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European Commission

[Check Against Delivery]

José Manuel Durão Barroso

President of the European Commission

The European Union in the New World Order

Yale School of Management

Brussels, 21 September 2014

Ladies and gentlemen,

Dear students,

When Mahatma Gandhi was once asked 'what he thought about Western civilization', he famously replied: 'I think it would be a very good idea'.

Today, when you hear someone discuss 'the new world order', you may be forgiven for spontaneously thinking: 'World order? That would be a good idea as well'!

It would certainly seem an improvement on the evolutions we have been seeing recently, in which disorder is the order of the day, and a number of threatening trends can only be described as 'unworldly'. From Eastern Ukraine to Syria and Iraq, some events just don't fit the world view we had been cherishing for years, possibly even decades.

And yet, out of all this chaos some kind of order will eventually materialise, and in our defence against such threats we will find the real essence of our governing systems.

We will have to.

These evolutions force us, not only to find an effective answer in day-to-day political terms, but also to revisit the very concepts on which our political and societal institutions are based, to reaffirm our commitment to democracy and the rule of law, to redefine our attachment to globalisation and international integration, to upgrade our engagement in multilateralism and multiculturalism.

Either we will shape the new world order, or we will suffer the consequences.

Ladies and gentlemen,

Adapting to changing demands is the very raison d'être of democratic political and societal institutions – even of systems in general.

Ilya Prigogine, the Nobel Prize winning physical chemist, has described how systems can adapt and find a new equilibrium - create 'order out of chaos' - and how their fundamental openness is the talent that allows them to change: 'We grow in direct proportion to the amount of chaos we can sustain and dissipate...'

Political and social institutions adapt themselves as well in order to deal with complex and sometimes chaotic situations. They have to. The main question of our times is whether or not we succeed in adapting to a changing, complex and challenging global environment, and how. Per definition, structures of governance need to evolve together with developments beyond their immediate control.

They need to support citizens in dealing with dynamic societies, empower them get the most out of the opportunities that globalisation offers in terms of jobs, travel, knowledge and innovation, education and exposure to new ideas, and shield them from some of its harmful effects. Institutions are there to help us, and when circumstances change, institutions need to adapt.

This is particularly true in times of change and crisis, when hard questions are asked of governments everywhere.

Around the world, we see a double gap emerging: within states, between governments and the governed, between society and elites; and within the global sphere between an increasingly interdependent and interconnected world which lacks the global governance mechanisms to manage that interdependence and interconnectedness. As a result, political institutions and economic systems across the world are under pressure.

In democracies such as the United States and the European Union, the democratic gap shows easily. But this is not – as some would have it until a few years ago – a problem aggravated by democratic openness. Indeed, when we see, for instance in some of the emerging countries, the masses of demonstrators asking for some goods they still do not have, we see that they are now facing a number of problems that most of our economies have somehow dealt with in the past. The legitimacy question is a fundamental one everywhere, and I believe democracies are better suited to deal with such issues than the 'pressure cooker' model of undemocratic or less-democratic systems.

In the same vein the multilateral and cooperative – even if competitive at times – model of external relations is the only one that can effectively deliver solutions for the global commons we are all bound to protect and preserve.

Our openness, the accountability of our political structures and the diversity accepted by our model of society, is what allows us to – in Prigogine's words – sustain and dissipate a large amount of uncertainty and chaos.

Having said that, I must immediately add that democratic evolution and progress is not an automatic phenomenon. After all, we are not dealing with particles and molecules, but with citizens who need to be convinced and brought together towards a consensus before any change can come about.

And this is certainly challenging. Countries with vertical structures of power, with a strong state and a weak society are quicker and sometimes more effective to react in the short term.

However in the long term solutions that are imposed and not embraced do not stand the test of time. Stronger states need strong societies. Weak societies will also weaken the States in the long term.

Change, in short, demands leadership as well as stronger legitimacy.

Let me give you two examples of recent years that have, I believe, profoundly affected the 'new world order' and where the European Union has been either at the centre or on the lead to bring about change and adapt our common rule book to the new geopolitical and geo-economic realities.

The first is the emergence of the G20.

The economic liberalisation that has been so spectacular – and so spectacularly successful - over the last two decades came under threat as soon as the financial crisis erupted. The need for openness and for a global response was more obvious than ever before, namely by collectively resisting pressures of naked and ugly protectionism. But that in itself was not enough to bring it about, because the temptation to go it alone and try to survive the crisis by 'beggar-thy-neighbour' policies was very strong. We simply had to step up our common engagement.

I vividly remember coming here to the US in October 2008 with the then French President Sarkozy, holding at the time the rotating Presidency of the European Council, for a meeting in Camp David to try to convince President George W. Bush to join our call to act against the crisis in a concerted and convincing way. This eventually led to the G20 in its current format, at heads of state or government level, and the hugely important effort to globalise the response to the crisis at that stage.

