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Ladies and gentlemen,

Thank you very much for inviting me to Cambridge. Having sat on the Steering Committee of the Königswinter Conference for several years, I know Königswinter very well. It’s a great privilege to speak to you this evening in these magnificent surroundings here in King’s College.

David and I have come fresh from the British-German EU State Secretaries meeting in London. The format of these bilateral consultations is a good illustration of what Anglo-German relations are all about: close and pragmatic co-operation and frank exchange of views. In December I became Minister of State for Europe at the German Foreign Office. In a way, you could say I’m now a diplomat. And I’ve learned that in diplomacy a frank exchange of views typically means that people shout at each other behind closed doors . Let me assure you that is not what happened this afternoon in London!

I’d like to thank David for his speech and outline for you now some of my own views on Europe. As David rightly pointed out, the European project is currently at a crossroads. On the one hand, European crisis management is bearing fruit. On the other hand, the Union is experiencing a deep crisis of confidence. And in our neighbourhood we’re faced with a grave crisis that forces us to think very hard about – as the title of this year’s Königswinter conference puts it – “Europe’s place in a changing world”.

1. Europe and the crisis in Ukraine

Let me start with Ukraine – the most pressing issue right now on the international agenda. Here Germany and Britain – as partners in the European Union – are undoubtedly pulling in the same direction.

The international order has been severely shaken by Russia’s annexation of Crimea. Until recently such a situation in Europe would have seemed unimaginable. We all agree that Russia’s actions are absolutely unacceptable and in breach of international law. Its behaviour is a challenge for Europe and the foundations on which it is built. Coming hard on the heels of the economic and financial crisis, this is the second big test Europe has had to face in a very short period.

So have we as Europeans managed to remain united in this crisis? The answer is yes – also thanks to London and Berlin acting in unison. EU leaders unanimously agreed on a three-step approach. Asset freezes and travel bans against those responsible for violating Ukraine’s territorial integrity are now in place. The USA, Canada and others have acted in the same vein. All this has sent a clear signal: Russia’s behaviour here is something we cannot tolerate. We stand ready to take further restrictive measures if Russia continues to escalate the situation.

But it’s crucial at this point also to weigh our options very carefully. While considering how best to respond to Russia, we must make sure we retain the necessary room for maneuvre. Our aim is not to “punish” Russian aggression but to deter further escalation by the most effective and credible means available. And to facilitate de-escalation wherever a window of opportunity opens.

We must also ask ourselves who would pay the highest price for further escalation. In Europe it’s not the United Kingdom or Germany that would pay this price but our partners in Central and Eastern Europe. They are the most vulnerable countries here. We may of course be forced to take additional steps against Russia. And in that case we’d have to actively demonstrate our solidarity with those partners in Europe that need help.

Let me make another more general point here. We Europeans should take more pride, I feel, in what we’ve achieved. The strength of the EU lies, after all, in its soft power. Of course, as we’ve seen in recent weeks, that almost inevitably forces us into opposition with Russia, which remains stuck in a 19th-century mindset – a mindset in which big countries determine the fate of smaller countries.

Yet our diplomatic and political approach to the crisis in Ukraine is absolutely right, I believe. We remain united, we look for ways to avoid further escalation, we keep channels of communication open and seek to de-escalate wherever a window of opportunity opens. I’m fully convinced that in the medium and long term our European approach will prevail. The 19th century is over and done with. In the long run, one power is bound to lose out – and that will be Russia. In this sense, the Economist is quite wrong to proclaim a “new world order”, as it does in its current issue.

2. The situation in the European Union

Not only on Ukraine, but also when it comes to the lessons to be learned from the crisis in the euro area and the perceived loss of confidence by voters, there are many things on which Germany and Britain agree. Let me give you two examples to illustrate my point:

- We need to do more for jobs and growth: completing the single market, providing better access to capital markets for small and medium-sized enterprises, advancing free trade in a responsible way, in particular with the US, reducing red tape – these are priorities we share.

- We also welcome the United Kingdom’s support for our efforts to strengthen the Economic and Monetary Union – even if you want to stay outside. Important steps have been taken. We’ve established the European Stability Mechanism. We’ve adopted an ambitious pact for growth and employment. We’ve agreed on a Fiscal Compact. Currently, we’re working hard on completing the banking union. It will be a key challenge over the next few years to organise EMU reform in a way so that EMU remains open to non-euro countries.

But I won’t hide from you that we also disagree on a number of issues:

- We don’t believe that the EU can or should limit itself to providing some kind of easily quantifiable “output legitimacy”. To most Germans that would seem just as absurd as the idea of quantifying the value of Hyde Park by counting how many potatoes grow there. To us Germans, Europe has a different raison d’être, it’s not just a free trade area yielding economic benefits. Europe isn’t just about business. It’s also and above all a community of values and solidarity.

- As you know, we Germans are very attached to what we call the social market economy – the balancing of economic prosperity with social justice. I’m firmly convinced that longer-term growth can be achieved only if you also invest in social cohesion. Europe can’t simply be a collection of islands of prosperity. The most pressing issue at the moment is the enormously high youth unemployment in many EU countries. In Greece more than 60% of the young are out of work. Obviously we can’t afford to lose a whole generation of young Europeans, many of whom are highly qualified. So we need to demonstrate greater solidarity and give a helping hand to Europe’s poorer regions – in our best own interest. A politically and economically strong, but also socially just Europe is what makes us so unique. That’s our global trademark.

- I share the British view that we need to regain people’s trust by focusing on solving real problems rather than banning olive oil containers. The EU needs to learn how to prioritize. In President Barroso’s words: “Europe needs to be big on big things and smaller on smaller things.” But we won’t turn the clock back in the EU by reversing integration. As far as Treaty changes are concerned, new “red cards”, re-editing passages referring to “ever closer union” or repatriating competences are things we can’t go along with.

As you’re all aware many Germans love the “s-word” – subsidiarity. Well, I personally am not particularly fond of the word. Maybe that makes me a bad German. But rather than discussing whether we need more or less Europe, I think we should focus our energies on how to achieve a better Europe.

These are critical times. We need to overcome for good the financial and economic crisis. And our willingness to act together on the world stage is currently being tested by Russia. Yet I for one am convinced that Europe is our only answer to the current challenges. If we get things right, Europe will emerge from these challenges stronger than it was before – and it won’t end up as a “museum”, as the title of this year’s Königswinter conference might suggest.

Thank you.