Ladies and gentlemen,

I haven’t actually prepared any sort of rebuttal to what Jean‑Claude Juncker and Günther Oettinger said just now. You will soon see that I agree with almost all of the points that they raised.

Perhaps it is a good thing that I am trying, at least at the beginning of the speech, not to get to the topic of finances straight away. Instead, Günther Oettinger, I would like to say something about how we can win people over, at least in my country. Which arguments can we harness in order to rally support? And even though we are here in Brussels and some things seem so self‑evident to those here today, it’s important for us to call to mind what we’re actually talking about here.

Many things have changed dramatically in the world in the past few years, and in the course of the last 12 months in particular – and not for the better in far too many cases. Precious little in the way of security and reliability appears to have survived. And here in Europe, too, many things have started to shift and some things that were thought to be safe as houses have turned out to be most fragile or already broken. However, despite major challenges and problems, the European Union continues to be a unique area of democracy, peace, freedom and stability in the world.

It is unique to the world!

Nowhere else in the world is there such a successful project involving the cooperation of peoples and states. While we within the EU occasionally have our doubts about this project, many millions of people outside the EU are absolutely certain. For them, Europe is what the United States of America was in the transition from the 18^th to the 19^th, and later on in the 20^th century: a place of freedom. Freedom not only from oppression and persecution, but above all the freedom to lead our own lives as we see fit. A place where our own children would enjoy better lives than their parents in their home countries. For many people around the world, Europe has become a beacon of freedom.

This is bound up with many problems for us Europeans as mass migration of displaced people, fleeing war and civil war or simply in search of a better life, is difficult for us to cope with. Sometimes this even seems to tear our Union apart.

And yet, over 70 years after the end of the Second World War, it is still something wonderful. Europe was a terrifying place back then, and we Germans were at the root of this fear. The fact that a terrible place has become a place of hope today is at the heart of this incredible history of European integration.

This story began with the courage of women and men, only a few years after the devastation of World War Two, to invite us Germans of all people back to the table of civilised peoples in Europe in order to build this Europe. It was these very countries, to which our nation had brought war and genocide, that now offered us the outstretched hand of friendship. These women and men in France, Belgium, Luxembourg, the Netherlands and Italy must have been very brave. I cannot imagine that it was a very popular move among their own populations to invite us, the Germans of all people, to this European table.

But the founders of the EU knew that this was literally a matter of life and death. For the return to nationalism, as the later French President François Mitterrand once said, would have led to war once again. The dawn of the EU was literally a matter of life and death.
Why do I say that? My goodness, how fortunate are we as a community that we are only worried about money today, and no longer about life and death!

I don’t mean this at all ironically here. I believe that it is important to mention this story about the EU’s success at the beginning in order to illustrate that we are talking about manageable problems when addressing the issue of medium‑term financial planning.
I say this quite deliberately at the outset because we still need courage to stand up for Europe today. Certainly not as much courage as back then, but a measure of courage nonetheless. After all, it is often easier to berate the technocrats and bureaucrats in Europe – of whom there are indeed many just as there are in our nation states – and it is even easier to pretend to be the guardian of one’s own money, money that we claim is better spent at home than in Brussels.

For all the discussion about structures, finances and administrative problems, it is this incredible success story of having transformed a terrifying place into a place of hope that we must first tell when talking about Europe. If we manage to embed the uniqueness of this European success story in the world in the consciousness of our people, then they will also better understand and hopefully also support our sometimes seemingly endless discussions about the architecture and financing of our EU.

Ladies and gentlemen,

At a time of fundamental change, many people in the world, and above all we in particular, should have a fundamental interest in a strong Europe. We are sometimes almost among the last, or are at least among those few, to take a bold stand for the values and interests that we called Western values in the past. This is not a geographical term, but rather the notion of universal values and the protection of freedom and democracy for citizens that is based on the concept of solidarity, standing up for one another and assuming responsibility.

Let’s face the facts – the EU of today only has limited scope to do this; its internal cohesion has suffered in recent years in the wake of financial, economic and political crises. That is why, in the coming years, we must overcome the internal division of Europe and re-establish the EU as a strong global player.

This doesn’t come easily to us. At the end of the day, our Europe was founded with a focus on the domestic front – creating peace and prosperity at home. The EU was not meant to be a global player. We Germans in particular left this to the British and the French and, when the going got tough, to the Americans. And if things went wrong, we always had someone to quibble with.

This approach won’t work in the future; we will have to jointly stand up for the interests of Europeans in the world ourselves.

