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President Lim Deok-ho,
Ladies and gentlemen,
It is a great honour to speak to you today and a pleasure to be back at Hanyang University. I have happy memories of my visit here in 2006, when Hanyang University was so extremely kind as to award me an honorary doctorate.
Germany and South Korea are far apart in geographic terms. But I am impressed again and again by how many things we have in common.
Germany and Korea have shared a destiny as nations divided from the 1950s on. Our economies possess few natural resources, but we are among the top export nations thanks to our leading positions in science and technology. Our modern industry has helped both our countries to come out of the financial crisis comparatively well.
As trading nations connected with the world, we share a political commitment to rules-based globalization. We believe in openness but also in a functioning system of global governance. Values and interests go hand in hand here. International law, cooperation, and multilateralism are the best basis for development and prosperity, for security and peace. If you think of energy or rare earths, a reliable world trading system is a question of both economic efficiency and political conflict prevention. The financial crisis is a good demonstration of how much we need global policy coordination.
In times of global interdependence, it is only natural that a country like South Korea is watching the European debt crisis very closely. I know that there are concerns and questions in Asia and elsewhere about what is happening in Europe.
Germany’s role in particular is under close scrutiny. There are some who think that we are doing too little, too late to solve this crisis. And there are others who think we are trying to dominate Europe in solving the crisis. We take both these views seriously. But we think that neither of them is accurate.
The term “euro crisis” is convenient, but it is misleading. The euro itself is not in crisis. Our common European currency is a remarkable success story. The exchange rate and the inflation rate are as stable as they were for the Deutschmark. And the euro has become the world’s number two reserve currency.
In the financial crisis, governments had to pour billions into rescuing the international banking system. And stimulus packages were adopted to support the economy, more than 50 billion euro in Germany alone. Sovereign debt increased steeply in the United States, in Europe and around the world.
Some of the countries with the common European currency had excessive levels of public or private debt even before the crisis. Greece most of all. As a result, financial markets, nervous in the crisis, started to question the ability of some countries to repay their debt. What we got was a crisis of confidence.
Some voices in the English-speaking press have called for an even bigger “bazooka”. But it is important to see what has already been done and what such a “bazooka” would mean. We have set up the Greek rescue programme and the European Financial Stability Facility with its loans to Ireland and Portugal. We will introduce a permanent European Stability Mechanism this summer that can provide huge financial assistance to euro countries suffering liquidity problems. As the anchor of stability, Germany shoulders by far the biggest share. We are paying 22 billion euro in capital stock and providing guarantees of over 200 billion euro. This is a clear sign of our solidarity with our partners in Europe and sends a strong message to financial markets.
However, providing short-term liquidity alone is not enough to overcome the crisis of confidence. We cannot fight a debt crisis simply by accumulating more debt, or by having one country take over the debt of another. We need to convince markets that the eurozone will be an area of financial stability in the future.
There are three key points under way: Firstly, all euro countries are going to introduce a new national budget rule, or “debt brake”, to set binding limits on their expenditure. Secondly, we are strengthening the budget rules for the eurozone that were set out in the Maastricht Treaty. Those countries which run excessive deficits will be sanctioned automatically. Thirdly, we are going to expand our economic policy coordination within the eurozone. This is to improve competitiveness in all member states and to avoid macro-economic imbalances within Europe emerging again.
The steps we are taking towards a political union would have been unthinkable only a few years ago. In this sense, Europe is „making good use of its crisis“, as they say. The fiscal compact we have adopted lays the foundation for a new culture of stability. And it will improve our monetary union through a coordination of fiscal policies. With a common currency, this is a commitment to stability that euro countries owe one another.
Of course, we need austerity and growth in the troubled countries. The IMF and the European institutions have to take into account the danger that budget cuts, if too strict, could create a downward spiral. But the best and most sustainable means for growth are structural reforms and improved competitiveness in the member states, in such areas as pensions, infrastructure and employment.
At the European level, too, more needs to be done for growth. Extending the scope of the common European market to new sectors opens up great opportunities. The EU budget with its transfer elements needs to focus on supporting competitiveness rather than subsidising the economy of yesterday. And thirdly, more free trade agreements can be concluded. Germany has long pushed for a conclusion of the Doha round. As long as this is not possible, Europe should conclude further bilateral agreements, especially with Asian countries. The free trade agreement between Europe and South Korea serves as a prime example.
South Korea knows from its own experience that a banking and sovereign debt crisis simply cannot be solved overnight. But it also knows that it can be solved, and that countries can emerge from it stronger than before.
South Korea has undergone tough reforms with IMF conditions. They were painful but turned out to be effective. This is an encouraging example. It is part of the answer to the crisis in Europe, together with liquidity help, eurozone governance reform and debt restructuring for Greece.
The answer to this crisis must be more Europe, not less. We don’t want a German Europe. We want a European Germany. European integration has been the foundation for the peaceful coexistence among the peoples of Europe for over more than sixty years. It is our future, and it may serve other regions as an example of political cooperation and governance.
On the subject of the current situation in Europe, let me quote what Mark Twain said about the music of Richard Wagner: “The music is better than it sounds.” The situation has significantly calmed down since the New Year, as a result of policy action. And Europe is a strong continent that will emerge from this crisis stronger than it was.
