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José Manuel Durão Barroso President of the European Commission Stability and growth: Setting Europe on course Stuttgart address on Europe Stuttgart, 19 January 2011

Commission Européenne - SPEECH/11/37   19/01/2011

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SPEECH/11/37

José Manuel Durão Barroso

President of the European Commission

Stability and growth: Setting Europe on course

Stuttgart address on Europe

Stuttgart, 19 January 2011

Herr Ministerpräsident Mappus,

Herr Minister Reinhart,

Herr Oberbürgermeister Schuster,

Meine Damen und Herren,

Lassen Sie mich beginnen mit einem sehr herzlichen Dank für diese Einladung, hier und heute die "Stuttgarter Rede zu Europa" zu halten. Dies ist für mich Freude und Ehre zugleich. Denn ich spreche heute zu Ihnen am Anfang eines für Europas Zukunft ungemein wichtigen Jahres.

Die Europäische Kommission hat genau vor einer Woche ihren ersten Jahres-Wirtschaftsbericht und damit ihre Vorschläge für Wachstum und Arbeitsplätze vorgelegt. Dies ist der erste Schritt in ein neues Zeitalter der wirtschaftspolitischen Koordinierung in Europa. Es ist daher eine besondere Freude, Ihnen heute in Stuttgart, der Landeshauptstadt von Baden-Württemberg, meine Vorstellungen von der Zukunft Europas zu präsentieren.

Damit Sie nicht den gesamten Abend mit mir verbringen müssen, fahre ich nun, wenn Sie erlauben, auf Englisch fort. Auch wenn ich die Sprache Friedrich Schillers bewundere und liebe, so liebt sie mich doch nur in Maßen.

I said that I found this place an ideal place to speak about our future challenges in Europe. Not only is Baden-Württemberg geographically at the heart of Europe. It has a long history of commitment to European integration. Your former Minister-President, Günther Oettinger, is now in charge of one of the key strategic portfolios of the European Commission, energy. Another former Minister-President of this Land, namely Erwin Teufel, gave an important contribution to Europe as a member of the European Convention. And also today, Baden-Württemberg is actively involved and often leading in many different European fora. With Minister-President Mappus, by the way, I already discussed about European politics when he was still a leader in the regional parliament.

Baden-Württemberg is also in many respects a perfect illustration of what we want to accomplish at European level in the months and years to come, economically and socially.

Baden-Württemberg is a true success story of a flourishing social market economy. Some key figures speak for themselves:

  • Baden-Württemberg is spending 4.4% of its GDP on research and development, thereby already exceeding the objective of 3% that the EU has set for itself.

  • Close to three out of four persons in working age (15-65 years old) are employed. Again, Baden-Württemberg already is where we want Europe as a whole to be.

  • Baden-Württemberg is among the best in Europe in terms of number of patent applications.

Baden-Württemberg is one of the wealthiest regions in Europe. But this is not inherited. It is based on the continuous drive by people in this Land to always do better, to invest into their future and to be creative.

But Baden-Württemberg is much more than this. It is a Land that knows well that wealth creation must be based on investment. That good entrepreneurship is about a long-term commitment to a business. Not seeking the quick gains but steady growth. A counter-model to the short-termism which dominated financial markets before the crisis emerged.

The success of many smaller and highly successful companies in your country, many still family-owned, tells us a remarkable story. I will visit some of them tomorrow morning, and I am looking forward to that. Sound and sustainable investment, not speculation is the basis for long-term success.

According to a saying in your Land "life is good where the vine is grown." I wholeheartedly agree. But I would add that your economic success and social coherence also tells us that life is good where a strong work ethics foster growth, stability and competitiveness and where there is a keen sense that there is more to life than just the economy: a sense of belonging rooted in values and a open heart for culture and the arts.

That is precisely what we want to achieve for the whole of the European Union.

Of course, for many parts in Europe, this is a long way to go. But we can improve. We must improve. And let me add: we will improve. We must focus all our efforts, with determination and perseverance, on correcting the weaknesses to attain our goals of macroeconomic stability, budget consolidation, and growth that will generate jobs. So that people here and everywhere in Europe can be confident that the good future is not behind us but ahead of us.

