Speech by Minister of State for Europe Michael Roth at the conference Europe after the euro crisis – where is the economic and monetary union headed?

12.06.2018 - Speech

-- Translation of advance text --

Ladies and gentlemen,

Judging by the title of today’s conference, Europe after the euro crisis, you will be looking at both the past and the future. You will be doing a stock-taking of the crisis and examining the prospects for the economic and monetary union.

For one thing, the worst of the so‑called euro crisis seems to have passed. The economic indicators for the eurozone are generally good – this is particularly true for Germany.

At the same time, your conference is asking the right questions about the future, questions that also make us politicians feel uncomfortable: have we truly done everything in our power to make the economic and monetary union resilient? Have we succeeded in improving economic and social convergence in the eurozone?

One look at our partners in southern Europe shows that they are still faced with serious social grievances. The truth is that the eurozone is still suffering an excessive economic and social disequilibrium. That will not work in the long term.

What needs to be done? Coordinating fiscal policy alone will not be sufficient. Neither will it be enough to set up an investment budget for the eurozone, as was again recently proposed by the Federal Chancellor.

Rather, we need a whole package of measures, namely investment in a better Europe, a concerted effort to fight youth unemployment, which is far too high in some member states, and binding minimum standards for work and taxes, as well as in the social domain.

In short, we need a social Europe. It’s good that, meanwhile, there are specific proposals that actually stand a chance of being implemented. We’ve truly had enough sermons and speeches on this subject.

Ladies and gentlemen,

I would like to warmly thank all those who have presented their analyses and conclusions about the future of the eurozone from very different perspectives.

As a social democrat, I want to say one thing quite openly at this conference, which has been co‑organised by our friends at the Friedrich-Ebert-Stiftung, the German Trade Union Confederation and the Macroeconomic Policy Institute (IMK):

The success of the SPD to a large extent hinges on how well it can balance the relationship between the economic and social domains. For more than 150 years, social democracy in Germany has championed peace, freedom, justice and solidarity.

The SPD has always been the party of international solidarity and a standard-bearer of a united Europe. That is why it must now strike the necessary balance, through and with Europe. If the SPD wishes to truly renew itself and be strong again, then that is exactly what it must accomplish. And it must do so now.

As dyed‑in‑the‑wool Europeans, we all agree that Europe’s internal market is a unique accomplishment. In times of massive trade disputes, the economic union is more important than ever. And yet, we have always known that Europe is much more than a single market and a monetary union.

The EU is a unique community of shared values and solidarity. For the EU to have a bright future, we must work every day to make this solidarity a reality, by always treating economic and social policy as two sides of the same coin. For the economic and social dimensions are not a contradiction in terms. Rather, they complement each other.

This is apparently not as obvious for many in Europe as it is for us social democrats, who have the principle of a social market economy more or less embedded in our DNA. I sometimes hear remarks like: “If we want to compete internationally with the US and China, we cannot afford to cling to our European social model.”

In response thereto, I say that we must confidently face this global competition – and at the same time preserve and protect the hallmarks of our European system. What makes Europe special, after all, is the unique way that we tie our economic prosperity to freedom, democracy, justice and solidarity.

We Europeans also believe in a rules-based order that pursues openness, not isolation and protectionism.

We are currently witnessing a trade dispute with the United States, and there is generally the danger that progress on multilateral trade may be rolled back. Protectionism is the cynical and wrong answer to the social challenges of our time. The greatest danger is a vicious circle of protectionism through which, in the end, everyone would lose.

Ladies and gentlemen,

As experts, you know best that financial crises last much longer than normal economic crises. Their follow‑on effects are particularly complex and long-lived.

So what needs to be done to patch up the roof – while the sun is still shining? It is just as certain that the next storm will come along, just like the next crisis – and we need to be well prepared.

Asking the question Where is the economic and monetary union headed? almost gives the impression that no one is manning Europe’s helm, as if the eurozone were wandering around aimlessly. Although that’s not exactly true, it can be said that in recent months we might have operated too much on autopilot. This was certainly also due to the fact that our EU partners had to wait a long time for the formation of a new German Government. Now, I’m just as impatient as many of you here in this room.

