Crisis as Opportunity: Problems, Challenges, Frontiers and Chances for the European Union - Foundation Office United Kingdom and Ireland
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No other invitation in British academic life could attract me more than the opportunity to deliver the annual Adenauer Lecture at the European Studies Centre, here at St Antony’s College, Oxford. It is not just that it is a great honour to follow in the footsteps of so many distinguished predecessors, over many years. It is that - for me personally - it is especially inspiring to give a talk dedicated to the memory of Konrad Adenauer - one of the founding fathers of today's Europe, to whom my country owes so much - and one delivered here in the European studies centre of one of the leading universities in the world.
The former Chancellor of Oxford University, Roy Jenkins, was once asked: "What is difference between a speech and a lecture?" He replied: "A lecture is characteristically a little longer than a speech, but not necessarily more interesting!" As a professional politician, like Lord Jenkins, I understand the perils of that distinction, and will try to keep what I say as succinct and interesting as possible, consistent with its rubric of it being a "lecture".
Adenauer and Oxford
When Konrad Adenauer was invited by Winston Churchill on his first visit to Britain as German Chancellor, in December 1951, Oxford formed part of his programme. No Chancellor had been in this country since Heinrich Brüning twenty years before. Adenauer knew too well what had happened in the decades in between. He was ready to help forge a new beginning in relations between Germany and Britain, and to play a decisive part in developing what our host this evening, Timothy Garton Ash, has since described as "a non-hegemonic order for the whole of Europe".
Adenauer looked to a Europe in which never again would any one country aspire to dominance. He had shown imagination and courage by supporting the supranational pooling of the coal and steel industries, in the ECSC created in April that year. He was ready to accept the concept of a European army too, as indeed at one stage was Churchill.
Reflecting in his memoirs on the 1951 visit, Adenauer wrote that both countries were called upon to take common responsibility in shaping the new order of the West. He recognised and understood a certain reserve on the part of Britain in forging a common destiny with continental Europe - an instinct he must have found disappointing given Churchill's strong promotion of European unity in Opposition (from 1945 to 1951).
In his conversations with Churchill and Foreign Secretary Anthony Eden, Adenauer acknowledged that a certain dose of British restraint and political realism would always be useful. For its part, Germany would pursue the path of European integration, in a measured way, “reflected and without haste, but steady and effective”, as he put it.
Adenauer's visit to Oxford left a deep impression upon him. He visited Balliol College where he saw the lists of students who had died in the First and Second World War. Among them was his own nephew, Hans Adenauer, who had been studying at the college in the late 1920s. Confronted with the horrors of history and the challenge to build a new Europe, Adenauer felt that “a community of Western, Christian culture and tradition” united our countries.
In London, Churchill asked Adenauer whether good relations might ever be possible between Germany and Poland. It is impressive, indeed moving, to note that, five decades after Adenauer's visit, Germany, Britain and Poland are all members of the European Union - part of the free, democratic and united Europe of today.
Achievements, Challenges and Crises
The political achievement of unity and common interest that we have forged together in Europe since the 1950s is truly remarkable. In the West, we defined a new culture of sovereignty-sharing that has proved highly effective in allowing ‘unity in diversity’. Then the collapse of Communism permitted the re-unification of Europe, finally brought to fruition in 2004. As Milan Kundera observed, Eastern European history for most of the twentieth century was a “day with two nights”, as one totalitarian regime replaced another. That nightmare is now over.
Building a peaceful, cooperative, united Europe is perhaps the most seriously under-rated political achievement witnessed in recent years anywhere in the world. It gets scant recognition as such, not least (if I may be permitted to say so) in this country. Such an outcome was far from inevitable, as the contrasting experience of East Asia since 1945 testifies. It should, as a result, never be taken for granted.
In addition to this political success – and indeed in part because of it - today’s Europe is also more advanced economically and socially - in terms of personal prosperity and freedom - than anything Adenauer and Churchill might have expected or hoped for when they talked in 1951. Yet, the irony is that, despite dramatic progress in so many spheres, many of our fellow citizens in Europe today are increasingly consumed in pessimism and fear, and many decision-makers seem overcome by inertia in the face of mounting challenges. The future seems to weigh heavily over us.