Together, we can overcome the crisis and emerge strengthened and more cohesive. Together, we can preserve Europe’s influence in an ever more competitive globalised world.

Together means everybody has to contribute. When I say everybody, I also mean the regions and the cities, and especially the economically successful ones, like Baden-Württemberg and Stuttgart, if we want to make the European Union as a whole a more prosperous and stable place.

Ladies and Gentlemen,

In many respects 2010 was a very turbulent year for the European Union. We faced some extremely severe tests, the like of which we had not seen in the past 60 years. But for me 2010 was above all a year of major European political choices that will prove decisive for our future. The year 2011 must see those choices put into practice, with determination, without fail and without delay.

We must now abide by the choices we have made. And when I say we, I mean the European institutions and the Member States, in a spirit of full cooperation, respect for subsidiarity, and shared responsibility in the service of the general European interest.

Transcending the socioeconomic disparities between our different countries, together we have been able to reach a European consensus on a broad common strategic approach for our shared future. Let us leave commentary to the commentators. Political leaders and those who have political, policy-making responsibility should not comment, they should take decisions. We will work tirelessly, and undogmatically, to make a reality of the political choices we have made.

The crisis has cruelly laid bare some of our vulnerabilities and shortcomings. But the crisis has also given a new and strong impetus to European integration. Because, as Hölderlin once said:

"Wo aber Gefahr ist, wächst das Rettende auch."

I really believe that this is true. I believe that Europe is able to transform these dangers and challenges into opportunities for growth if collectively we draw all the lessons of what has happened.

Europe has advanced more in a few months than in the last few years. We overcame differences of opinion that appeared insurmountable only a few months ago.

The crisis had harshly exposed our vulnerabilities and shortcomings:

  • Indebtedness that has reached a level at the limit of what is sustainable; almost all member states lived above their means, and had failed to bring down public debt sufficiently over the past ten years;

  • Major macroeconomic imbalances due to persistent disparities in competitiveness in the euro area had hampered economic growth;

  • Our common economic and monetary Union is still not complete and therefore subject to instability;

  • In particular, our surveillance regime does not enjoy the necessary credibility, as long as Member States have the possibility to take more than a few liberties with the rules they had given themselves.

Sharing a common destiny, and particularly sharing a common currency, means that every Member State must observe the rules of the game. They are indispensable to preserve the cohesion of the Union as a whole. They cannot be ignored with impunity. A French intellectual, Jacques Lacan, once said, "reality is when you bang your head." Reality has hit us hard.

Now we must live to the challenge. The human, economic and political cost is heavy. In many parts of Europe, though fortunately not here, the foremost cost is a sharply rising unemployment, which in some countries has reached 40% among the young people. This is not sustainable. This is intolerable from an economic and moral point of view.

Structural reforms, including in labour markets, that you have anticipated in your Land, have elsewhere been put off for too long. Of course, carrying out those reforms today is probably more difficult than it would have been in a more benign economic climate. But there can be no excuse for further delay, Europe needs those reforms more urgently than ever.

Debt reduction, structural reforms, greater convergence between our economic models, and stricter economic governance are not options but imperatives for the European Union. It is vital to keep up the reform impetus we have embarked on and to consolidate our action.

In 2010 we agreed on a common European Union strategy for employment and growth, the Europe 2020 strategy, which rests on a broad partnership between all actors in the European Union down to the local level.

With the Europe 2020 strategy we have all undertaken to carry out structural reforms that will promote budget consolidation and a revival in job-creating growth. We have committed ourselves to establishing a new model for growth in Europe – intelligent, sustainable, and inclusive growth – that will enable us to preserve our social market economy and our European social model. We have committed ourselves to investing in a Europe of knowledge and innovation, a more competitive Europe, a Europe of employment and social cohesion.

We have also decided on a common strategy to strengthen European economic governance. We have committed ourselves to tightening up the Stability and Growth Pact, correcting macroeconomic imbalances, and establishing a solid crisis management framework. We have committed ourselves to improving coordination between budgetary policies, macro¬economic policies, and structural reforms.

