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European Commission

[Check Against Delivery]

José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso at the European Business Summit

European Business Summit

Brussels, 14 May 2014

Thank you very much, dear Didier, for your invitation.

Thank you also, President Marcegaglia, dear friend, Emma,

Dear friends of the business summit,

First of all, thank you for inviting me to open this 12th European Business Summit, focusing on Europe's competitiveness and the business agenda for the next period 2014-2019.

Indeed, if ever there was a time for the voice of business and industry to be heard, it is now.

Coming out of a crisis - because I believe that we are coming out of the crisis - and at the end of some of the most turbulent years in the history of the European Union, we need to take stock of all that has been achieved and what still needs to be done.

Seeing the tremendous changes in the economic and technological world around us and the challenges they bring, we need to be prepared for what comes next.

And as the campaign for the European elections is gathering pace, the big questions of what needs to be on the European agenda in the years to come demand a clear answer.

This is the time for citizens to speak out about Europe.

This is also, I believe, the time for political leaders to discuss Europe.

But this is also the time for you, business leaders, to voice your opinions, your needs and interests so that the business agenda and the economic agenda for the years to come fit the European vision we debate today.

This European election campaign provides us all with a unique opportunity to express our views about what European Union we need. Not only to move beyond the crisis, but also to reinforce Europe's influence in the world of today.

The last decade of European integration – and indeed I had the privilege of leading the Commission during these last 10 years, that were, as I have said, very challenging – was marked by historic achievements, starting with the biggest enlargement of the European Union - exactly 10 years ago this month - fulfilling the promise of uniting our continent around shared values and shared principles, as well as a common destiny.

But this decade was also marked by unprecedented crises.

First, the institutional crisis that began in 2005 with negative referenda on the Constitutional Treaty in two Member States. I can say that this crisis was basically overcome in 2009 with the entry into force of the Lisbon Treaty. Second, since 2008, we had the financial crash that turned into a perfect storm of a combined sovereign debt crisis, an economic crisis and a social crisis. And third, more recently we have seen – I'm not going to mention other international crises, but specifically with some impact on Europe - this Russia-Ukraine crisis, which is probably the biggest challenge to security and peace in Europe since the fall of the Berlin Wall.

All of this has represented an enormous stress test for the European Union and for the euro. Many people were predicting the end of the euro, Greek exit, implosion of the euro, even disintegration of the European Union. It required exceptional measures to address it, including the creation of completely new instruments to ensure stability and solidarity. Instruments we did not have before the crisis. They were not in the treaties, they were not in our legal system.

These events and our common reaction to them are testimony to the extraordinary resilience of the European Union, its institutions, its Member States and all of us in Europe. I want to make this point about the extraordinary resilience of the European Union because, during all these years, I have been listening to so many prophets of doom, internally and externally, that I think that it is time to say that some should recognise that they were not right when they were predicting the worst for the European Union. A lot still has to be done, but those more negative scenarios were in fact not confirmed.

These developments also confirmed that the European Union needs to adapt continuously to address new challenges. The EU cannot stand still. The world is moving, so we should also move. We can never take the benefits of European integration for granted. And as I have been saying, using Latin: Non progredi est regredi. Meaning: If we don't go forward we go backwards. We are in a situation in international developments where we cannot stand in the same position. Either we go forward or we fall down.

Because, with the crisis, tensions have re-emerged between the "centre" and the "periphery", between "richer" and "poorer" Member States, between "creditors" and "debtors", between the north and the south. And with the dramatic rise of unemployment, there is now a fertile ground for all kinds of populism and extremism. And also, we are seeing the cost in terms of social equity and threats to the European social market economy.

But the crisis - and this is not always said - has also increased the resolve for reforms. Today it is common sense that Europe needs to reform. There are different levels of enthusiasm - let's be honest - among the different political forces and different governments, but honestly no one will now put into question the need for Europe to reform and to adapt to a much more competitive environment. And so, from that point of view, the crisis has forced and is forcing Europe to make some reforms, which would be politically much more difficult to achieve without the impetus of the crisis.

The crisis has also shown that our interdependence is much bigger than people thought. We are in a situation where, as I said before, because we are all in the same boat in Europe, we cannot say: "Your side of the boat is sinking". We have to get out of this together. In other words: the crisis has helped us to undertake the reforms that were necessary. Now, we need to build on that – by remaining open to the world, by being more united and becoming stronger. So the goal should be: keep Europe united, open and stronger.

Never has the global context been more important. In order to safeguard peace and prosperity in Europe, we need a European Union that is much more willing to act together, to project its power internationally and to strengthen its role and influence.