We can see the symptoms of this malaise on many fronts. Fear of globalisation is one. Resistance to economic reform is another. There is a reluctance to think clearly about the challenges of our shrinking populations – whether for pensions, or healthcare, or public spending, or immigration or life-long learning. We experience a deep foreboding about climate change, matched by a strange refusal to take tough decisions on global warming. There is a pervasive sense of insecurity at home and abroad, as we confront rising domestic crime and the advent of brutal international terror. The list of concerns is written for us every day in the newspapers we read and on the news programmes we watch.
I often wonder how the great mid-century leaders, such as Churchill or Adenauer, or Truman or de Gaulle, would have looked at these challenges. My instinct is that they would have found our prevailing attitudes too cautious, even defeatist. They would have found today’s debates too constricting and lacking in ambition. They would have been unimpressed, I think, by a political culture that too often sees limits, rather than possibilities, at every turn. I believe that they would also have seen Europe as part of the solution to the problems facing our continent, rather than part of the problem itself.
Looking at today’s European Union, many see a system simply in crisis. I recognise crisis, of course, but I see significant opportunities too. Professor Ludger Kuehnhardt, a good friend of mine who is also here in the audience today, is organising - in this very college, this term - a seminar series entitled “European Crises: 1945-2005”. As that title recognises, the reality is that the European Union has been built in response to crisis at many stages in its history. As Timothy Garton Ash has written, “the European project has many times moved precisely through and out of crisis”.
In my own time as a Member of the European Parliament since 1979, I have witnessed the peaks and troughs of the integration process at first hand. Rarely has any major breakthrough - whether in terms of institutions or policies - not been preceded by some period of impasse, or of deep pessimism, or of obvious need for action that is unforthcoming. It would seem that often the very perception of crisis is a necessary condition, not of course a sufficient condition, to mobilise the will for change and to allow progress to happen.
In order to break free of the current crisis, it is important to think clearly about what Europe is and has the potential to be; what it can and what it should do. I would like to share some of my thoughts with you this evening. Although I was once an academic, these are the reflections of a practitioner, of someone who has spent most of his adult life in European politics, working at the coal-face of practical integration on a daily basis.
The Institutional Challenge
Let me deal first with Europe’s institutional challenge. I believe very deeply that none of us would be better off if there were no European Union today. Equally, all of us would be better off if the Union were more effective, democratic, transparent. And accountable. If Europe could be made to work better institutionally, this would help address more directly the problems and concerns of the citizens, and through that process, help make the European Union itself more popular and legitimate.
Institutionally, few could deny that the European Union today is facing difficulties in acting coherently and in carrying consent. The constitutional arrangements set down in the existing treaties are inadequate to meet Europe’s obligations and ambitions. Yet ironically the public in some countries is reluctant to reform those institutions, for a whole diversity of reasons, only some of which have to do with Europe. Professor Vernon Bogdanor of this university has spoken of a “dis-connect” between the people and Europe’s institutions. For too many, the latter seem to be (what he calls) an “alienated superstructure” that they do not trust.
The paradox, however, is that with reformed institutions, the problems which our citizens face would be much easier to confront, and that without them, they are correspondingly more difficult to solve. People rightly demand a better management of Europe’s affairs in an age when so many problems have an international character - and where common European action can make a positive difference; yet many seem reluctant to use the means to precisely that end.
No programme for reforming the EU’s institutions and procedures has ever been as transparent or consensual as the one which led to the text of the Constitutional Treaty. Yet ironically one of many reasons why the text was rejected by majorities in France and the Netherlands was because people felt that the product was not democratic enough.
When it comes to constitutional questions, I can only speak on behalf of the EPP part of the EPP-ED Group. But I believe that the key elements of the Constitution would make Europe either more efficient or more legitimate, or both. You can see these features in the strengthened role it envisages for national parliaments, in the greater use of co-decision between the European Parliament and the Council of Ministers, and in the opening-up of the Council so that it would legislate in public.