Despite some initial reluctance the need for global action was accepted. The lessons of the Great Depression of the 1930s had been drawn everywhere. And we were able to hold the first meeting in Washington in November 2008. A second summit was held only four months later, in London, and since then, the G20 has become the premier forum for coordination of economic policies between its members, giving concrete shape and form to a lot of the concepts that the EU has brought to the table, for instance, on a framework for balanced and sustainable growth, on financial regulation and supervision, on action against tax evasion and fraud - issues that before were simply not possible to discuss at global level. The OECD would discuss them, but it was unthinkable until then to have at the same table the most developed economies and the emerging economies discussing and agreeing on common action on those matters.

The development of the G20 is one of the most significant transformations of the global system and its creation certainly helped to avoid much more negative scenarios that might well have happened without it.

However I believe it is not enough and we are far from having the structures we need to manage politically our interdependence.

The second example I want to mention is the reform of Europe's economic and monetary union, on which there has been tremendous - and often underrated - progress since the start of the crisis.

If the financial and economic crisis highlighted the unprecedented level of global interdependence, the fallout in Europe, in the form of a sovereign debt crisis, revealed not only an unprecedented but even an unexpected level of interdependence of the economies – namely but not only - of the euro area.

Decisions by national governments, but also the economic health of the banking and corporate sectors and of the households in one specific country, irrespective of its economic dimension, proved to have a very strong impact on the situation in other parts of the Monetary Union. So we could no longer avoid being attentive to the spill over effects of the decisions or non-decisions taken by one single country. And to really understand - which is, by the way, in the Lisbon Treaty - that the economic policy of each Member State is indeed a matter of European concern, not only of national concern.

Differences between economies did not smoothly and automatically balance out, as some had expected or hoped before. And the asymmetry between integrated financial markets on the one hand and a financial stability architecture still nationally segmented on the other, proved untenable.

This is the new reality the crisis brought to light. And we, as a Union, have worked hard ever since to bring our rules, policies and institutions up to speed.

I will not sum up everything we have done – from a new rulebook for financial institutions to the supervision and resolution of banks at EU level. We have created what we now call the Banking Union. When we launched it, I remember some capitals called me saying 'why are you speaking about a banking union, this is not in the treaty'. But it was in fact indispensable if you want to have confidence in the European economy. So from a new rulebook to the Banking Union, from tighter oversight of governments' budgets and economic policies to solidarity mechanisms for countries in distress – but my point is that, if we have left the worst, existential threat of the financial and sovereign debt crisis behind us, that is only as a result of a fundamental rethink and revision of Europe's institutional framework.

When circumstances change, institutions should change as well. And those that have the capacity to reflect changes the best, succeed the most.

Again, that has only been possible because of political leadership was there to forge a broad consensus. And it took some time – actually we are still in this process – because in parallel we needed to democratically legitimise these changes. Individual countries needs' and sensitivities have to be respected while pursuing what is a common European interest.

Having been all these years in crisis mode, as Professor Cameron said – my ten years as President of the Commission have been always in crisis mode – let me tell you that my experience was since the beginning of the financial and sovereign debt crisis, that we would be able to overcome it. Of course, and that was felt here in the United States and by some of our partners, people were impatient because they wanted a kind of spectacular decision. But we told our partners that it would take time, because in Europe we are now 28 countries, 28 democracies. And the time of democracies is not exactly the time of the markets. We had to come to build a consensus. But eventually we could in fact respond and create mechanisms that were simply unthinkable some time before, from the Banking Union to the new system of governance, a much more integrated system of governance in economic policy.

Basically what was there, and I believe some analysts did not understand at the time, in Europe, the United States or elsewhere, was the political interest of all Member States to come to a conclusion.

As the American TV journalist Hugh Downs once said, that 'to say my fate is not tied to your fate is like saying: your end of the boat is sinking.' And that could not be said during the crisis in Europe. We could not say 'it's only you, your country'. In fact, we saw how deep the interdependence of our economies is. And not only in the European Union, we saw the effect it had in the markets elsewhere, from Tokyo to New York, when, for instance, there were problems with the Greek debt crisis that had a very important global impact.

When you're in the same boat, you had better fix it together.

This is what we did, both at global and a fortiori at European level.

Today, the questions raised to us Europeans by this shaking world order remain as pertinent as ever:

- To safeguard Europe's social model in the global race: can our countries do this on their own, or are we better off together?

- To stand up for Enlightenment values in the world and speak up for democracy and the rule of law: could we attempt to do this alone, or should we do this together?

- To help guarantee security and stability in and around Europe: can we do this alone, or are we stronger together?

- To help our companies compete and make our economies competitive: do we try to do this alone, or are we compelled to work together?

