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SPEECH/11/510

José Manuel Durão Barroso

President of the European Commission

Anchoring Europe’s Future

Château de Westerlo

Westerlo, Belgium, 6 July 2011

A shared history and a shared future

Ladies and gentlemen, I would like to begin by thanking the Harvard Club of Belgium for this invitation. And of course, Renee Haferkamp – a former Director-General of the European Commission and a now highly valued member of the Harvard community.

The last Harvard address I gave, in Cambridge, was the week after the collapse of Lehman Brothers. It goes without saying that a lot has changed in Europe and the world since those days in 2008, some of which I will cover tonight.

First I would like to recognise the links between Harvard and Europe, and indeed the US and Europe. There are 10,000 European Harvard alumni living today, 600 of you in Belgium, and the links run right back to Harvard's first professor, Nathaniel Eaton, and its first President, Henry Dunster, who were both raised in England. Perhaps most significantly, it was at Harvard in 1947 that the then Secretary of State, General George Marshall, outlined his plan to help rebuild Europe. The European Union's Founding Fathers drew on that spirit of peace and rebirth, and more than 60 years later we have produced – together - the world's greatest political and economic relationship: the Transatlantic Relationship.

This indispensable relationship has defined the political economy of the post-war world. Emerging economies and emerging democracies continue to pursue the living standards and universal rights and freedoms we have secured.

Based on openness and a level playing field, our economic links alone provide up to 14 million jobs today. In other words, ladies and gentlemen, our shared history and our shared future matter greatly.

I also think it is appropriate that we are here tonight in Westerlo, home to the House of Mérode. The Mérode family is itself a version of the European human tapestry. Dating back a thousand years and stretched across much of Europe, the Mérode family have played an important role in the history of Belgium, the Netherlands, Spain, and Germany. The Mérode story is a truly European story and is now complete with American links. Today the village of Westerlo is twinned with Westerlo in upstate New York, and the famed Mérode Altarpiece by Campin is displayed at the Metropolitan Museum of New York.

So whichever way you look at it, Westerlo, Belgium, Europe and the United States are forever linked in the story of human progress. And it is relationships like these which anchor us in these uncertain times.

What I thought I would do tonight was to give you a sense of the size of the issues the European Union is facing over the next year. It is a subjective list, and certainly not an exhaustive one, based on the tasks we have in common.

Beyond the Headlines

Observers have always said that Europe won't make it, that the European Union can't succeed. Everything we now take as normal and necessary – from the single market to the common currency to Schengen and post-Communist enlargement - all of this was once a dream many thought could not be realised. The stakes are higher this time, because our Union is deeper, but time and again Europe finds a way to rise to the occasion.

Of course, half a billion people, 27 countries and cultures: it is a lot to stitch together. But the powerful political forces that bring us to compromise and keep us together are very hard for a capital market to price. Yet they are very much real. So I caution against the glamour of pessimism. It makes good headlines, but not good policy. And it is good policy that Europe needs today.

Let me also appeal to you as responsible people, as civic leaders in European society. It is clear to me that the immediate crisis is just one challenge in wider set of changes and challenges in the world.

It has been obvious for some time that there is a rebalancing of power taking place in our world. This is related to the globalisation of the economy, and it is certainly amplified by the information revolution.

Individuals and nations once excluded from the global conversation are no longer merely asking to join it. They are staking out new ground, winning some races and demanding engagement. We see it in the rise of the BRIC economies. We see it in the young people driving the Arab Spring.

These forces for change are far too powerful for us to run away from. At least if we want to maintain our living standards and secure Europe's role in the world. And that fact places a great responsibility upon all of us who are aware of it. By that I mean everyone here tonight, because we are in a position to help Europe adjust to these realities.

Why do I make this particular point? Because alongside the opportunities, this global dynamic also delivers uncertainties. Sometimes it fragments our shared understandings and our social solidarity. This can be fertile ground for populism.

So I say to you tonight that we must confront both our global challenges and those who offer only populist responses. We must keep making the case for open and inclusive societies, and for open and modern economies. We must walk the road of reform together.

The European Union's work between now and 2014, indeed 2020, is not just about crisis management. It is an active agenda to deal with this wider set of issues, and now I'd like to mention a few of those specific issues.

Current issues and actions

It is clear that we need to invest today if we want to achieve sustainable growth tomorrow. That comes with two responsibilities: 1) all sectors should make a contribution to that investment, and 2) the European Union should be disciplined in the way it funds such investments. This brings us directly to the new financial framework the Commission has proposed for the period 2014-2020.

There has been a lot of nonsense spoken about our proposal for the next EU budget. So I want to emphasise that the Commission is proposing a stable budget. To achieve it we are trimming some areas to refocus on our highest priorities – like building the missing connections in energy, transport and ICT that are holding back the single market.

It is perfectly honest and transparent. Some people will always want to debate micro-movements in the spending figures, but what matters is that we fully exploit every Euro that we spend. That we focus on where we add real value, not in replicating national spending. That we address today's concerns and tomorrow's needs. For these reasons it is ambitious and responsible.

So it is frustrating then to see that elements of an unhealthy culture of entitlement remain. In some quarters we have seen even a Pavlovian rejection of our proposals. In these serious economic times, that really won't do. And I can assure you we will be fighting hard to keep the coherence of our proposals.

