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Speech - The Political implications of European economic integration – towards a political Union

European Commission - SPEECH/13/923   18/11/2013

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European Commission

José Manuel Durão Barroso

President of the European Commission

The Political implications of European economic integration – towards a political Union

Annual meeting of Jean Monnet Chairs/Brussels

18 November 2013

Dear Jean Monnet Chairs,

Professor Mc Cormick,

Dear friends,

Ladies and gentlemen,

It is always a great pleasure to address this annual meeting of Jean Monnet chairs because of some academic nostalgia I keep.

You have come from the four corners, not only of Europe but of the world, a tangible sign that there is indeed a great interest in the European Union, that is why Europe matters, as Professor Mc Cormick's says, taking it from the title of his book, Europe is needed.

Ever since the financial crisis struck in 2008 world leaders have stressed to me the importance of Europe's economic recovery and their vital interest in a strong vibrant Europe capable of remaining a global actor.

Indeed, the crisis has shown how interdependent we are, not only in Europe but in the world. A crisis that started in some of our Member States - apart of course from the Lehman Brothers collapse - but the crisis of sovereign debt in one or two of our member states, raised concerns about the euro all over the world, and also had a profound impact to the global financial markets. And one point I'd like to share with you is that at international level, for instance in the G20 – where I've been since 2000, so many years now – and the G8, the messages were convened to us from our partners, from the United States to China, from Brazil to Japan, was that more European integration is needed. It's interesting sometimes to see how we are seen from the outside. Because at the end there was a clear perception for the need to a more political Europe, also because of the financial strengths originated by the so called euro crisis.

I am heartened that in the recent G8, in Northern Ireland, and the G20 in Saint Petersburg, the European economy was no longer at the centre of the concerns. We have instead received praise, and words of admiration for the very determined way in which in the European Union was able to secure the euro. And now, as you say, there is no longer that perception that we are at the centre of all the world's problems. The last G20 was more comfortable for me than the other G20s, where we had to receive the advice of many leaders around the planet.

There is a recognition that our efforts are paying off. And these efforts are important not just for Europe but for the world at large. The EU with its 507 million inhabitants accounts for 7.3 % of the world's population but over 23% of global GDP. Our combined GDP is greater than that of the United States and twice that of China. Our combined weight is essential to understand Europe's future challenge. And it is not, however, just about size and scale. It is also about the model.

In a globalised world, the European Union is endowed with many assets from fantastic human capital, to world-class companies and to top quality R&D and higher education institutions that attract almost half (45%) of internationally mobile students. As importantly Europe has a model of governance that reconciles national sovereignty with cooperation, including within European institutions, some of them supranational institutions, and political integration. A model which as in the past, and continues today, to inspire others.

The Nobel Peace Prize that we have received last year highlights precisely the great example that Europe is setting in terms of reconciliation, peace and democracy. An example that I can tell you is very much inspiring other regions of the world. One of the points in many of my contacts with leaders from Asia or Africa or other parts of the world, when we discuss these matters, is a matter of admiration for them. How was it possible to achieve the reconciliation after the Second World War and to build this kind of project? Something that has not happened, I have to say, in some other parts of the world, where some deep problems are still present in terms of reconciliation and in terms of countries being able to share some of their common interests.

But if Europe is to maintain its leading role, we need to reinforce our institutions and improve the governance structures. We must realise that our Member States, even the biggest ones, on their own, are no longer capable of facing up to some of the challenges that a globalised economy puts them and act on this. But they can do it together in the European Union, if they are able to pool their national sovereignty.

This is not about losing sovereignty; it is about pooling it to be stronger, about sharing power to regain power and influence in the world. And it is not about giving up on politics, as sometimes some people suggest, it is about adapting our political toolbox to make a difference and help shape globalization. Some people now say that because of the huge developments on the financial markets or in technologies or ICTs, politics no longer matters. I believe it's a complete mistake. Politics matters, and we can see from the financial crisis, where political mistakes were made, to the other crisis including in terms of war and peace, what happens when some leaders make mistakes. So if politics matters to make mistakes, politics should also matter when it's a matter of good judgment and good choices.

The problem is not that politics no longer matters, the problem is that the form of politics today is different. And today it's impossible to be a leader in any country in the world without having a global vision. It's impossible to take decisions that are looking only into the national interests, because national interests should be understood and promoted, - when it's the case - also in the context of the regional or global challenges. So it's a change in the shape or the form – if you wish – of politics, but not the irrelevance of politics. It is not, as some people suggest, the supremacy of technocratic decisions, because even when there is a choice of technocratic decisions this is a political choice. And it's important from that point of view - I would like to underline - to still keep the idea of the primacy of politics.

