Apr 20, 2017

Finance Minister Wolfgang Schäuble spoke at the Johns Hopkins School of Advanced International Studies (SAIS) on "Building Europe's Future."

Minister Schäuble at Johns Hopkins University SAIS
(© Thomas Koehler/photothek.net)

Building Europe’s future – what does this involve? Let me start by describing the context. 

First of all there are the global challenges of our time – the challenges that affect the West as a whole, and Europe specifically.

And I don’t just mean the challenges with regard to maintaining our economic power in competition with other regions of the world. After all, globalisation means that global interdependencies are increasing. In light of these challenges, the idea of a national monopoly on regulation is becoming obsolete. It is inadequate when it comes to fighting climate change. Neither is it enough to ensure security and stability in the era of weapons of mass destruction and asymmetric warfare, or to implement legal standards for the internet or globalised financial markets.

All of these things require more cooperation and coordination on the global level, or at least on the multinational level.

It is my humble opinion that the European project is by far the world’s most advanced model for this type of global governance, despite its undeniably cumbersome and complicated procedures.

Secondly, we have the structure of Europe and hence of the European Union, which has been determined by Europe’s history. The EU is a federation of 28 – soon to be 27 – nation states that want, and need to, reach joint decisions on an equal footing. Most of the time, they manage to do that.

Europe is not a nation state. For people in Europe, politics still primarily happens on the level of the individual nation states. As member states of the European Union, the nation states are the “masters of the treaties”, as we put it. This means that they have the power to decide how closely to cooperate and to what extent the various political areas should be “communitized” – in other words, to what extent control of those areas should be transferred from the member states to the EU institutions.

Europe is, after all, a continent which has been marked by an unbelievable diversity over the course of its history. Within Europe, there are large differences in living conditions and traditions. The same applies to the political decision-making processes and how the law is applied. This places limits on further European integration.

In many European countries, voters are not exactly eager to accept EU majority decisions. Similarly, they are unwilling to accept European institutions – the European Parliament and the European Commission – as their own, democratically legitimized, representatives. On top of this, we are facing an ever-accelerating pace of change, mainly due to the interplay between globalization and the spread of digital technology. And we Europeans have to try to cope with this change as our societies age.

These processes of modernization and change, which are barely comprehensible to many people, are triggering defensive reactions. People have a growing need for the familiar, for a stronger sense of groundedness in their regional or national identities. Scepticism towards openness and change is rising. And, as we can see, this isn’t solely a European phenomenon.

Given the current situation, it is not realistic to think that we can take further steps towards deepening European integration at the moment.

Here I mean further communitization of policy areas where European institutions would then make decisions centrally.

This would involve amending the European treaties, which in turn would require ratification processes in all member states, including referendums in some countries.

Following the Brexit decision in the summer of 2016, the European governments quickly agreed that we need to improve Europe’s ability to take action on problems where even Eurosceptic sections of the population can see it is impossible to find purely national solutions. We need to respond to urgent questions in a way that is visibly European, and we need to find European solutions to acute problems.

This doesn’t necessarily mean that all member states always need to participate when this is not feasible. We need flexible speeds, variable groupings of countries, “coalitions of the willing”, whatever you want to call it in a particular situation.

Under the pressure of current events, we are beginning to understand that we need to solve our problems more effectively, identify our interests better and then jointly represent these interests:

• in the area of migration policy,

• in security and foreign policy,

• and in economic and monetary policy.

In all of these areas, Europe can achieve more together than each member state can, acting on its own.

There are numerous signs that the current refugee situation is just a harbinger of things to come. We may well be entering an era when things that happen elsewhere in the world have a stronger and more tangible impact on our lives in Europe – and this includes, in particular, migration.

If we want to do without internal border controls – and this is indispensable for European unity – then we need a uniform regime for our external borders. To this end, we require uniform European asylum procedures and common standards that make it clear who has a chance of obtaining asylum in Europe, and who does not.

And we have to find a solution for distributing refugees within Europe in a way that is fair and accepted politically. The European heads of state and government have agreed to accomplish this in the coming months. The European Commission is working in parallel on a range of re-admission agreements with African countries of origin of refugees.

We have to work harder to help stabilize neighboring regions.