The most recent Global Competitiveness Index lists seven European countries in its worldwide top ten. Europe is the largest source of foreign direct investment in Asia, creating many jobs. Europe is the primary destination of Asian investment, according to recent surveys. European companies are innovators. Europe is the largest donor of development assistance and humanitarian aid. The EU has developed quality rules and standards for consumer protection and more. And it is leading efforts to address global challenges.
Global governance has become both more necessary and more complex than ever. No country can meet the challenges of our time on its own, be it financial market stability, security or climate change. It is increasingly difficult to draw a clear distinction between domestic issues and questions of global policy. What’s more, in a world of seven billion people and many countries on the path of industrialization, more topics are arising as global challenges: food prices, climate change, energy, raw materials, disease prevention and more.
At the same time, the world is becoming more multipolar. The economic rise of ever more countries is a tremendous success and great news. It provides great benefits for the people in these countries, for the fight against poverty, but also for the rest of the world as trading partners and political partners, even if it means our companies face more global competition.
New economic centres of gravity have aspired to a greater say in world politics, too; and rightly so. They have their place at the table, and the world needs them to contribute to solutions. From a very early stage, Germany has supported plans to reform our international forums to reflect the realities of today: be it in the IMF and World Bank, by creating the G20 finance ministers’ meeting at the G8 summit in Cologne in 1999, by creating the G8+5 in Heiligendamm, or in pushing for reform of the UN Security Council. We are committed to forging a stronger link between the G20 and the United Nations, the centrepiece of world politics. We need international institutions that have international legitimacy and that are effective.
Who would know more about the global shift than South Korea? Korea is one of the world’s most dynamic countries, well-connected and located in the world’s most dynamic region. It is faced with the fast rise of some of its neighbours. And it is itself a new centre of gravity that serves as a reference for others.
South Korea symbolises the profound changes sweeping our world. It serves as a model, being the first country that has gone from receiving development aid to giving development aid. More than that, it is a responsible donor: it is engaged in the debate on effectiveness and coherence of development aid, trying to coordinate with other donors – such as Germany – in the UN, in the OECD and elsewhere. South Korea has not only integrated into the world economy but also assumed an important role in global governance. The G20 summit in Seoul is one example. Today’s summit is another.
Today and tomorrow, I will be participating in the second Nuclear Security Summit. I am thankful to the government of South Korea for its initiative to host this event. Keeping nuclear material secure is another global challenge that demands strong international cooperation. Today, what happens with nuclear material in one country can have implications for the security of all others. Germany strongly supported President Obama’s initiative for the first summit in 2010. We have to do all we can to ensure that weapons of mass destruction do not become the curse of globalization, and address the risk of terrorists or criminals trying to get hold of nuclear or other radioactive material.
Nuclear disarmament, non-proliferation and safe civilian use of nuclear technology are all important elements of our nuclear security. I am happy these topics are back on the international agenda, in accordance with the non-proliferation treaty. Our overall goal has to be Global Zero, a world without nuclear weapons. This also implies stopping North Korea from threatening the world with its nuclear strategy and making Iran cooperate with the IAEA, fully and transparently in accordance with its obligations under international law.
After the tragic nuclear accident of Fukushima, the German government decided to opt out of nuclear energy completely by the year 2022, despite our strong industry and the fact that we intend to stick to our ambitious goals in cutting emissions. I know that this decision has raised much attention internationally as well as in Germany. Today we are investing even more in renewable energy, a sector where Germany is already a world leader.
Every country is free to choose its own energy mix. What is important for our own safety and for the safety of other countries is that we do all we can both to keep nuclear and other radioactive material secure and to ensure the highest safety standards for nuclear energy.
New global challenges and new partners require new forms of cooperation. Germany wants to forge new, additional partnerships. This is the spirit of our new globalization policy that I presented in Berlin in February. We see the rising powers as more than just emerging economies. They are new players with political and cultural clout, new powers in the shaping of world affairs.
South Korea and Germany are strong partners, in trade, in scientific and cultural exchange and multilaterally. We are engaged in discussions on Iran, Syria and Myanmar. As G20 members, we agree that there is unfinished business in regulating financial markets and in correcting macro-economic imbalances. Korea knows it is time to act on climate change, as expressed in its Global Korea strategy. Our companies cooperate successfully, in Korea, in Europe and in other markets around the world. They are strong in the cutting-edge technologies that we need for the future, in electromobility and renewable energy, in engineering and manufacturing.
German companies are the second largest source of investment in South Korea. They are impressed by the skills and the speed of their Korean partners.
And as you know, we are in talks about Germany’s experience of the reunification process. In one of the happiest moments of our history, Germans were able to overcome their division just over 20 years ago. I hope that we can see and assist the people of Korea in their reunification in the not too distant future.
Neither Germany nor Korea, neither Europe nor Asia can address global challenges alone, threats that range from financial market instability, to climate change and the race for resources, to nuclear proliferation. Europe and Asia have much to gain from close cooperation, for our common interests and our common values, today more than ever before.