We should approach this task with the ambition to open up a new chapter of European policy, and we Germans in particular have good cause to do this, and to do this with the courage to shape the EU and the willingness to shoulder responsibility. We need an ambitious and forward-looking European policy based on the principle of solidarity, not a policy of timidity and red lines that allegedly cannot be crossed.

While this doesn’t mean that we always need more Europe everywhere, we often need a different Europe.

And, at the same time, we shouldn’t delude ourselves into thinking that Europe is an end in itself. Only a united Europe can be a strong Europe. Whether this is about foreign policy, security, migration or finances – the citizens of Europe expect responses from Europe to the major issues of the future. Europe must deliver on these issues in order to convince Europeans. Europe’s capacity to act and European cohesion are inseparably linked in this regard.

Ladies and gentlemen, as Jean‑Claude Juncker and Günther Oettinger have already said, we must start by defending ourselves against false myths and offer true narratives instead.

(1) The first false narrative is that of the net contributor. This is a narrative that calculates how much tax revenue from a member state goes to the EU and how much money it gets back in the form of subsidies. This is one of the most popular false narratives about Europe in my country.

Politicians of all parties have told this story for the past 30 to 40 years, which is why many people now believe it. It is as if EU finances are a zero‑sum game in which one person graciously offers the other financial support without getting something in return.

Everyone in this room knows how untrue this story is. In reality, for example, Germany is not a net contributor, but is perhaps one of the biggest net beneficiaries of European integration – in economic and financial terms, and, it goes without saying, politically too. We don’t primarily export our goods and commodities to China and the US, but 60 percent of our exports go to Europe and 44 percent to the EU. Only when the countries around us are doing well enough to be able to afford our goods will there be employment and income in my country. No one depends on the prosperity of other European member states as much as Germany. And this is why we are far from net contributors, but are in fact economic, financial and political beneficiaries of the EU.

(2) The second myth is that of a loss of sovereignty as a result of the EU. The truth is that, as nation states in the world of the 21^st century in which Asia, Africa and Latin America are growing, we are shrinking in relative terms. The fact of the matter is that we in Europe are declining in importance, population and economic clout relative to everyone else.

In this world of the 21^st century, we will only be able to lead our lives in a sovereign manner if, via the EU, we claw back the sovereignty that we as nation states in the world of today and tomorrow no longer have by ourselves. Even an economically strong Germany will no longer have a voice on the international stage. Our children and grandchildren will only be able to choose between having no voice at all or having a common European voice. The EU does not lead to a loss of sovereignty. We would have less sovereignty with respect to how we lead our lives in Europe if we didn’t have the EU and the nation states had to defend their populations’ interests by themselves. And I believe that it is important, at long last, to enshrine this modern concept of sovereignty more strongly in our societies.

(3) A third story that will be much less easy to dispel is that of a “multi‑speed Europe”, which already exists in reality, for example in the form of the Schengen area or with respect to monetary union.

Europe is already moving along at different speeds.

To be honest, I would be delighted if that were our problem. In a Europe of different speeds, everyone goes in the same direction, only some at a fast and others at a slower pace.

Our actual problem, however, is not a multi‑speed but a multi‑track approach. We now have a very different perception of the EU’s development. And I am certain that if we do not manage to breathe new life into common EU objectives, then it will be very difficult to promote acceptance in our member states of the fact that we want to spend more money on this.
A Europe at any rate that is not absolutely united on fundamental issues such as the separation of powers, the rule of law and freedom of opinion and freedom of the press will not enjoy any lasting support from its citizens.

This is why, incidentally, every budget, no matter how large, is a budget based on solidarity that includes common finances and common responsibility for the same EU objective. The core objective is to develop and preserve freedom, democracy and the rule of law on our continent.

(4) And the last myth that I would like to mention is the fear of the “debt union” or the transfer union that is stirred up time and again also in my country.

Eurobonds, Community liability, banking union – these are the terms that stir up great fears of overburdening taxpayers, especially in northern Europe. In the South, this often appears tantamount to a refusal to demonstrate solidarity. I believe that we need to break free from this trap that we have got ourselves into. In reality, Community debt in Europe is nothing new. After all, who is liable for the financial risks that the ECB has taken in recent years? The member states of the EU and the European Central Bank, of course. Thanks to politicians’ refusal to assume responsibility themselves, the ECB has bankrolled European economic development – a role that it did not want for itself.