We are on a learning curve here, but this is also something that the countries of Europe can do better when they take action together.

As long as living conditions in the refugees’ home regions do not improve, people will continue to flee from war, violence, hunger and poverty and head for Europe. It is plain to see that we need European solutions in the area of security policy.

Regardless of how strong the United States’ commitment to Europe is in the future, Europe must do more for its own security. If Europe’s great success – namely, bringing down the Iron Curtain and ending the division of Europe mapped out at the Yalta conference in 1945 – if that success is to remain safe from peril, then belonging to the EU must go hand-in-hand with a sense of security for all its members.

Europe must make a bigger contribution – also to the transatlantic partnership. But we can only achieve this gradually, step by step, by intensifying cooperation and by working towards a European Defence Union.

As surveys show, there is support for this among citizens throughout Europe. Discussing European military cooperation would be a good first step. The European Commission’s proposal for a European Defence Fund is a move in the right direction.

In addition to the Fund, we will need joint military forces, with their own command structures. As a first step, EU foreign and defence ministers agreed in early March to set up a Military Planning and Conduct Capability that will take over the direction of training missions.

There is another area in which success stands and falls with European cooperation: ensuring that Europe stays competitive throughout the disruptive transformations brought about by globalization and digitalization. Otherwise, we will no longer be taken seriously and will have less and less influence on how the global economy takes shape.

European competitiveness is embattled, simply due to globally divergent expectations about how much social welfare systems should provide; this problem is only intensified by the global contrast between demographic trends in different parts of the world. It is plain to see that building a digital union in Europe – including, for example, a European cloud – has the potential to deliver tremendous benefits.

The European Commission has already announced the creation of such a digital union.

Now it is time for Europe to act.

Europe’s global role could be that of serving as a type of communications centre – a hub for communications in logistics, traditional infrastructure, and digital infrastructure. This is one more reason why boosting investment is crucial to ensuring that Europe remains fit for the future. This is why we have created a European Investment Fund, which is a step in the right direction.

Innovation and mobility are closely interconnected. For this reason, mobility within Europe must increase, especially where job and training markets are concerned. That is another development we are working on.

Another key factor shoring up Europe’s role as a global player is its common currency. If the eurozone is to be kept strong, Europe will need to ensure that assistance for countries in difficulties is actually used to solve existing problems.

There is an international consensus – both in Europe and around the world – that all economies need to undertake structural reforms to enhance their productivity and, in many cases, their competitiveness.

There is no lack of debt in the world, and no lack of central bank liquidity. There is, however, a lack of productivity and competitiveness in many countries because the necessary reforms have not been carried out. Above all, this means reforms to improve institutional frameworks: streamlining administration, ensuring an efficient judicial system, or reducing bureaucracy – all of which are decisive for improving economic performance.

Before the European Monetary Union was created, many economists were skeptical as to whether a currency union could work in the absence of common fiscal and economic policies.

Since that wasn’t politically feasible at the time, European leaders agreed to rules for national-level policies, while simultaneously stipulating that no country could be made liable for the debts of others – what is known as the “no bail-out clause”.

These are rules that we need to respect. If you follow the rules and implement reforms, you are certain to see success. The most successful countries have been those which received help under European assistance programs and were therefore obliged to actually implement unpleasant reforms, and those countries which have kept to the agreed rules.

So the problem, as far as some parts of Europe are concerned, lies not with the rules, but with the fact that the rules have not been properly implemented. For this reason, Europe needs to continue to exert pressure on national governments to implement reforms.

I have taken it upon myself to point this out, again and again.

That would be why I am probably not exactly the most popular finance minister in the eurozone.

Taken together, everything I have just said amounts to “building Europe’s future”. Despite all of the problems that Europe, and the West as a whole, is experiencing in connection with globalization and digitalization, and with the accelerating social changes of our time:

our open societies,

our institutions,

our rule of law,

our separation of powers and representative democracy,

our prosperity and social cohesion,

our environmental sustainability –

all of these qualities remain attractive around the world.

But the fact that our Western model is attractive is something we need to nurture and uphold.

And that’s the key issue.

At the end of the day, however,

Europeans and Americans can only achieve it together.

© Federal Ministry of Finance

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