You can see the right approach in the simplification which the Constitution would introduce into the structure of European legislation, in the clearer delineation it would give to the respective competences of the EU and member states, in its streamlining of the Presidency of the Council of Ministers, in its creation of a more permanent President of the European Council, as well as of an EU foreign minister, and in its provision for the first time of a form of Europe-wide popular initiative. None of these changes in Europe’s institutional design is revolutionary, but they all point in the right direction. Cumulatively they add up to a better system of governance for the Union.
Of course, no institutional improvement can on its own suddenly resolve any one of the key policy challenges facing the European Union. But together they can offer the chance of putting in place a decision-making process that is on a par with the challenges we face. If you doubt that, you only need to take a look at the illogicalities and contradictions of the existing Nice Treaty, with which we are currently condemned to work.
What next for the Constitution? The text has, of course, been ratified by a majority of EU member states, whose populations constitute a majority of EU citizens, in accordance with their own constitutional practices. Others have decided to defer taking a final decision. In that sense, the document is currently in limbo, rather than dead.
The European Parliament has proposed that we look again at the Constitution during the period between 2007 and 2009, after the ‘period of reflection’ that is now taking place. The German government plans to hold a serious discussion among governments about the Constitution during its Presidency next year. There are different views, among governments and within the European Parliament, about exactly how much of the existing text should be retained. My own hope is that, whatever the precise form, the key innovations it foresees can eventually be ratified by all member states, and the EU be given a more rational and credible foundation for action at home and in the wider world.
The Challenge of Enlargement
Let me turn next to the question of enlargement. We have rightly undertaken the historic process of enlargement, to re-unite Europe as we understood it. This has been, and continues to be, a huge undertaking. The EU’s status as a beacon of democracy, political stability and relative prosperity has made membership the goal of an increasingly large number of countries to our east. As Chris Patten has long argued, enlargement has been Europe’s most successful foreign policy. It has exported democracy, stability and market-based reform to candidate countries.
Enlargement, however, comes at a price. The European Union is not an international organisation like the United Nations or the OECD. It involves formal sovereignty-sharing across a large range of policy areas. The larger the number of member states, the greater the diversity of interests to be brokered, the more complex the compromises to be struck. Hence in part the rationale for reforming our institutions.
Governing together depends crucially on the participants in the process believing themselves to be members of the same political community. We are now approaching - for the first time - a situation where the boundaries of the European Union might no longer correspond to what many Europeans consider to be ‘Europe’. This is an important moment.
The prospective enlargement to Turkey, which played a part in generating the ‘no’ votes on the European Constitution last June, has brought this issue into sharp relief, at both national and European levels. The question of the Ukraine has done likewise. If Ukraine, why not Russia? A lively debate has been sparked on what it is to be a European. What are our values and identity? Do those who want to join share them? How far must they as a precondition of membership? I think that we have to be honest in facing this debate, rather than attempt to conceal it or pretend it does not exist.
This is not a static scene. The prospect of enlargement changes the very countries which aspire to it. We have started, in good faith, an enlargement negotiation with Turkey, for example, which will in itself change the very country we are dealing with. No-one can tell yet whether a m odernising Turkey a decade or so from now will have progressed sufficiently far and fast to look likely to be able to take its place in the European family. In Turkey’s case, the problem is compounded by the fact that by - or soon after - the time of entry, Turkey would be the largest EU member state whilst also being one of its poorest, if not the poorest. It would have the most votes in the Council of Ministers, whilst also aspiring to be the largest net recipient of EU funds. This would be the opposite of the current situation with Germany.
Issues such as these pose the question of what in the jargon is called ‘the absorption capacity’ of the Union - the least noticed of the famous Copenhagen criteria for enlargement. The capacity to absorb new member states was severely tested by the admission of ten new countries in 2004. My own view is that further enlargements - beyond those already imminent - will become increasingly problematic without institutional reform. And even with reform, they will still be difficult.
Putting all these factors together, my conclusion is that we should very actively consider inventing some new intermediate option, which offers some of the de facto benefits of membership without the formal status of full membership as such. This is the so-called ‘privileged partnership’ concept.
In a memorable passage in his new book, “Not Quite the Diplomat”, Chris Patten argues that, just as the “reconciliation of France and Germany was the necessary and admirable European accomplishment of the twentieth century,” so “reconciling the West and the Islamic world, with Europe acting as a hinge between the two, is a major task for the twenty-first.” He goes on to argue strongly for Turkish membership of the EU.