This role came about because politicians were not willing to take on responsibility for their own citizens – so the ECB stepped up.
The fact is that we have secretly had debt, a transfer union and eurobonds for a long time – we just haven’t taken this into account in political goals or policies on the future of Europe. In my opinion, this must come to an end. We will need to be much braver as regards making our economic and monetary union fit for the future. Otherwise, the constantly recurring debate on bank crises, the ECB, the lack of a common economic and financial policy, and unemployment, which is still far too high, will undermine the public’s trust in European policies.

I am speaking in depth about these issues because I am concerned that we will once again try to solve the medium‑term financial issues by treating them as a technical process and thus end up with a “national horse trading” scenario, in which net contributors and net recipients somehow come to some sort of agreement.

I am certain this will no longer be enough. We first need to be clear about what is at stake, what tasks lie ahead of us and how we want to address them together.

We will then enjoy support when it comes to providing the necessary funding.

I think Jean‑Claude Juncker and Günther Oettinger have described these tasks well.

Furthermore, we can build on positive experiences – Europe has achieved great things with its budgets in the past decades. Much would be inconceivable without the resources we jointly made available through Brussels, for example the economic convergence process in many European countries and cutting‑edge research in the member states.

Without these resources, Europe would long since have fallen behind. All of us – North and South and new and old member states – have benefited enormously from European integration. In fact, we are all winners as regards European integration!

So let us use this opportunity to ask ourselves what we want to achieve with the EU budget in the future. That is primarily a political challenge – not a question of arithmetic!

I believe we need to ask ourselves if we are using EU funding to make Europe fit for the future, if this funding is reaching the right targets and if the public can see what the EU is doing. We also need to ask ourselves if we are creating European added value that is greater than the sum of our national endeavours and linking our budget and finances to common aims and values in Europe.

The answers to these questions will determine how we fund the next financial framework and how much funding the member states will provide.
The share of expenditure on traditional areas, that is, agricultural subsidies and structural funding, is currently very high, accounting for almost three‑quarters of total expenditure. Meanwhile, the amount we spend on research and development, as well as on foreign policy and security, is comparatively low. We still cover most of these areas via our national budgets.

As the traditional areas of spending account for such a large share, we need to look at them particularly closely with a view to their viability for the future and contribution to European cohesion. Better spending is not merely an argument against spending more. On the contrary, I would say that we first need to discuss whether we are spending the currently available funds on the right things – and if we are not spending enough to then think about spending more.

It is not a contradiction to talk about better spending and still support the idea of spending more.

We should shape these traditional policies in a way that enables us to respond to new challenges through them.

Some member states will say they are opposed to having their funding from these budget items cut in the future. Germany – Jean‑Claude Juncker spoke about the German‑speaking region, but Günther Oettinger and I are living proof that there are other views both in north and south Germany – well, some people in Germany will say there is no way we are going to pay more. What both arguments have in common is that they set the status quo in stone.

And to be perfectly frank, this logic – the logic of net balances – is extremely harmful to Europe. It is not a matter of net balances. What is important is that we all make use of the added value provided by Europe.

I would like to look at five priorities today that I see as crucial as regards putting European finances on a new qualitative basis. As these are decisive weeks in the formation of a new government in Germany, I kindly ask you to understand that this is my political position. I also ask you to understand that I, like any other politician, hope my position will win through in Germany. However, the process of forming a government in Germany is in full swing. At any rate, I believe that no matter who is in the new government in Germany, for the first time we will have a coalition agreement that places Europe at the heart of national policy. This has never been the case in my country so far. And I am absolutely certain that regardless of which parties govern in the future, no one in Germany will try to dodge this question.

1. People expect policies, be they national or European to create the prerequisites for growth and employment. We need to pave the path both to growth and social justice in Europe by having significantly greater tax convergence and fair taxation, a common labour market policy and a robust European investment programme.

It was already a couple of years ago, but I still remember vividly how a report by the European Commission informed us that the EU loses a trillion euros per year through legal forms of tax avoidance. A trillion!

My country accounted for 150 billion euros of this loss. I certainly don’t believe that even the most ambitious type of tax policy would come anywhere close to recouping these sums. But imagine we could give the EU 10 or 20 percent of this incredible sum by changing our bizarre tax‑dumping competition. That would be the same as the budget we currently allocate to the EU. And I have to tell you frankly that at least in my country, I can’t explain to a baker why he has to pay nominally higher tax rates than corporations such as Google, Starbucks and Amazon. And I don’t see myself as a politician who tends to be stuck for words. I simply believe this is a genuine problem of justice and fairness. I can also understand small and medium‑sized enterprises that are not able to benefit from this tax‑dumping competition and experience it as anti‑competitive and a disadvantage on the European single market.

