Speech by Foreign Minister Frank-Walter Steinmeier at the Deutsche Bank dbAccess investor conference

19.06.2015 - Speech

Mr. Schmitz, Mr. Eisenach,
dear guests of Deutsche Bank,
Ladies and gentlemen,

Thank you very much for the invitation! And especially those of you who have come from far away: let me welcome you warmly to Berlin! I hope you have seen some of the city besides the inside of conference rooms.

I know: This is a conference of investors and entrepreneurs. Company news are being shared, growth opportunities discussed, maybe even some deals made. And then the Chief Diplomat walks in the door – and you might ask: Did he get lost? What’s he doing at Deutsche Bank? Doesn’t he have enough civil wars to deal with?

I am glad that you invited me. And I guess there’s a reason for it. It’s a sign that foreign and security policy has gained -or rather re-gained- importance! Indeed, in my entire political career, I cannot remember any other time when we were besieged by as many and complex international crises, in as many different places, as today! And foreign policy is not just dominant in general news and headlines, but it is more crucial than ever for what you do. In fact, there is no global economic issue today that doesn’t have at least some foreign and security policy aspects to it. And vice-versa: There’s no foreign and security policy issue which doesn’t have economic and financial aspects to it. Just look at some of the current issues:

Take Russia and Ukraine: a political conflict, but economics is crucial – both with regards to sanctions and for rebuilding the future of Ukraine.

Take Iran: a political deal in the making, but the economic lever is decisive, fueling especially the hopes of the young and more progressively minded in Iran for a better, more open future.

And, of course, take Europe: a continuing crisis that is both political and economic / financial in nature.

So, as you see, I have lots of reasons to meet regularly with business leaders in these turbulent times – And when I do, there is one question I get asked often, especially by the German business community, the Small and Medium-sized Companies in Germany, who do business on every continent of the world. They ask me: “Mr Steinmeier, the world has grown closer together than ever – economically, technologically, and socially. In such an interconnected world, how can there still be crises as frequent and as grave, as today?”

My answer may come as a surprise. I think that this wave of crises does not occur in spite of globalisation but rather because of globalisation. If globalisation means that the benefits of economic and technological progress no longer stop at borders, the same holds true for the bad things: for dangers, tensions and conflicts. That holds for Foreign Policy –remember, for example: the quick spread of Ebola across borders last year, to which the International Community did react – but reacted too late. But it also holds for business – think, for example, of the digital revolution, where one simple App can disrupt an established business model literally overnight.

And, if I may anticipate the bad news: This is not going to change any time soon.

On the contrary! Despite all of our efforts, we are going to have to get used to a situation in which crisis is the new normal – rather than the exception.

If I am correct so far, I am afraid we need to rethink some of our most basic assumptions, especially those orthodoxies about globalization that were regarded in the 1990s and 2000s almost as natural laws.

First, the belief that globalization is a self-fulfilling prophecy. But today, globalization seems to be in recession. Already in reaction to the global financial crisis from 2007 to 2009, we saw, at least in part, a retreat into stronger national and regional boundaries in reaction to the excesses of global capital markets. And we see that recession in another area of global importance: the Internet. A number of major countries including China and Russia, are devoting considerable resources to regulating and controlling the Internet in their own national arena.

The second orthodoxy we need to reconsider is that economic and technological globalization somehow, by itself, will also bring about political globalization. We are experiencing quite the opposite: Economic globalisation is no guarantee of political convergence. More BMW’s on Moscow streets and more Volkswagen factories in China do not automatically lead to more political commonality. Global capitalism is “politically polygamous”, as the Financial Times put it recently.

If my argument is correct, I believe we –governments and businesses alike–, need not only a globalization of markets but also a globalization of “the rules of game” of globalization. What do I mean? We need to work to strengthen and reform the structures and institutions of international order that have come under pressure by the tectonic shifts on the global stage, especially the rise of China, India, Brazil and others. And I believe this strengthening of international order is as crucial to you as it is to me: because rules and their reliability are the basis of peaceful politics just as of successful business!

If you ask: What can old Europe and Germany do in this process? I think it is exactly that: Europe stands out in the world as a model of order, where freedom of markets, freedom of movement for half a billion people have been successfully linked with political institutions – institutions of social cooperation and cohesion. Let’s keep that German and European perspective in mind, that quest for a rules-based, cooperative, peaceful international order, when we discuss the pressing foreign policy issues in the remaining time of my speech.

And in spite of the mountain of challenges, I will try to be as brief as I can. I hope I will keep that promise... Because at my last speech, I spoke for 10 minutes, and then 20 minutes, and then 25…and then I realized that people were getting tired and I said: “Oh sorry, but I forgot my watch at home”. Somebody from the last row shouted: “But behind you on the wall is a calendar!”

So let me say just a few words about the conflict that currently occupies the largest share of my time, at least: Ukraine. It’s not only about Ukraine. In fact, something has happened that Europeans didn’t even consider possible 70 years after the end of the Second World War: the question of war and peace has returned to our continent. We have seen the forcible redrawing of borders, in clear violation of international law. This was not done by just anybody, but rather by a state that had signed the Helsinki Accords and was a founding member of the OSCE, which lays down the rules and principles of our European peace order, including the inviolability of borders. We cannot ignore this, ladies and gentlemen! Some voices in the business community -some quiet, some not so quiet- would have preferred to just carry on. But I told the business community: What has been violated in Crimea and Eastern Ukraine, are the very rules of cooperation that are the basis not only of European peace but also of trade and economic prosperity in Europe. So compliance with these rules is in the interest of businesses just as well!