The structural weaknesses which the crisis exposed and exacerbated; excessive public borrowing, corporate and individual indebtedness and erosion of the global competitiveness of a number of our Member States had been building up over years. They cannot be overcome from one day to the next. However, Europe's efforts to ensure stability, through fiscal consolidation combined with deep structural reform and targeted investment to lay the foundations for sustainable inclusive growth, are beginning to bear fruit.

Of course, and this is very difficult sometimes, with very very hard sacrifices in many parts of our population. As I've been saying there is a situation of social emergency in several of our Member States.

But we are now seeing a modest, but encouraging return to growth, breaking with two years of recession. The rebalancing of our economy is underway, as I have highlighted yesterday at the occasion of the adoption of the Annual Growth Survey (AGS), which set the priorities for 2014 for the EU and Member States.

All indicators are positive, I would say, expect one: unemployment. Unemployment is the most dramatic challenge we are facing, namely youth unemployment. This is why I simply cannot say the crisis is over. How could we say the crisis is over when we have still these high levels of unemployment? But it is fair to recognise that very important challenges are now behind us. Some time ago, let's not forget, many people in the markets also in our international partners were questioning the very survival of the euro. This is no longer a scenario. I received, during the most acute moment of the crisis, very dramatic questions from the leaders of the United States, Russia, China, India, about the capacity of Europe to resist these strengths and pressures. Now everybody agrees that the euro is a strong, credible and stable currency. The problems remain but are from a different nature. It's no longer the existential threat to the euro but the possibility of ensuring a lasting recovery. The first signs of recovery are there, but can we make sure this recovery is sustained? This is the question now, a different question from the one that we have discussed one or two years ago.

Ladies and gentlemen,

Economic integration in Europe is a unique process. The creation of the Economic and Monetary Union (EMU) was, undoubtedly, one of the major milestones of European integration. The Euro – the second largest reserve currency - is one of Europe's defining symbols at home and across the globe. Some of great aspirations of the Economic and Monetary Union have been realised, while others remain to be achieved.

Our fundamental response to the crisis was aimed at restoring confidence that the achievements of the single market and single currency will not be undone. But while focusing on the individual economic and institutional reforms we should not be missing a bigger picture: not just of the changes required, but also of the political will, to move forward on the road to complete the design of the Economic and Monetary Union and ultimately the political union.

And here I want to highlight the word 'political', because indeed it's about politics we are speaking. Once again I want to share with you my experiences during the most difficult periods of the crisis. When discussing this matter with the President of the United States, the Prime Minister of China, the President of Russia or the Prime Minister of Japan and also very important entities in the financial markets, the question they asked was not about the deficit of Greece or about the debt of Ireland. It was namely about the political determination in the euro area to sustain the currency. It was, very concretely, about Germany. 'Do you believe', I was asked, 'that Germany will do whatever necessary to sustain to euro?' And the answer I gave was: 'yes, I believe it will'. And I explained why.

So in the end, and this is very important to understand, the stability and the credibility of a currency like the euro lies on the credibility and the sustainability of the political institution construct behind it. That is why in the end – of course it has to do with markets, of course it has to do with debt, of course it has to do with deficits – but it has to do with the political construct that is behind a common currency. In the end it is about the commitment to live together and share a future. To share not only a currency that is by the way a symbol of Europe but to share a future. So it is eminently a political issue. And it's very interesting that the main doubts about the euro dissipated when there was a clear sign from the Member States and the European institutions like the ECB that in fact Europeans would be ready to do whatever it takes to support the euro. Once again, it was not an economic intervention, it was not a technical decision, it was a political commitment that changed the mood in the markets - once again an example that politics matter.

With our Blueprint on a deep and genuine economic and monetary union, presented in November 2012, the European Commission is precisely filling this gap, the gap between what is perceived as the current crisis, namely to some problems that we have already mentioned, including in the market perception, and the future. Our main purpose is to present the political vision that justifies the institutional change in the short term, builds political awareness and leverage in the medium term, and launches a public debate on Europe's longer term.

This comprehensive approach is based on key principles that need to be upheld in order to deepen the EMU while at the same time preserving the integrity of the European Union at large.

First, deepening the euro area should be done within the institutional and legal framework of the Treaties, according to the Community method. Moving outside of the Community framework risks legal fragmentation but also undermines democratic accountability.

Second, the deepening of the EMU should first and foremost make full use of the potential of EU-wide instruments. Certainly, for some purposes we need integration in the EMU, we need a reinforced model of governance, we need more discipline for the members of the EMU. But we should not forget that the present configuration of the euro area that will soon have 18 members - one more in the beginning of next year, not one less, contrary to predictions - is only temporary, since in principle all member states except those that have one form of opt-out are destined to become full members of the EMU under the Treaties. Measures should, therefore, be open for others to participate. Any kind of deepening of the EMU should be done in an open way, so that we have not only the members of the euro today, but all those that are going to be members of the euro area, if they wish to participate already from now in many of the features of this reinforced governance.