Ladies and gentlemen,

That is why I believe we need to agree on a fair tax policy. That does not mean we have to standardise our tax systems, but it seems reasonable to me that this unequal treatment of small and medium‑sized enterprises and large corporations must come to an end.

In the European Semester, the Commission calls on the member states every year to undertake structural reforms so they remain competitive. We need to strengthen the link between these recommendations and the cohesion funding provided by the EU budget. After all, the aim of cohesion funding in particular is to foster growth and employment. Incidentally, that can sometimes mean that more funding must be allocated to areas where structural reforms have not yet had a sufficient impact. We don’t always have to say that those who do not carry out certain structural reforms will receive less funding. In fact, the opposite is sometimes needed.

I have never understood why the three‑percent criterion for debt has always been viewed so strictly in Germany. My country did the following – it launched social reforms in 2003 while increasing its domestic debt. We did this because we knew we had no chance whatsoever of achieving structural reforms while rapidly reducing our debt. In the end, we achieved our structural reforms and now we have a budget surplus. So sometimes it can be necessary to give a country more support on its path to structural reforms than has been the case so far. And we cannot always say that funding should be cut to member states that have not yet achieved sufficient structural reform.

2. Economic and monetary union must be completed in order to bring about social and economic convergence in Europe. Completing the banking union is a priority in this regard. Whether it is just for the eurozone or the EU27, we should allocate part of the multiannual financial framework budgets to ensure we are better prepared for future crises. And we must not lose sight of a very important aspect, namely that we cannot allow the euro to cause rich and poor, North and South, and East and West to drift further apart. That is why I think it was right of the Commission to suggest, at the start of December, the creation of a budget to help counteract downturns, particularly so we do not have a repetition of the experiences of the crisis, with a huge increase in unemployment.

3. With regard to security and solidarity, Europe has become a destination and a dream for refugees and migrants seeking better living conditions. We were not prepared for this large influx in 2015. Since then, we have achieved quite a lot. However, we should not delude ourselves. We need to work together to safeguard our external borders more effectively. We need to do more to tackle the causes of irregular migration by working with Africa in particular. And we should not leave this neighbouring continent of ours completely to China, but instead recognise that Africa clearly has something to offer. At any rate, China is not investing in Africa because it is afraid of refugees. The debate in Europe is overly dominated by the refugee issue, while the opportunities afforded by working with Africa feature far too little.

4. With regard to our common foreign policy, the world has become less safe. The number of fragile states near Europe has increased, as has been pointed out.
So, along with what we are doing internally, we also need to enhance our external security and to join up our defence and security policy more closely. Doing so can also help us to save money. We have been discussing the famous two‑percent target in NATO. The truth is that Europe spends around half of what the US spends on defence, but only achieves 15 percent of the latter’s efficiency. I would suggest doubling efficiency in Europe by working together in a better way rather than simply doubling our defence expenditure. If we look at the target of 1.1 percent plus x rightfully suggested by Günther Oettinger, we can show relatively quickly what that actually means for national budgets. In Germany, 1.2 percent would mean a net amount of 10 billion euros per year – a lot of money. At the same time, however, the US President wants my country to increase its arms spending by 30 to 40 billion euros per year. But to be honest, I think that investing 10 billion euros in Oettinger’s European target is likely to safeguard peace at least as much as investing more in NATO’s defence capability. And we see that it is not actually so hard to achieve balance and weighting if we look at what we otherwise still need to do.

5. When it comes to innovation and research, Europe is – still – performing well. There is a large gap between Europe and the US as regards technologies and services in the digital world, and a real risk of this gap growing. We need to catch up. We cannot continue to leave the fields of energy‑saving vehicles, medical technology, computer‑operated machines, robots, high tech for space travel, shipping and railways to individual countries. Instead, we need to pool our resources.
To put it briefly, we need to restructure EU funding. We cannot simply give things new names. We need to do more in order to meet our responsibility and counteract the critics on all sides.

And that brings me back to the question of the EU budget. I will do my part to ensure that Germany is a constructive partner on the path described by Günther Oettinger. I think we can make a real difference if Germany paves the way in this debate.
That is why I call on the Commission to present an ambitious proposal for the next financial framework.

The next financial framework is a huge opportunity – one we only have every seven years. Let us not take a blinkered view by only looking at net balances, but instead remind ourselves that Europe is our best hope for a good future in an unsafe world.

Find out more:

Shaping Europe’s future: Negotiations on the next EU budget get under way