We have set up a European Financial Stability Facility (EFSF). For the next three years it will make it possible, if need be, to provide swift and effective stability to Member States in difficulty, in order to safeguard the stability of the euro area as a whole. Germany is the main contributor. Its existence rests on the principle that in the European Union and in the euro area in particular there cannot be stability without solidarity nor solidarity without stability. Nor solidarity without responsibility.

I am aware that questions have been raised, and in particular in Germany, on the compatibility of the Fund with the "No Bail-out" clause of our Treaty. Let me assure you: this is neither a "free ride" nor the way into the transfer union. We are not proposing a transfer union. The stability mechanism is based on credits, not grants. It is grounded on rigorous conditionality. The countries that resort to it observe rigorous not to say painful adjustments. In order to get the solidarity of the others, they have courageously embarked on ambitious programmes of economic and budgetary adjustment. I salute the courage and determination both of the political leaders and of civil society as a whole in the countries concerned.

And, it is not a "one-way street". We had to learn in the financial crisis that nobody is an island. Our societies are so interdependent that nobody can in the long run remain stable and prosperous unless all are stable and prosperous.

This is true for the whole EU where more than 60% of all EU exports go to other EU countries. And this is even more correct in the case of Germany, with its export-oriented economy. Germany has all reason to be proud of its impressive growth rates, and of the substantial reduction of unemployment.

But these successes would be unthinkable without the Euro and the Internal Market. Last year, 63% of all German exports went into the EU Single Market. And 40% of all German exports went into the Euro area. Germany is exporting more goods and services into France, the Netherlands, Italy, Austria or Belgium individually than to China. Can you imagine? More than 85% of the German surplus balance is realised within the single market. In turn, 65% of all German imports are coming from within the single market of the EU.

The German economic and social model, a great global success, is highly dependent on a sound Euro and a functioning single market. Without these, German goods abroad would become more expensive and therefore less competitive, exports would go down, and so would economic growth, jobs and prosperity in Germany.

Germany would have to bear Billions of Euros to counter-balance the risks of currency volatility, namely SME come into difficult situations because of compe devl and systemic instability. German investments undertaken in third countries, not just those of a few banks, would lose value and eventually default. Ultimately, Europe, and with it Germany, would lose economic weight and political influence at global level. The future of the German economy is extremely linked to the future of the European Union economy. And the European Union economy is extremely linked to the future of the German economy.

And, Ladies and Gentlemen, let us have no illusions: the weakening of the single market or the disintegration of the Euro would not remain without serious political tensions, accompanied by protectionist tendencies, in Europe. Such tensions would also affect Germany. Economic and social stability also needs political stability.

Thus Germany would not be unaffected by grave economic and financial instability in Europe. We either swim together or we sink separately. The way out of this crisis must and can only be a common way.

And it must be a way into a new sustainable future. This is why we have decided to set up a permanent crisis management mechanism from 2013, the European Stability Mechanism (ESM), which will operate following the main features of the current European Financial Stability Facility including strict conditionality.

Pending the entry into force of the permanent mechanism, the detailed arrangements for which the Commission is currently working on, we have undertaken to guarantee adequate financial support under the European Financial Stability Facility. In fact, at the last European Council meeting in December, all EU Heads of State and Government and the EU Institutions have agreed for the euro area that "they stand ready to do whatever is required to ensure the stability of the euro area as a whole."

I am quoting and will go on quoting. In particular, the Heads called for "determined action in ensuring the availability of adequate financial support through the European Financial Stability Facility, pending the entry into force of the permanent mechanism."

The European Semester which we launched last week with the first Annual Growth Survey ties all these strands together. And consequently the Commission has stated that it "considers that the effective financing capacity of the EFSF must be reinforced and the scope of its activity widened." This is a part, and only one part, of our comprehensive response to the challenge of the Euro area stability.

If you read our document, and I recommend all of you to read it, it is a very concise, sharp document. It is about fiscal consolidation, structural reform, growth-enhancing measures. It sends clear messages. I would like to see the measures we proposed only in context, not one isolated from each other. They all make sense only as part of a comprehensive systemic response.