A new world order is being forged. Either we contribute to reshaping it or we will miss out on the future. Either Europe will be strong enough internally to act as a global power or Europe may face irrelevance.

However, this does not mean we need to reopen the whole debate about Europe from an institutional point of view. Quite the opposite.

All too often, debates on European policies become debates on European institutions, competences and the balance of powers. Instead of just making decisions, we discuss how to make decisions and who gets to make them.

But with current challenges I am convinced that the debate on the future of Europe must be first and foremost a debate on politics, only then on policies, and only then on the polity, the political system. It must be above all a debate about what we want to do together, and why we need to do that together.

As we have proved time and again during the last few years, when the political will is there, the framework for decision is there too. And we should have in mind: no institutional engineering, no treaty creation will replace the political will. So if there is a political will, namely among the member states and the institutions, I believe we can, as we have seen in the past, overcome the obstacles, create new instruments when necessary, respond to the challenges.

But it is true that the politics of Europe - not so much the institutions, but the politics - have at times prevented Europe from acting as it should have.

There is a lack of ownership in European politics. There are still some national leaders that think of European policy as foreign policy. European policy today is not foreign policy – it is part of internal policy. When we have democratic decision-makers who take decisions in Brussels and afterwards refuse to defend their common decisions, of course European legitimacy suffers. So we need national politicians to exercise real ownership of the European project and of the decisions made at European level.

Political controversies are also too often putting the blame on 'Brussels', forgetting that many of these demands come from societal, business or workers' interests. They are the ones that come with proposals. Populism thrives because key stakeholders often shy away from assuming accountability.

So we need to fix the politics of Europe first.

To do so, we need to develop a new relationship of cooperation between the Union, its institutions and the Member States based on trust and loyalty, that focuses on common goals and interests rather than political or institutional in-fighting.

On a concrete level, this means that we need an agreement between the Commission, the Council and the Parliament on what should be the priorities of the next legislature. And also what should not be the priorities - the positive and negative priorities.

Europe, and now I can say it after 10 years leading the European Commission, to be governed, needs a 'Groß-Groß-Koalition', a great, great coalition. It does not make sense to keep a system like we have today, where in fact, when it comes to the European Union, most people feel a little bit in government and a little bit in opposition. We see that in the European Parliament, in the parties. Of course the parties have to defend their own positions. We see in the Council the different governments. Of course the governments have to defend their own positions, but when it comes to defending the European interest as a whole, usually only the Commission is there. And very often the Commission is left alone, namely in periods of more turbulence.

That is why I really believe that for the next five years we need an agreement with the most important political forces, the democratic, pro-European forces, to say: for the next five years, these are our priorities in the economy, in terms of growth and jobs, on economic reforms; that's what we are going to do. And that the same parties that are in the Parliament are in the Commission, and are also represented by the Heads of State and Government in the Council. So they can give some stability. Because what happens today is a very, very difficult system to manage. I can speak to you based on experience, which is different from a government. I was Prime Minister, so I can make the comparison. In a government we have a majority and an opposition. In Europe, most people like to be in the opposition. That is the problem. And it is quite common to see governments that come here to take a decision and afterwards they go back to their country and criticise Europe.

Sorry, but this cannot go on forever. We can resist this and we have been resisting, but there are some limits. If we want Europe to gain new momentum, we need to overcome this. And this is my political message.

This is the politics. And it is the political message that is critically important. Because when people in our countries criticise a decision by the government, they turn against the government or against the party in government. But when people systematically criticise a decision by the EU, they turn against Europe. It becomes much more serious. And that is why, if you want to avoid Europe going for new forms of protectionism, of ultra-nationalism, of renationalisation, of the decline of Europe, if you want to avoid that - and I have been conveying this message with this clarity to the Heads of State and Government, my colleagues in the European Council - we need a broad consensus on some priorities and we need to stick to them.

Because Europe needs legitimation by results, differently from governments or countries. In our countries, at least I would say in most of them, we don't need to justify every day the existence of a country. Some of our countries exist for nine centuries or even more. So the country is not put in question. The European Union is different. We have now more than 60 years, but we cannot take it for a permanent given. We have to show our citizens what are the benefits of European integration. And this cannot be done only by the European Commission or only by the European Parliament. We need this ownership at all levels. And let's assume it, not all levels have been doing this. Some have, some have not.

A lot has been done, and that shows the resilience I have been speaking about. The stabilisation of the euro area is indeed a great success. Most analysts some time ago were predicting the collapse of the euro or at least the Greek exit. Not only has no country left the euro, Latvia joined, Lithuania is prepared to join. Not only was there no disintegration of Europe, Croatia joined and others want to join. The countries in a programme, like Ireland or Portugal, have either already left the programme, like Ireland, or Portugal, which is going to leave this very month.