So we had to react – But the question is how. Some have said –and we just heard those voices again around the G7 summit—that we need to tighten sanctions further in order to bring the Russian economy to its knees. I think that’s wrongheaded and against the interest of our own security. We have no interest in seeing a dangerous mix of capital flight, absence of investment and a sharply deteriorating rouble in Russia boil over.

I have advocated a dual strategy. On the one hand, we had to react with political pressure and with economic sanctions, too. But on the other side, sanctions are never an end in themselves. In my view, sanctions always have the aim of bringing a negotiating partner to the table. And for that goal, we ourselves have to be at that table; willing to communicate and negotiate. This is the approach that got us to Minsk and to a ceasefire agreement. And that’s why, especially now, as we see new eruptions of violence in Eastern Ukraine, I tell both sides, Ukraine and Russia: Get back on the path of Minsk. Because if you let Minsk derail at this point, it is not only Minsk that has failed, but it might also be the last avenue of political conflict solution before even more irrational forces are unleashed.

For a political solution to the crisis, we short-term de-escalation but we also need a vision for tomorrow. A unified economic area extending from Lisbon to Vladivostok remains our long-term vision. Even if it sounds utopian at the moment, it remains true that Russia and Europe need each other and complement each other. Ukraine, which is historically tied with both Russia and Europe, can benefit from close economic cooperation. That’s why, for example, I advocate a greater density of contacts between the EU and the Eurasian Economic Union.

I do not know how Europe’s security architecture will look in 15 years. But I do know one thing: A sustainable European security architecture can only exist with Russia and not against it. Because, whether good or bad, Russia will always be one thing to us in Europe: a large and influential neighbour. Plus, we need Russia in the many other conflicts that the world is currently struggling with. In many of them – especially in Syria – we will not be able to find any solution without Russia.

Of course, you are not only interested in what goes on at the border of the European Union but also inside it! So looking at the half year that’s ahead of us, let me invite you to consider the following scenario:
· First, we manage to reach an agreement with Greece.
· Secondly, the UK prepares constructively for the prospective referendum, with the aim of remaining in the Union.
· And thirdly, in the upcoming elections in large EU member states, parties are elected that continue the path of European integration.

All of these decisions are coming up. But you guessed it: Where there’s a Scenario A, there’s also a Scenario B. Let’s imagine:
· First, we lose Greece.
· Second, the UK makes unacceptable proposals to us that cannot even be a basis for negotiations. And I’ve heard that many international businesses in London are already worrying about that kind of development.
· Third, in one of the large country elections, populist and anti-European parties gain power.

Being familiar with scenario thinking, we know that none of them will be exactly what happens, but a combination of both. But my point is: The trajectory will be shaped by the early decisions. And on that trajectory, there is more at stake than the financial questions that are being negotiated right now, and where the Greek government still needs to move substantially. But what’s also at stake is the European narrative as a whole. That narrative is essentially a global narrative. We Europeans have been saying for years: New global players are emerging, and the relative weight of Europe is shrinking. So if we want to make the European voice heard on the global stage, we need to do it together. And that global European voice needs the British accent, too!

What does this have to do with Greece? The world is looking at us right now, saying: ‘Greece makes up 1.3% of Europe’s economy. How seriously can we take Europe as a global actor if you cannot handle an internal problem on that scale?!’

I cannot tell you today what the outcome of the negotiations will be. I only know that if the outcome is negative, we will no longer be in the same European story. We will be in a weaker position, at least toward the world around us.

And therefore, if international investors ask: ‘Can I still trust in this Europe?’ the answer is ‘Yes’, because Europeans are aware of the magnitude of our European model, this unique combination of economic freedom, political cooperation and social cohesion; And that’s why we are serious in defending this model. I think anyone of you looking at the reform efforts, for instance, of Manuel Valls and Emmanuel Macron in France or Matteo Renzi in Italy will see that these are serious reform efforts. They are taking great risks to push reforms that have been deferred for too long.

Those of you who are skeptical, I want to remind of a situation just twelve years ago. You know who was called the “sick man of Europe” then? Germany. So under the government of Gerhard Schröder, we undertook a series of structural reforms that were tough at first –in fact, the Social Democrats lost not only one election over it– but that were necessary and put us on our path of today:
· economically strong,
· with a sound industrial base,
· with our innovative Mittelstand,
· with strong labor relations,
· firmly embedded, both economically and politically, in the European Union –
· and even soccer world champion – but that has nothing to do with our reforms…

So with this experience, let me share two final thoughts about reform that might not be unfamiliar to those of you who have led reform efforts in your own companies. First, while it is happening, lots of people will say “It’s not enough” or “It’s too late”. I say: Let time decide! And second: The fruits of reform take time to grow! It might even be the case that you only get the early pain and your successor reaps the praise. In fact, I can tell you a thing or two about that from my own political career … and maybe people at Deutsche Bank, too …

But as all of you know from your own work: If you create value, it’s worth the pain. And for us Europeans, we know it’s worth the pain – because the “European model” I have talked about is not just for us, but also for this unsettled world in search of a peaceful order. And that goal, I hope, is one that we as governments and you as businesses share alike – so there are two things you can take from Berlin: this common global project and hopefully many successful investments with German businesses! Thank you very much.

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