In 2010, we also agreed on a common strategy of reforms to the regulation of financial services. We have undertaken to set up a stronger, more stable, more solid financial system for Europe. We have reformed the European architecture of financial supervision, the keystone of this entire programme of reforms.

In 2010, the first year that the Treaty of Lisbon was in force, the European institutions and the Member States worked together effectively at the rhythm of European democracy, which involves compromise and mutual concessions. Without this effective cooperation we could never have reached all the decisions I have just referred to, which, better than any high-flown rhetoric, bear witness to our strengthened political solidarity. These decisions are the foundations of the European Union’s overall response to the crisis.

I would also like to stress that these common decisions rest on a huge range of initial proposals put forward by the European Commission, which has made use of its right of initiative and will continue to do so.

The crisis, then, has made us face up to our responsibilities. And we have risen to the challenge. This is all the more vital because the crisis also accentuated the effects of globalisation, and in particular of multipolarisation, in other words the emergence of a new world order that is undoubtedly rich in potential but which will inevitably also bring increased competition. And we Europeans should not be naïve about what is going on out there at the global level.

At the end of 2010 we have seen the emergence of a Europe that is both more responsible and shows greater solidarity. Let us be clear. Europe is being governed. The euro is solid and viable. There is not, as some say, a crisis of euro. The euro is a strong currency. It is true there are some problems in some Member States. But the euro is, and will remain, an essential element of European integration. There can be no remaining doubt about our political commitment to do all in our power to ensure the stability of the euro area as a whole. Our commitment is unshakeable, for the cost of a breakup of the euro area would be enormous. This work is not finished. And a new culture of responsibility is emerging. The measures and decisions that we are taking are without ambiguity all in favour of stability. We are asking that everybody of us has to do is part. This is the way I understand stability, solidarity with responsibility.

Once again, then, the perspicacity of Jean Monnet has been borne out when he wrote in his Mémoires that "Europe will be forged in crises, and will be the sum of the solutions adopted for those crises."

In 2011, let us at last leave behind us the frenetic pace of emergency measures and short-term responses. We need to rediscover a more serene sense of what is urgent, for we cannot let our guard drop, so that in the long term we can win the battle to safeguard our position in the world. Outside Europe, our partners are looking at us and ask: Is Europe, its system of governance, able to solve its problems?

We are perfectly capable of this; we have equipped ourselves with the means to do so. And we must do it; because the future always comes back to haunt those who ignore it. If we were to be weak and hesitant today, future generations would pay the price. This would be quite simply unacceptable.

I have confidence in our political will to stick resolutely to the course we have set. The new year has already begun with the establishment of a new European framework for financial supervision. Together with the European Systemic Risk Board, three European financial supervisory authorities have commenced their work on the 1st January.

With this, the European Union thus now has the means of supervision necessary to detect any build up of risks in the financial sector. Transparency as regards the situation in the banking system must be further increased and improvements will be made to the new series of stress tests planned for the spring.

If I had asked you two years ago if this could be possible, the answer would have been “no”.

As I indicated at the outset, we have also launched the very first step in a new age of common economic governance in the European Union, the “European semester”.

The European semester offers, for the very first time, ex ante coordination between our member states and the EU institutions. This coordination will be covering every aspect of economic policies. It will allow the Member States and the Commission to work together within an overall framework on macroeconomic stability, structural reforms, and measures likely to stimulate growth.

The European semester does not impinge in any way on the budgetary sovereignty of national parliaments. On the contrary, the European semester makes it possible to involve national parliaments more closely in European affairs.

Once again, if I had asked you two years ago if this could be possible, the answer would have been “no”.

Clearly, the main challenge we face is to avoid the vicious circle of unsustainable debt, unstable financial markets, and weak economic growth. We need to generate a virtuous circle through rigorous budgetary consolidation and greater macroeconomic stability, structural reforms, and growth that will create jobs. To this end, the European Commission in its Annual Growth Survey of last week has proposed ten urgent actions. With these, we believe we can turn the vicious into a virtuous circle.

The fight against unemployment is one point I would like to stress, because the social and economic cost is intolerable. And nothing would be worse than a return to growth without the creation of new jobs. That is why several of the urgent actions we have put forward aim at mobilising the labour markets and creating jobs.

