targets.

He was also a pioneer in the field of European economic integration, where he made major policy and academic contributions.

Jan Tinbergen was an economist with a social conscience. He wanted to turn economics into social policies.

He had ideas about fighting unemployment. About increasing development aid. And about reducing barriers to imports from the third world.

Those ideas still inspire us.

Today I wish to talk about turning dynamics into policies in the new Europe. A Europe which must step up its efforts to meet the citizens' real needs and expectations.

When we talk about turning dynamics into policies and successes in Europe, we have to start with the euro.

The changeover has proved that Europe's people can indeed work together, with enthusiasm and firm resolve, towards a common goal and in support of a shared ambition.

The euro symbolises the aspiration of Europe's people to share a future together. And their determination to make that aspiration a reality. The euro also shows that, in Europe, diversity and effectiveness can go hand in hand.

Diversity and effectiveness are two sides of the same coin. It is no coincidence that the euro coins we jingle in our pockets have two faces: a universal European face and a national face reflecting our distinctive national cultures.

The euro will become a key factor in our citizens' shared European identity and their sense of a common destiny.

Diversity and effectiveness can also work as regards the non-monetary part of economic policy. Budgetary and structural policies are conducted by Member States governments and coordinated within the framework of the Stability and Growth Pact and the Broad Economic Policy Guidelines. The overall experience gained so far is therefore positive. But greater coordination of economic policies is required.

The way forward is to build on and further strengthen this. Many things can be done within the present Treaty framework.

Formal common standards for the conduct of economic policy will make the coordination of national economic policies more consistent and predictable. These could include behavioural rules, covering the conduct of structural and budgetary policies, as well as procedural rules, like prior information exchange before significant proposals are launched by Member States' governments.

Other measures will also need to be addressed within the Convention.

But a strong euro is not an end in itself. It is only a means of building a stronger and more prosperous Europe.

The economic discipline that the single currency imposes has been good medicine for the EU. Our economic fundamentals are in good shape, and the euro has helped us absorb the external and internal shocks we suffered last year.

The euro has firmly established the principle of price stability. It has done this even better than the German mark did on average over its lifetime. In the early stages of Monetary Union, the Netherlands already attached great importance to price stability by pegging the guilder to the mark.

But there is one difference with the past, when the Netherlands had no say in decisions regarding the mark. With the advent of European Monetary Union, the Netherlands can actively participate in decision-making through its representative on the Governing Council of the European Central Bank, just like the other members of the euro area. In addition the President of the ECB is one of your fellow countrymen!

And here I wish to pay tribute to the work of Wim Duisenberg in shaping and running the ECB.

The Union needs more than a successful single currency. It also needs to turn this success into a dynamic modern economy that generates jobs and prosperity.

In Lisbon two years ago, the European Council decided on an ambitious goal: to turn the European Union into the most competitive and dynamic knowledge-based economy in the world by 2010.

That is no mean task. It means catching up with our main international competitors and overtaking them before the decade is out. It means transforming our economy so it reflects the economy of tomorrow's world. It means increasing skills and developing information exchanges.

Our competitors have a head start in many areas. But our cultural diversity, our historical perspective and our social model will help us. We must harness this heritage to help attain the goal.

The Lisbon Strategy complements the micro-economic dimension of the euro. It is also directly linked to our efforts to preserve and modernise Europe's social model.

We are determined to uphold our commitment to social justice. Europe must be a caring and competitive society. And a sustainable society too. Economic, social and environmental sustainability are our top priorities.

These are not just vague ideals: we have a detailed strategy for achieving them. A strategy of far-reaching economic and social reform. And the example of the Netherlands shows that this is feasible.

When the European Council met in Barcelona last month, it identified three main priorities for 2002:

  • First, a review of taxes and benefits to make work pay and increase labour-force participation, in particular amongst women. Here I salute the "Dutch miracle" we owe to the "Polder model". A model combining several active labour-market policies that increased labour participation from 52% in 1985 to 65% in 2000. A model in which social partners and institutionalised dialogue play a key role, showing that cohesion and productivity can strengthen each other.

  • The second major area is economic reform in basic sectors. Like energy, transport, telecommunications and financial services, the backbone of our economy.

    The objective is to enhance competition to reduce prices and make all the other sectors of the economy more dynamic, while maintaining an adequate level of basic services for everyone.

  • The third priority, and I am glad to underline it in this academic context, is investing in knowledge. Let me emphasise this: education and research are fundamental to economic renewal, sustainable growth and job creation.