I think that Chris Patten’s basic analysis is correct, but that the conclusion he draws is over hasty. The “hinge” of full membership of the European Union may simply not be strong enough to bear the weight of this huge role on its own. Only time will tell. In the interim, other structures and instruments must be available, if we in Europe are to carry prime responsibility for reconciling the West with our diverse neighbours, whether to our east or south.
Europe’s Policy Agenda
The decisions we take on EU institutions and on enlargement will decisively affect the shape and capacity of the Union in the years ahead. If we make the right choices on those questions, we will be in a significantly stronger position to tackle the central policy challenges facing Europe today. But, in the absence of clear decisions to date, the practical policy agenda to be tackled does not go away; indeed it gets more pressing by the day.
We must continue to show that, whatever its shortcomings or ambiguities, Europe can deliver for the citizen. As Tony Blair argued, in an impressive speech to the European Parliament last summer, Europe can, through its actions, build the popular support which would make it possible to reform its institutions, for example.
A critical part of the crisis which the European Union is facing is one of adapting our continent to the new challenges posed in an age of globalisation. The difficult birth of a new era requires change all across Europe. It requires change on the part both of the EU and the member states. At both levels, it requires leaders to find the political courage to lead the debate and citizens to recognise that opportunity involves risk and that progress cannot be built on certainty. The French and Dutch referenda were as much about these challenges as about the EU institutional structure.
Europe is, I believe, a powerful potential vehicle for confronting the challenges of globalisation. A global world respects fewer and fewer national boundaries. A global world is one with big new international problems, like terror networks, migratory flows and climate change. It is creating an open, porous world-wide market-place for goods, ideas, communication and even people.
In this international market-place, Europe’s shrinking working-age population will stand in marked contrast to rising populations in the third world and even in the United States. Europe’s competitiveness will depend more than ever on the skills and aptitude of its people. Inter-dependence will become an increasing hallmark of politics in Europe and worldwide.
The opportunity for the European Union lies in offering a framework in which to develop common answers to these questions. One capable of turning local, regional and national problems and fears into a bigger common solution, by working together on a continental scale. This prospect will affect every area of policy, from foreign policy and the environment to social security, healthcare and pensions.
You will be relieved to hear that I will not deal with all such dimensions this evening, but I will, if I may, briefly allude to three of them: foreign policy, demographic change and economic reform. All of these policy fields have traditionally been the preserve of national governments, but the realities of today’s inter-dependent world dictate the need for greater and greater common action.
European Foreign Policy
Let me deal first with foreign policy. Here, despite the shortcomings of weak institutional structures, and often divergent perspectives among the member states to date, it is important to note that Europe’s emerging foreign policy is in general nowhere near as flimsy or inadequate as some critics like to claim.
The European Union is already by far the biggest donor of development aid across the world. It is heavily engaged in bi-regional cooperation with groupings such as ASEAN, Mercosur and increasingly the African Union. EU soft power is increasingly being put to hard use in the world’s trouble-spots. Take the Kimberley Process to eliminate the trade in ‘conflict diamonds’, a multilateral and multi-organisational effort to be chaired by the European Union in 2007. Take the work in South Eastern Europe, where the EU has done much to stabilise and integrate the region.
Most importantly, take the Middle East. Both Israel and the Palestine have requested a police mission of the EU to monitor the border crossing in Rafah between the Gaza Strip and Egypt. For the first time, the EU has been recognised by both sides as a serious political factor in delivering the Road Map of the Quartet. I consider this a major breakthrough.
In the ‘hard power’ field too, the score-card is increasingly positive. The European Security Strategy of 2003 identified at least the right issues, working in parallel with the United States, not against it. The interface between NATO and the EU is being systematically strengthened. A serious effort is being made to identify how duplication among EU national defences could be reduced and more effective burden-sharing undertaken. The new European Defence Agency has the potential to open up procurement in the EU and enhance defence capabilities.
These developments offer hope that Europe can and will play a bigger, more coherent, more responsible role in world affairs, in the context of a vibrant transatlantic partnership.