You know what my answer and the answer of the European Commission has been. We, Europeans, can only face those challenges by being genuinely united, within Europe and towards the rest of the world. We can only be a building block of the new world order if we are, in a number of vital aspects, truly a bloc – coordinated, constructive and consistent:

- In development aid, for instance, where lack of focus and long-term predictability would undermine our aid effectiveness, but where the EU as a whole is the largest donor in the world, and by combining efforts we have made serious progress in reaching the Millennium Development Goals, fighting poverty, investing in health systems, supporting education, reducing child mortality and so on;

- In climate action, by its very nature a global problem for which Europe sets the pace globally. We have aimed high for 2020, and we are now doing the same while hammering out our energy and climate framework up to 2030. In fact, the Commission made already a proposal to reduce the greenhouse gas by 40% by 2030, which I hope the Member States will approve in our European Council meeting in October. Tomorrow I will participate in the High Level meeting organised by the Secretary-General Ban Ki-Moon of the United Nations, where many Heads of State and government from all over the world are coming. I hope there will be a clear commitment to reach goals on the fight against climate change. That is typically a case where we can only succeed by global cooperation.

- On taxation, where companies for both good and bad reasons cross boundaries without even thinking about it and governments simply have to think about cross-border cooperation to tackle the effects this poses them. They are powerless alone, but together we do find solutions both in the European context and beyond, in the G20;

- Or in international trade, where the game is played as hard as ever and only large economies carry enough weight to make sure the rules apply equally to all. Yet Europe, if and only if we are one and indivisible, succeeds in pushing the boundaries of what is possible internationally, and succeeds in reaping some of the benefits. Where together we can join up with the most important market in the world, the US, to start the most ground breaking negotiations in recent years and go for a genuine Transatlantic Trade and Investment Partnership, while defensive or unconcerted efforts could only undermine us. Where together we can take on unfair practices across the world, while individually we can only abide them...

There is no doubt about it. Our internal coherence and international relevance are inextricably linked. Our economic attraction and geopolitical traction are fundamentally linked as well.

Ladies and gentlemen,

Europe's interdependence, not just in economic but in geopolitical terms as well, has never been more obvious. The need for us to act together has never been more clear.

What is happening to the East of the European Union, in the conflict between Russia and Ukraine, and in the southern rim of the Mediterranean with the sectarian extremism of the self-entitled Islamic State, threatens the very security of Europe internally and the very idea of what Europe stands for internationally.

The European Union took a principled position throughout the recent developments in Ukraine. A political and peaceful solution of the conflict remained our first priority. Not any solution, but one that guaranteed the sovereignty, independence and unity of Ukraine.

The very essence of the problem was that Russia did not accept the sovereign choices of an independent neighbouring country because it had other designs for it. It resorted first to political and economic bullying, and then to outright aggression.

We could simply not accept this behaviour. This would mean the explicit return of spheres of influence or limited sovereignty to the European continent. We have recalled time and again that European Union's relations with our eastern neighbours were not detrimental to their relations with their other neighbours. We never sought exclusivity in our relations.

In fact, the European Union has invested also a lot in a strategic partnership with the Russian Federation, convinced that it is in our common interest to cooperate. But the EU could never legitimise what can never be legitimate.

We had to show our support for Ukraine, and we did. We make no apologies for the decision to respect the democratic right of a third country to seek a closer relationship with the European Union. We would have been morally bankrupt if we had refused this request of the Ukrainian people. And we had to present Russia with the consequences of its behaviour.

The developments are still unfolding. The European Union continues to work for a political negotiated solution. The European Commission, especially, has been very active in mediating between Ukraine and Russia namely on issues of energy – there will be a new trilateral meeting this week with Russia, Ukraine and the European Union. And we have been also trying to find a compromise for the implementation of the free trade part of our Association Agreement, which was now ratified in the Parliament of Ukraine and in the European Parliament. I have personally been active seeking with President Poroshenko of Ukraine and President Putin of Russia, trying to work for a political compromise that respects Ukraine's independence.

But if the EU had not reacted with firmness, and in close partnership with the United States and our other G7 partners, what would be at risk would not just be Ukraine’s independence but the sustainability and the credibility of a multilateral order based on values, equality and the rule of law.

This is also what needs to be done to tackle the extremist and sectarian Islamic State movement. An international coalition of countries is needed to defeat an ideology that thrives in hate, bigotry and extremism. The danger of inaction and hesitation is too important to look aside. ISIS represents a threat to the whole international community, but more specifically, to the Arab and Muslim world. It needs to be defeated militarily but also politically. Countries in the region are essential to uproot this ideology.

I am convinced that with decisive leadership we can succeed. But we need each one to do its part. Order demands each partner to shoulder part of the responsibility, and have the rules upheld by all.

Ladies and gentlemen, let me conclude,

Interdependence may sometimes lead to free-rider behaviour: the benefits of global markets and international stability are taken for granted, while each country's responsibility for such global public goods is all too easily neglected.

In the new multipolar world, some even call it a-polar, each power's stake and responsibility will only increase with time. Emerging powers will take an increasing part in decision-making, and will eventually take up a bigger part of the responsibility. They will have no other choice. Order, they too will realise, is something you create, establish, work towards.

And I am deeply convinced that the partnership between the US and the EU, which has come to the same conclusion many times in the past, will continue to form the core of that effort in the future as well.

Hopefully, we will have a world order based on the principles so important to us: the principle of freedom, justice, rule of law, democracy and human dignity.

I thank you for your attention.

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