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Speech by Foreign Minister Guido Westerwelle to the Asia Society in Hongkong: “Europe at a Crossroads – The Sovereign Debt Crisis and its Impact on Asia”

31.08.2012

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Mister Ronnie Chan,
Herr Generalkonsul,
Excellencies,
Ladies and gentlemen,

It is a great honour to speak to you today here at the Asia Society in Hong Kong. I am grateful to Ronnie Chan and the Asia Society. I feel privileged to speak to you at this distinguished venue.

Over the last decades, Hong Kong has changed remarkably. Under the principle of “One Country, Two Systems”, Hong Kong symbolizes the advantages of an open society with a global network of business, financial and innovation relationships. Hong Kong’s commitment to an open economy and society, to good governance and to the rule of law, remains at the core of its much-respected success story. The presence of some 600 German companies here is testament to this.

Today I am coming from Beijing, where we held the second German-Chinese Intergovernmental Consultations.

This special, high-level dialogue format underscores how close, broad-ranging and thriving the strategic partnership between Germany and China is. It shows how committed both sides are to further strengthening our important relationship.

Indeed, the intense political exchange that we have developed over the last 40 years has been a sign of our strategic partnership’s true quality.

There are areas where our views still diverge at times. I regard our on-going dialogues on human rights and the rule of law as key pillars of our relationship.

We acknowledge that our countries have to deal with different circumstances and have highly divergent histories. But we know that we have to work together for common goals such as sustainable economic freedom, social security and environmental protection.

We recognize that in this globalized world our countries share responsibility for a prosperous, healthy and peaceful future.

It was in this understanding that I had a good exchange with Foreign Minister Yang on important issues of regional and international security. We had intense discussions with our Chinese partners about how to end the humanitarian catastrophe in Syria.

Along with these political exchanges, our deep economic ties continue to serve as a stable backbone to our dynamic bilateral relations. China is Germany’s second-largest export market outside the EU. Germany is China’s number-one trading partner in the EU. Bilateral trade totalled an impressive 140 billion euros in 2011. German companies are some of the largest foreign investors in China, making Germany a key partner for China’s economic development and technological progress.

We frankly discussed efforts to address the challenges for business in the areas of market access, equal treatment and intellectual property rights. Both sides are committed to working together closely in order to tap the full potential of our economic partnership.

Of course, we discussed the developments in the euro zone. Germany greatly appreciates China’s constructive stance in supporting efforts to overcome the crisis.

Some people wonder whether Europe is going about overcoming the so-called euro crisis the right way.

The term “euro crisis” is misleading. The euro itself is not in crisis. On the contrary, our common European currency is a remarkable success story. Whether we look at the exchange rate or the inflation rate, the euro is stable. It has become the world’s number-two reserve currency.

In the wake of the financial crisis, governments had to shore up the international banking system with sums amounting to billions. Huge fiscal stimulus packages were put together. Sovereign debt, already high before the crisis, increased more. In the end, the financial markets questioned whether some euro countries would ever be able to repay their massive debts. The sovereign debt crisis turned into a crisis of confidence.

The provision of short-term liquidity alone will not be enough to overcome the crisis. What we need to do is convince the markets that the euro zone will be an area of enduring financial stability in the future.

We are laying the foundations of that stability in the form of three pillars:

Firstly, we are demonstrating great solidarity with those who are under pressure. That’s what’s behind the permanent European Stability Mechanism. The German Bundestag alone has adopted guarantees of far more than 200 billion euros.

The second of our three pillars is that we are generating a new culture of stability. Europe has taken its decision to move away from sovereign debt. This is a fundamental paradigm shift. It is put into force by the European fiscal compact, which is currently being ratified by the EU member states. A number of countries have already ratified it. The German Bundestag ratified the fiscal compact in July.

Thirdly, we are paving the way for fresh growth in Europe. It is particularly important for individual euro zone members to become more competitive. You can’t buy competitiveness. Competitiveness can only be achieved through ambitious structural reform.

Ten years ago, Germany was the sick man of Europe. But then we embarked on a programme of structural reform. These were highly controversial political decisions. We faced strong opposition in our own country. That is why we have a lot of respect for the reform efforts that a number of European populations have taken on.

Reforms may be painful, but they truly pay off. That is what we Germans have experienced firsthand, and that is what we are observing in those countries in the spotlight today: unit labour costs are declining, exports are rising and budget deficits can be reduced. We are even seeing positive growth rates in some cases.

Of course, this does not mean that we have put the debt crisis behind us. But these first positive indicators are important incentives to continue the reforms.

We know that the end of the debt crises is nothing we can achieve overnight. But we are making progress. With perseverance, we will get there in the end. Sound budget management, growth based on competitiveness and solidarity with our partners: that is our strategy.

Germany’s role in all this has been subject to a lot of scrutiny. If you listen to the public commentary, we seem to be caught in something of a dilemma: we are either criticized for being too cautious in addressing the crisis or for being too dominant in dictating our own policies to others. We take both views seriously. And we believe both miss the mark.

Let me be perfectly clear from the outset. There can be no good future for Germany without a good future for a united Europe. The broad consensus in my country is that the answer to the current crisis has to be more Europe, not less Europe. Germany is and will remain deeply and firmly committed to a united Europe. Not only because of our history, but because of our future.

The relative influence of Europe’s individual countries – including Germany – will continue to decline in the years ahead. The game of global competition is now being played on a larger stage. But if we bring our own house in order, Europe has every reason to be self-confident and optimistic.

A united Europe has a lot to offer:

Seven of the top ten in the newest "Global Competitiveness Index" are European countries.

Europe remains the largest source of foreign direct investment in Asia, creating many jobs.

And Europe is the primary destination of Asian investment, according to recent surveys.

We want to foster close ties between Europe and Asia and the new powerhouses of the global economy. Economic strength generates political clout. This in turn means a greater share of responsibility for the world.

Globalization is ushering in completely new challenges. I am thinking here of climate change, scarcity of water and food, cyber security and preserving creation.

Anyone who wants to shape globalization needs strong partners.

It is not a coincidence that I have chosen Hong Kong as the site for this speech. Hong Kong’s success in dealing with globalization’s challenges and opportunities over the past fifteen years provides an inspiration for Europe today.

And let there be no doubt: every crisis is also an opportunity. Europe will use this window of opportunity during this special Year of the Dragon. Europe will remain a reliable global actor in working with its Asian partners towards a future of prosperity and peace.

We are aware of Germany’s responsibility for Europe. And we are aware of Europe’s responsibility in the world.

Thank you very much for your attention.