But, I, too, am confident that in the coming weeks a clear course will finally be charted for the economic and monetary union. Germany and France will at long last submit a joint proposal, for which we will then seek support among the other member states.

We need a true European monetary fund that can be activated in the event of a crisis – without support from the IMF.

The monetary union must be supplemented by a completed Banking Union. We must act swiftly to repair the deficiencies in the banking system, so that we can introduce a joint European deposit insurance scheme and a common fiscal backstop for bank liquidation. However, that can only be a first step.

This will place the risks on the broadest shoulders. In saying so, I do not mean Germany’s shoulders, but our pan‑European shoulders. We all benefit from preventive action that strengthens trust in our financial system. This further reduces the risk of a crisis occurring.

But these steps alone will not be sufficient. In Europe, we will need to go beyond a narrow definition of crisis prevention and crisis management.

Long‑term investment is one of the prerequisites for more economic and social convergence in Europe. In its coalition agreement, the German Government has declared its support for an investment budget for the eurozone – and we stand by that statement.

What is the idea behind such an investment budget for the eurozone? Europe most not pursue austerity policy as its single aim. What makes Europe strong is our intelligent mix of socially balanced, consolidated budgets, coupled with structural reform and investment in the future.

Particularly when it comes to investment, the EU has lots of catching up to do. Germany has a prosperous economy and will take on significantly more responsibility with a view to closing Europe’s investment gap, because sustainable economic and social development requires investment.

“If we all save, then we’ll all be better off.” This statement may sound sensible at first – but it is completely wrong. What may be true for your personal finances simply doesn’t apply to Germany, or to the European Union. For it is clear that, when everyone saves more, there’s no money left with which to buy or invest.

In 2018, for the first time since the introduction of the euro, all eurozone countries are below the three-percent deficit-to‑GDP ratio. We can use this good financial position to make our national economies more resilient. By investing in education, research, innovation and infrastructure, we can lay the foundation for future prosperity and job growth in Europe.

In this way, we will not only be helping economically weaker countries in the EU catch up with ‘core’ Europe. It is precisely by investing in the spheres of artificial intelligence, digital technology and broadband infrastructure that we will strengthen Europe’s international competitiveness and position in the global marketplace.

The aim of investment, after all, is not to dole out money. Smart investment that creates added value for Europe makes us all more competitive – and, ultimately, increases Europe’s wealth.

By global comparison, Europe is in good shape, we’re quite wealthy. But unfortunately not everyone shares in that wealth. Not everyone gets a piece of the European pie, so to speak. Everyone has a right to their fair share!

One issue that I’ve been engaged on for years is youth unemployment, and the fact that in some member states it is still far too high. If more than 30 percent, and in some cases more than half, of young people don’t have a job, then that’s a social tragedy.

This tragedy highlights how severe the effects of economic and political crises can be. This is not just about raw statistical data. It is about the individual lives of hundreds of thousands of young Europeans. When young people cannot find gainful employment, use their talents and build a future for themselves, then their lives are permanently scarred. This dramatically changes the social fabric of a generation, and even of a country.

These young people must not become Europe’s lost generation. Europe must be a continent of opportunity for young people.

The fight against youth unemployment will only succeed, however, if we are prepared to spend more money. Fighting youth unemployment is not only a social, but also an economic imperative.

Investment in the future of Europe will also be an issue during the upcoming negotiations on the Multiannual Financial Framework. In early May, the European Commission presented its proposal for the EU’s 2021 to 2027 budget. A 20‑billion-euro increase in spending on research and a doubling of funding for the Erasmus Plus youth exchange programme send a positive signal.

My feeling is that the Commission’s proposal creates a good basis for further discussions, even though I would have liked to see even more courageous proposals in some areas. For it is clear that, in the end, everything cannot stay as it is.