And third, moves towards a genuine EMU should primarily be made through secondary legislation. Treaty change should be contemplated only where and when necessary. Most of the building blocks of the EMU in the medium term, however, go beyond what is possible under the current treaty, and we should acknowledge that.

The Blueprint presented by the Commission also sets out the major questions both of our destination and how we progress on all fronts at the same time. The crisis has made one thing clear, it is that economic governance, democratic legitimacy and social commitments need to move forward hand in hand, keeping pace with one another.

We have provided our vision and principles for the future, with concrete sequencing of short, medium and long term to support the deepening of the EMU. And we should now focus – while keeping that horizon, the political union – on what we can do in the short run. The banking union is at the forefront of our priorities. The single supervisory mechanism has been adopted and a single resolution mechanism is under discussion. We have also been working on some other measures such as a mechanism to better coordinate major economic reforms across Europe, the so called contractual arrangements. Or, as the Commission has said, convergence and competitiveness instruments, that could combine specific contractual arrangements for reforms with Member States with a focused and targeted financial support.

The social dimension of the economic and monetary union is also being strengthened along the lines recently proposed by the Commission.

Ladies and gentlemen,

The subtitle of our Blueprint is "launching a European debate".

We want to start and fuel a democratic debate with the European Parliament, members of national parliaments, governments, academics, people of culture and thinkers, and citizens on the future of Europe.

A truly European debate is necessary to underpin the intensified political union that is a key complement to fiscal and economic integration. Europe's democratic legitimacy and accountability must keep pace with its increase role and power, and I hope that the debate you are having in this Conference will help on this endeavour.

Ladies and gentlemen.

From the philosophers of ancient Greece, through the great thinkers of the renaissance and the enlightenment to the present day, Europeans have questioned any and everything. And Jean Monnet, himself, wrote, "Il suffit de poser les bonnes questions et de rencontrer la bonne volonté qui existe toujours quelque part." Yes, we need to put the right questions and I'm sure that if you put the right questions the goodwill, the political commitment will come. It is responding to this critical scrutiny which has driven our continent forward.

You can fuel this democratic debate. A debate on where the future of Europe lies. In your quality of Jean Monnet Chairs, you are, indeed, in a privilege position.

And that's why I want to conclude with a challenge, since most of you are professors, with some homework. I'd like to make a challenge to you to contribute to a task I'm now fulfilling. As I promised in my State of the Union addresses to the European Parliament, before the end of the mandate of this Commission, hopefully before the European elections, I will put forward some ideas for the future of Europe. I think it's a duty now, building on almost 10 years of experience leading the European Commission. And I would like very much to have your input, but I really mean an input, not just a conference or just some talk.

That is why I'd like to ask you – if you want – to send your contributions to my own cabinet, together with BEPA, the Bureau of Economic Policy Analysis, and they can organise this contributions. I know that some of you have been also thinking about constituting a more limited group. I'm afraid I cannot read 100 contributions, but at least if some of you gather in a group - I know for instance Professor Fausto Quadros, from the University of Lisbon, is developing some contacts for that, Professor Sidjanski, Professor of the University of Geneva and my special advisor, is also working on it.

So if some of you could organise a think tank group with some of your proposals – or, better said, options, because I know there are many different views among yourselves – I think it could be a contribution for that exercise that I would like to present on behalf of the Commission, in my capacity as President of the Commission, to fuel this debate, even before the European elections. Not only about institutional aspects but more about the future of Europe, where Europe is needed, what Europe can do more, what are the tasks, what are the principles. I've been already working, there have been already some important contributions, but I believe it will be a very concrete way of giving this contribution apart from what you are doing daily, in your teaching or research activities, to shape the European Union of the future.

On behalf of the European Commission and myself, on my own behalf, I would like to thank you for everything you have been doing, all over the world, to have this critical debate on Europe. We are not asking for propaganda. We are asking for the best of your critical capacities, for the best of your knowledge, on reinforcing the study and debate on European affairs. From all fields, from economy to law, to institutions, to political science, to sociology. I really want to thank you because I know – I've been in contact with many of you – that you are doing a great job keeping these studies alive.

And that's precisely why I am happy to see that we have obtained a substantial increase in the budget dedicated to the Jean Monnet programme, under Erasmus +, we want to ensure the participation of a new generation of professors and researchers in Jean Monnet projects and to reinforce European integration studies in higher education institutions. The Jean Monnet network's role is very important in promoting policy debate and exchanges between the academic world and policy-makers on moving ahead towards a political Union.

I'm sure that this role – you can also give a concrete contribution to this debate, I've already mentioned, but also that you can continue in your research and teaching activities, also, to give a very important contribution to this great project that is the European Union.

I thank you very much for your attention.

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