Demographic Change in Europe
Let me say a word next about demographic change. As a result of people living longer and having fewer babies, the working-age population across Europe has already begun to fall, both in absolute terms and as a proportion of the whole. The number of people aged 15 to 64 in the EU will decline by 48 million between now and 2050 (a drop of some 20 per cent), and the number over 65 will rise by 58 million. Europe will move from having four people of working age for every elderly citizen, to a ratio of only two to one. The policy implications of the ageing and shrinking of populations in Europe are multi-faceted and serious, and will need to be addressed.
A smaller workforce will result in lower economic growth, and possibly even deflation. There will be fewer producers in the economy and an ageing society is likely to save more and consume less. Japan's economic difficulties in recent years have already heralded the prospect of "ageing recessions". The European Commission recently predicted that such factors alone will reduce potential growth in the EU from over 2.0 per cent per annum today to 1.25 per cent by 2040.
Indeed this process is already having an effect. Daniel Gros of CEPS has calculated that over the last ten years, Germany’s GDP potential growth rate has already been one per cent lower than it would otherwise have been, because of demographic change.
Moreover, lower growth will happen just as the costs of an ageing population rise. There will be a significant increase in age-related spending on pensions, health and long-term care. The likely increase in the burden of such items is estimated to be between four and eight per cent of GDP, with some member states facing even higher increases.
As a result, there are many difficult questions which policy-makers have to focus on with some urgency.
First: whether and how to encourage higher birth rates - through financial incentives, measures to make it easier for working women to raise children, enhanced day-care provision, and approaches that strengthen the legal framework and social status of families.
Second: raising the labour-force participation rate, so increasing the percentage of the adult population engaged in employment, especially women and younger workers.
Third: extending the length of working life, by raising retirement and pensionable ages, discouraging early retirement, and combating 'ageism' in the workplace.
Fourth: increasing the financial provision made by those in work towards their pensions, through higher contributions to funded pension schemes and/or greater personal savings.
Fifth: whether to promote immigration, and how to ensure that immigrants admitted possess skills that add to the productive potential of the host countries.
The European Union is beginning to grapple with these difficult problems. Through the Lisbon process, it is attempting to increase the percentage of women and of both older and younger citizens who participate in the workforce. Progress so far has been positive, but modest. Pensions and social-security reform are being encouraged. A serious debate has opened up about a European migration policy, as countries realise that demography abhors a vacuum, and that inward population pressures are therefore bound to grow.
The European Union can provide a framework of mutual support and encouragement - and a forum for common commitments - as we all struggle with these challenges. The political group which I chair – the EPP-ED Group in the European Parliament - has begun an intensive discussion about the options and strategies we need to consider as we address demographic change. Our centre-right think tank, the European Ideas Network, is doing excellent work in preparing the ground, with a working group chaired by David Willetts, the Conservative MP here in Britain.
Demographic change raises a crucial and fascinating nexus of issues that affect virtually every policy area of government. Addressing it will be central to the future economic and social health of our continent.
This brings me to the parallel issue of economic reform. The European Union today is under-performing economically and has been doing so for some time. It is failing, in particular, to deliver jobs for its citizens. Unemployment in the industrialised countries has for two decades now been largely a European problem. We have more than 20 million people unemployed in the Union. During the past decade, the EU has enjoyed only half of the economic growth rate of the US and only one quarter of the growth rates of China and India.
The best way to create jobs in Europe is to free markets in goods, services, capital and labour – in national economies and across the EU as a whole. It offers the chance of renewal in order to safeguard and underpin our prosperity and to revitalise our societies so they can be inclusive, open and adaptable in an era of continuous change.
Demographic change makes the case for economic reform, already strong, even more compelling. We will need to promote the greater productivity of existing workers, so that increased output offsets the deflationary effects of falling populations. We will need to encourage the greater adaptability of workers, so that we all possess skill sets that enable us to move more easily between jobs and professions during the course of working life. Education, training and re-training will all become even more important, and will need to be funded accordingly.