This is not money for Brussels officials. Administration, which covers much more than salaries - accounts for only 5,7% of the budget. The bulk of the budget is operational with investment for getting people into work, for innovation and research and for getting the most out of our single Market.

Indeed, there are many areas where EU funding is less expensive than 27 national policies, or an essential complement to national action. Just imagine how much it would cost to have 27 separate agricultural policies. The immediate effect would be an expensive protectionist spiral. It is a similar story with border management. Ladies and gentlemen, it would be inconvenient, more expensive and no more secure to go back to 27 border control policies.

Knowing this, we have to protect the efficiencies and freedoms we have won. It would be madness to cut the budget now, simply to chase a positive media headline.

This is not a double standard: we of course recognise the need for budget discipline. But the European Union does not need to undertake a fiscal consolidation along national lines because it has no deficit or debt to purge.

So, we have to be honest here. Capitals cannot have their cake and eat it. We are interdependent as never before, and dealing with that costs money. Enlargement also comes with costs alongside its massive benefits. So, this is a budget for all of us. It is a very good offer for the net contributor countries, and for Europe.

There is a further reason for my confidence. If, as proposed, we rework how the European Union receives its necessary funds, then citizens, governments and the European institutions all win.

Take the example of a financial sector tax. Citizens win because they will pay less directly for the benefits they gain from the European Union. Member States win because their contributions to their European commitments will be lower. The institutions win because we will have greater autonomy to deliver, independently, what we have been asked to deliver. And finally, we end both the free ride for financial transactions, and the current imbalance whereby 10 member states have a tax and the others do not.

So, this is not an ‘extra tax’ for the European Union. The opposite in fact. It is a useful tax, a responsible tax, and a popular tax.

Let me also be clear: all 27 member states are committed to introducing a financial sector tax. Of course a global solution is preferable, but I do not believe we will hurt the banking sector or drive business outside of the EU through such a tax.

From a business perspective, the key innovation in our proposal is the €40bn ‘Connecting Europe’ facility for infrastructure investment. This will be topped up with another €10bn from our Cohesion Fund, and we also plan to leverage it with further private investment. Of all the elements in the budget, alongside boosting research funding to €80bn over seven years, this fund will do the most to improve the business environment and spur innovation.

After all, there is no reason why should a train slow down by half when it crosses a border. There is no reason why some should have access to broadband and not others. There is no reason why renewable energy produced in Spain shouldn't make its way to Germany. Fixing this will make life and business easier. It will deliver the higher productivity that is the common thread in every new job, in every path to growth.

What else are we doing to help you keep Europe open for business? Many of you will have already come across our Europe 2020 strategy. This provides the policy thinking for catalysing tomorrow’s growth. In 2011 and onwards we are starting to see implementation of this policy framework. Through this year's Single Market Act we are kick-starting the process of completing the single market. Let me give you a couple of examples.

Firstly, we are working to keep downward pressure on energy prices through more competition and more investment. We are also committed, and backed by the Member States, to complete the Digital Single Market by 2015. We see ourselves as enablers and catalysts but not as heavy regulators. But where strong regulation is needed, for example to stimulate competition in the mobile roaming markets, we are acting. Just today we have decided to extend and push down our EU-wide price caps, and given you the freedom to choose a roaming provider separate from your domestic provider. Gone are the days when you pay 30 times abroad what you would pay at home to check your emails.

More broadly, we have made over 200 proposals to simplify legislation and have tabled proposals that would reduce administrative burden by more than 31%. We are fighting hard to prevent these proposals being watered down.

Turning to skills, we are tackling the issue from both ends. Pushing for more investment in education while protecting the Schengen Agreement.

On education, we are boosting the European investment by almost 70%. This is aimed at strengthening mobility through a stronger Erasmus programme. We will also bring to vocational training and Masters programmes what has worked so well for undergraduates.

On borders, I don't ever want to see you stuck in a border queue instead of closing a deal. So even on an issue like freedom of movement, you have a stake, and I count on your to support us in our efforts to strengthen the freedom and benefits that Schengen allows.

Finally, a word on Greece. We have seen important steps forward in recent weeks. But I must emphasise that the situation in Greece is fundamentally not a crisis of the euro. It is a crisis in Greece and several other member states which affects the euro. Those are very different things. The euro is strong and here for the long-term.

There is real pain in Greece, but there is no easier route out of these difficulties than the agreed reforms. If there was an easier route, I would take it tomorrow. But you do not stop telling the patient the truth simply because the truth hurts.

Let's not forget also that Greece needs growth. There are EU structural funds available under our cohesion policy that can be deployed to help kick-start the Greek economy today. We should concentrate these funds on where it matters the most now: on improving competitiveness and employment. These funds should support real entrepreneurship. And we should find ways to frontload and accelerate them. But it takes two to tango.

Europe is ready to deliver for Greece. That is what a political and monetary union means. If Athens continues to act, Europe will continue to deliver.

In conclusion, ladies and gentlemen, Europe has some extraordinary assets at its disposal. We have the world's largest market and the lead in green growth. We have an ability to find solutions in tough moments. We have our relationships with the United States and across the globe.

We must be humble in the face of our challenges, but we can also say with confidence that we are building the lessons of the crisis into our policy-making. We have now both the plan and the tools needed to get Europe back on track.

Of course, the stakes are higher than ever for Europe’s future. The Commission is playing its part and I call on all the others to play theirs. On that note, ladies and gentlemen, it is time to turn to bring you into the conversation. I look forward to your questions.


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