And the Portuguese government did not ask for a new programme, not even a precautionary programme. Six months before, almost all analysts were predicting that Portugal would need a second programme. I expect now that they say: we were wrong. Because all this time I have heard them saying this, against the position of the Commission, who was saying that Ireland, Portugal and Spain, in terms of the programme for the banks, would be able to succeed. And even Greece, with the political difficulties we had there, was able to have a historic primary surplus.

So the countries have been doing a great job in terms of reforms. Sometimes we don't give them all the credit.

But also at European level we have reinforced the governance of the euro area. Who would have thought some time ago that it would be possible to accept that the European Commission has powers of assessing the national budgets ex-ante? That would be a dream, even for the most radical federalists, and now the Commission has those powers. So the Commission has today more powers than before the crisis, because the governments, including the most reluctant ones, have understood that inside a common currency we cannot go as before. We need some common governance.

And who would have thought, some time ago, that the European Central Bank could have powers of supervision of national banks? And now it is done, following the proposal of the Commission for the Banking Union. At the time as the Commission proposed the Banking Union, I heard many voices in many capitals saying, 'Don't think about that, the most we can have is some kind of framework for financial stability, but not a Banking Union'. Even if it's not perfect, we now have a Banking Union. This was the biggest change since the creation of the euro, in institutional terms.

What we have done with the new governance of Europe, the new powers for the Commission and also new powers for the European Central Bank, are part of the regulations and supervision of the financial sector at European level in general.

This is the issue. We have shown that through the crisis it was possible for Europe to advance. But of course we are not yet out of the crisis. We have started to get out of this existential crisis of the euro, but we have still a huge problem, the major problem of unemployment.

There are some specific issues we have to solve. Some of them, I believe, are more in the competence of the European Central Bank than in the other institutions' competence, such as the fact that we have fragmentation inside the monetary union. We have for instance companies, namely SMEs, paying completely different interest rates, not because of the quality of the company, but because of their geographical location. So there is a fragmentation of financial markets inside the same monetary union, and this is not correct. This has to be corrected, and some steps have been taken in the right direction. You see the evolution of spreads and you see the evolution of credits goes in the right direction, but still it is not sufficient. We need more investment. We need to fill these gaps. This is something I am sure the ECB is looking at with attention.

So there are a lot of things to do. For some of those matters, we have some instruments. For some of them, we have created new instruments, like, for instance, the facility for youth employment. We are working with the Member States, even if it is mainly a national competence, on youth employment programmes, but of course some of these issues take time.

So we have a situation that is, in a way, paradoxical. This year is better, economically, than the previous year. And I am sure that, if there is no accident, 2015 will be much better than 2014, economically. But we may have a situation where economically we are better, but politically we are not so well - or even worse. Because, in fact, that correction of this equilibrium is already taking place and reforms have been mostly successful, even if some countries have to do more in terms of reforms.

But the citizens do not yet see the benefits, and this creates a fertile ground for extremism, populism and anti-European forces that can, in fact, create some problems. That is why we need political leadership. Political leadership means not following what is popular or the trend, but to have the courage to explain things. Political leadership means making what is necessary possible. This is what political leadership is about.

And that has been my appeal to all the governments of Europe, to all the people with important responsibility, and that is also my appeal to you. I think it is the time for business to speak up louder for Europe. It is one thing to criticise the EU and the institutions. Of course, as any political institution, we need this kind of criticism. But another thing is not to come forward in terms of defending the European project. I am saying this here, between friends, as I know that BUSINESSEUROPE has been extremely supportive of the European project, and I thank you for that.

Since the beginning of European integration, generally speaking, the business community has been supportive, because of the internal market, because of the possibilities of free trade and investment. I ask you to keep that. I ask you to come out of the (sometimes) comfort zone and explain to our citizens, to your employees, because you are the people who create jobs, you are the people who can help us solve the employment problem. The states cannot solve the employment problem. The states, because of the fiscal pressure on them, are not going to be the big employers in the future. So it is you, the business leaders, who are going to create employment. So your help in explaining this to our fellow citizens, to try to reinvigorate this system of confidence in Europe, is critically important.

As business leaders, you know that nothing can be achieved without confidence. I am sure that when you are leading your companies, you are highlighting the difficulties, but you are showing hope to your management or to your employees. If not, you cannot succeed.

The same applies to Europe. So I think it is now time to turn back the page where pessimism was fashionable, what I call the intellectual glamour of pessimism, where everybody wants to show that they are more intelligent by saying bad things about Europe to where we have the courage to defend Europe and to say that Europe is not the problem, Europe is part of the solution for our economy and for our social aspirations as well.

I thank you for your attention.

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