Hard choices have to be made on liberalising markets. The up-coming Services directive, to be voted on in the European Parliament, is a case in point. It offers us a chance to liberalise a key component of the European economy, complementing the progress made in opening-up the single market in goods, and to a lesser extent capital. It is important that we send a powerful signal that, notwithstanding the fear of globalisation on the part of many, Europe is capable of embracing change and using for our collective prosperity.
Many countries have been pushing the right policies for some time. Here in Britain some difficult decisions were made in the 1980s that have paid off in subsequent decades. My own country is now beginning to face up to the same sort of challenges. In the race to get into the European Union, many Central and Eastern European countries locked on to the right path.
The situation in Europe is nowhere near as dire as some people like to claim. Even the conservative Heritage Foundation in Washington confirmed in its World Economic Freedom Index this month that of the world’s 25 most dynamic economies, over half are in the European Union. But the standard we should be comparing ourselves with is the very best.
Finally, let me say something about European and German politics as they have developed in recent months.
Charles Peguy once wrote that “everything begins in mysticism and ends in politics”. That tendency is not unknown in the European Union. Big-picture debates about the future of Europe have a tendency, sooner or later, to come crashing to a halt in some intense battle about financial resources or distributional politics. Many found the sight of European heads of government squabbling over the future financing of the Union over the last six months - whether in June or December 2005 - a pretty unedifying spectacle. I agree.
However, I would make three observations about this budget dispute - and European politics more generally - from my experience and perspective in the European Parliament.
First, the protagonists in the budget dispute ultimately realised that they had a common interest in reaching a deal, however much that deal fell short of what might have been optimal for them individually - or for Europe as a whole. The price of failure would have been too high for the European Union, in which all member states have a huge amount invested.
I can say that Tony Blair, whatever criticisms might be levelled against the British Presidency, behaved with admirable courtesy and attentiveness towards the European Parliament throughout his six months at Europe's helm. I understand that he will soon be visiting Oxford and will speak about his handling of the budget dispute and other aspects of his Presidency. I would be fascinated to be a fly on the wall.
Second, as the so-called ‘financial perspectives’ fall outside the normal budgetary procedure, the future-financing deal cannot be implemented without the approval of the European Parliament. We will now negotiate an Inter-Institutional Agreement with the Council and Commission, and intend only to agree it if certain important changes are made to the efficiency and accountability of the way money is spent in the Union.
Third, the debut of the new German Chancellor, Angela Merkel, in European politics proved to be encouragingly impressive. She played a crucial role in bringing the British and French positions closer together, a performance that bodes well for the future.
With Mrs Merkel, we hope that the unpredictable days of the recent past are over. Her first visit after being sworn in as German Chancellor took her in quick succession to Paris, Brussels, London and Warsaw. She visited President Bush only a few days ago, on 11 January. These visits were an expression of her deeply felt desire to regain confidence for Germany’s European and international policies wherever there have been doubts in past years. She demonstrated that she will exercise strong leadership on European and transatlantic matters.
In this approach, Germany is following its own legitimate interests, of course, but wants and can do so only if the interests of all other partners, and notably the smaller ones, are also met. This was the successful philosophy of Chancellor Helmut Kohl for many years and I cannot see why Chancellor Merkel should not be less successful. Her first weeks in office have underlined the rightfulness and success of this traditional German attitude towards Europe.
I am confident that we will see more of this new style, and more importantly, the substance of a mediating, yet resolute Germany in the years ahead. I am also confident that no matter how important German-French relations are, the European Union can only succeed if Germany, France and Britain work together in cooperation with each other and all other EU partners. Only such a constructive spirit can generate sustainable European interests and successful European policies.
It is my sincere wish that, in this spirit of reinvigorated focus, we can all work together in the years and decades ahead. The agenda is bigger than ever. It requires commitment and realism, steadfastness and application. As part of that process, it requires the most vital possible German-British cooperation in Europe. This would serve not only the interests of both of our two countries, it would recognize our common obligation - and the common potential we can realise - to make Europe work better.
The European Union is work in progress. It is a huge and potentially invaluable undertaking. Getting it right can bring enormous benefits for our citizens. The challenges of our globalised world will make Europe more, not less, important. That is why I believe it is vital that all of us - academics, business-people, civil society, even indeed politicians - work together to help Europe succeed, for our common future.