The Barcelona European Council endorsed the Commission's intention of presenting an integrated strategy for education and research in Europe. A strategy based on networks and mobility. Two concepts that were familiar to scholars and students in Erasmus' time and that put Europe at the very centre of the world's knowledge community.

One idea that could contribute in this area would be to introduce a system of European fellowships along the lines of the Fullbright scheme, to foster understanding and exchange skills and knowledge worldwide.

The knowledge-based economy of tomorrow, as I said, will depend on human skills as much as on technical prowess. In this area, Europe has much to gain from exchanges. Qualified human resources are our most valuable asset and one of our wisest investments for the future.

So if we want to reap the benefits in terms of qualified human resources, this is one area we must not neglect. In the future, the opportunity for creating synergy and harnessing the human potential of the whole continent will increase enormously.

Because the future will bring enlargement, the largest enlargement the EU has ever seen. It will take the EU into a new dimension. Making it a success will call for a huge commitment and enormous effort.

I have always regarded enlargement as my first priority. It is a task we cannot turn our backs on. Over the last fifty years, we have enjoyed peace, security, freedom and democracy within the Union. Now it is our historical duty to extend this to the whole continent.

Negotiations have been under way over the last two and a half years. They have covered topics ranging from immigration to veterinary inspections.

The candidate countries are also making a huge effort to prepare for accession. This involves changing their laws, recasting their administrations, introducing local autonomy, protecting minority rights and so on.

They are doing their "homework". And we must do our homework too!

We must make sure that the European Union after enlargement is stronger, more united and more cohesive.

That is why I asked for a Convention to be set up to lead the debate on the future of Europe. It will prepare recommendations for the Intergovernmental Conference to follow. And this will give birth to a new Europe capable of meeting the challenges of the future.

Three principles are fundamental to the Commission's approach to the Convention.

First, in the age of globalisation, the Member States must pool their sovereignty if the European Union is to be a global player. If it is to be competitive internationally. The euro is a clear example of this.

There are times when changes first bring hardship for some before they benefit us all. Vasco da Gama's voyage round the Cape to India spelled the end of Venice's control of trade with the East. It opened the European sea-route to Asia, and not only to the Portuguese. The Netherlands also became a major trading nation, with trade routes stretching right across the globe. And it ultimately fostered trade throughout the world.

Secondly, in the Europe of tomorrow, the nation-States must be treated in a balanced way. So the bigger States do not dictate to the smaller ones. In our democratic tradition, the majority decides, but the minority's rights are protected. And within the Union, we are all part of the minority at some point or other. So it is important to understand each other's views.

Thirdly, we must have institutions that identify and safeguard the general interest.

This is because we are a Union of peoples and of States. And a community of shared values.

The Europe of tomorrow must be able to take hard decisions. It must be able to turn ideas into policies and apply them. In order to protect our interests in the wider world. In order to safeguard our values and our social model.

This means ensuring we have the structures to do this. It means more majority voting, so we can take the right decisions.

It means preserving the Commission's role. As guardian of the Treaties, the Commission watches over the general interest. It ensures a balance between the bigger and the smaller countries, between firms in all countries. And it looks after the interests of all citizens.

In other words, the Commission must be there to play the honest broker between the institutions. To mediate with an eye to the general interest. To act as referee, with the Treaties as the rulebooks.

A stronger Union means concentrating on our core tasks. Redefining them. Sometimes extending them. Perhaps even reducing them in some areas.

It means refocusing on areas where the Union brings added value.

This means making sure the internal market functions smoothly. It means guaranteeing the four freedoms: free movement of goods, services, persons and capital.

This calls for:

  • a level playing-field in terms of competition

  • a degree of tax harmonisation

  • social measures to support the free movement of workers.

Competition policy at Community level is vital if the four freedoms are to be guaranteed.

Refocusing on our core tasks means pursuing and reforming sectoral policies. I am thinking of the European agricultural model, transport, financial services, energy, telecommunications, etc.

It means better coordination of national economic policies.

It means:

  • working towards sustainable development

  • ensuring the balanced development of the Union's regions

  • strengthening economic and social cohesion in an enlarged Union of 25 plus Member States.

It means preserving a dynamic approach to European integration.

It does not mean deciding on our future structure once and for all. And it does not imply a hard-and-fast catalogue of competences.

Our Constitution must not be set in stone. For no one knows what tomorrow holds.

Closer integration is a dynamic process. Our policies need to evolve as events unfold. So our Constitution must not be a blueprint for the future. Because the future often turns out different from what we thought. And blueprints for the future often end up as postscripts to history.

Thank you.

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