In particular, we must prevent long-term exclusion from the labour market for the most vulnerable: those on low incomes or young people, for example. Benefits should therefore be more closely linked to training and job-seeking.

We must also assist the reinsertion of the unemployed into the labour market and, once economic revival is under way, review unemployment benefits so that they provide an incentive to return to work.

We must, of course, take into consideration the demographic evolution and the ageing of our population and therefore reform our pension systems and the employment position of older people. Many Member States are now reforming their pension systems in terms of retirement age.

Once again, if I had asked you two years ago if this could be possible, the answer would have been “no”.

The annual growth survey also emphasises that to give priority to growth we need to exploit the potential of the single market, attract private capital, and ensure access to energy at an affordable price.

Energy will be the most important focus of the next European Council. And we have a real expert in that area: Günther Oettinger. We just went to Azerbaijan and Turkmenistan together. If we Europeans act together, we can protect and deepen our single market. If we have a common external energy policy, we can do much more for our growth.and also for our energy security.

As you can see, the survey sets out a coherent plan to enable Europe to return to strong economic growth and high employment. If it is fully implemented, I am convinced we will succeed.

Over the course of this coming year, then, we have to implement a programme as ambitious as it is necessary. To succeed, we need commitment and energy on the part of everyone.

For several decades, the European venture progressed against a relatively benign background. We enjoyed years of strong growth that favoured solidarity between the Member States and we had the comfort of a unipolar world which, in many respects, maybe has given us a false sense of security.

Now the situation has changed completely. And it has been a rude awakening. We are less able than ever before to escape the realities of the world. It would be easy to retreat into our shells, and yield to nationalist and protectionist temptations. But we are all too familiar with those temptations; we know that this is not the way forward, that it would be destructive for everyone.

We must not give in to resignation. There is no reason why we cannot shape our own destiny if we show the political will.

Our Old Continent is the birthplace of the Enlightenment and the rights of man. Our Old Continent has overcome centuries of violent division and embarked on a huge adventure, our European venture, that has brought us peace and prosperity.

Our challenge today is to move that European venture forward to preserve our values, our place, and our influence in a globalised world.

Our challenge today is to equip ourselves to defend our European interests and win the crucial battles on issues such as market share or energy independence.

That is the goal of the decisions which we have committed ourselves to and to which we must now put into practice. The European Union must equip itself for governance, political and economic influence, in order to maintain its place in a world where geopolitical, geo-economic and geostrategic realities are undergoing profound changes. Now, more than ever, is the moment to remember that ‘nothing ventured is nothing gained’.

I have given you a very detailed picture of where we stand and where we should go. Some of you might have expected a more flowery rhetoric. But I am told that you here in Baden-Württemberg are very practical and common-sense people. I am sorry if I have been a bit long but I guess that you by coming here wanted to get the full and true story, not just some sound-bytes or headlines.

Ladies and gentlemen,

Yes, in the Commission we can count on your support. But I also wholeheartedly want to thank here and today you and your German fellow citizens for everything you and your country have been and are still doing for Europe. I will always remember that when my country became a democracy in 1974, the first among those who were supportive were our German friends. And this I will never forget.

I have said at the beginning that Baden-Württemberg has a long history of commitment to European integration. Baden-Württemberg has a long history of contribution to European culture, arts and literature. This is the land of Friedrich Schiller and Friedrich Hölderlin, the land where Georg Friedrich Hegel was born, and the land of Hermann Hesse, to name but a few. These names not only stand for Baden-Württemberg. They stand for the great German and European culture.

We, too, must stand for Europe, at this crucial moment when the role of Europe in a new phase of globalisation is at stake.

This will require an effort. But Baden-Württemberg is a Land, and Stuttgart is a city used to efforts, that do not shy away from efforts. In this spirit, we can succeed.

As Friedrich Hölderlin put it:

Es wird uns leicht, etwas durchzusetzen, sobald wir nur nicht ans Ziel getragen sein, sondern mit eigenen Füssen gehen wollen und es nicht achten, wenn zuweilen ein hartes Steinchen die Sohle drückt."

Thank you.


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