We not only have to decide which future political priorities the EU wants to set. We must also urgently clarify the areas where we intend to spend less money, to pay for those other priorities. It is generally easy for us in the EU to agree on new political priorities. However, in recent years, we have not been particularly good at asking whether current EU expenditure is appropriate. Brexit and the upcoming negotiations on its financial framework are forcing us to take that necessary step.

Ladies and gentlemen,

In November 2017, at the social summit in Gothenburg, the European institutions proclaimed the establishment of the European Pillar of Social Rights. With these measures, Europe has committed itself to a process of upward convergence with regard to equal opportunities, working conditions, social protection and inclusion.

That’s a step in the right direction. We must strengthen fundamental social rights in Europe, and we must create fair basic conditions for workers.

One of the most important principles is “the same pay for the same work in the same place”. Reform of the Posting Workers Directive was long overdue. It is simply not fair to have different conditions and social standards for local and seconded personnel.

Learning from and with one another is one of the recipes for success of the European Union. Many member states have thus made progress with their statutory minimum wage. Without these positive experiences in the EU, Germany probably still wouldn’t have a minimum wage today. That’s encouraging! Even more so because, right now, it doesn’t look to me like there’s a chance of moving other national competencies to EU level.

That said, binding minimum standards and directives relating to education expenditure, health care, social security coverage, tax rates and measures to fight child poverty could help strengthen social convergence in the eurozone.

A social Europe also means fair taxation. Everyone should contribute his or her respective fair share to the common good. This means there must be fair taxation of corporations in Europe, and that we must fight tax evasion and fiscal dumping. It’s simply unacceptable that digital corporations generate profits in Europe on which they pay no, or next to no, taxes.

We’ve been talking about the planned financial transaction tax for far too long. Now, it’s time for us to deliver. Olaf Scholz has made clear that, as Finance Minister, he wants to further increase the pressure on our EU partners.

Ladies and gentlemen,

Our efforts to create a social Europe are also the best antidote to populism and nationalism. Anyone who pays scant attention to the social dimension of Europe lends momentum to the anti‑European populists and nationalists.

This trend is becoming painfully obvious in Italy. Twenty years ago, Italian public opinion was considered more pro‑European than almost anywhere else in Europe. Italy prided itself on being a founding member, and on always helping to lead the way on European integration.

Today, seven years after the euro crisis began to unfold, a part of the new coalition government is critical of the EU. In recent years, Italy has experienced economic and job growth. However, this was obviously not enough to convince the electorate to stay the course.

None of us should be so presumptuous as to lecture Italian voters on democracy. Rather, we must ask ourselves why EU‑critical positions fared so well in a country that was both pro‑European and a founding member of the EU.

Only if we understand the issues that people in our neighbouring countries truly care about, their interests, but also their concerns and fears, will we be able to reach out to one another and jointly work toward true solutions for Europe.

We all need to invest effort in fostering EU cohesion, and in making the EU capable of action. A divided Europe would be paralysed and unable to achieve anything for its citizens.

I sometimes fear that we Europeans are still too naïve and have not read the writing on the wall. The Belgian politician and European statesman Paul-Henri Spaak already drew the following level-headed conclusion in 1950: “There are two kinds of states in Europe: small states, and small states that have not yet realised they are small.”

I’ve taken it upon myself to try and spread this message in Germany. As a country in the centre of Europe, even a country that is supposedly as large and strong as Germany is particularly dependent on European cohesion.

It is people outside of Europe who often see the great value of Europe more clearly than we do. For example, when I’m travelling in the Western Balkans – like most recently during my visits to Skopje and Tirana – people stop me in the street to talk with me. They tell me about the hopes and dreams they are pinning on Europe. We must take these hopes of theirs seriously. After all, these people are Europeans, too, and we also have a responsibility to them.

The people in Skopje and Tirana still dare talk about their dreams with regard to Europe. But what about us? What’s our dream?

In conclusion, let me make another attempt. The American dream promises freedom. China’s dream promises prosperity. But what hope does the European model hold?

Europe’s promise of hope rests on two pillars: on the one hand, freedom, democracy and the rule of law. On the other hand, social justice, security and prosperity. That’s precisely what Europe stands for. And, honestly, who can compete with that?


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