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27 May 2014

Schäuble: The State of Europe – What governance is needed in the EU?

German Finance Minister Wolfgang Schäuble argued that in view of the gains of Eurosceptics in the EP elections, the debate about Europe cannot be resumed quickly enough. He urged to campaign for a strong and well-structured European Union again.

Now, at the start of the new European legislative term, is the time to think about Europe’s future in the next few years – so that we can take action soon. At the moment, everyone is interested in appointments: Who will become the next president of the European Commission? Who will the members of the Commission be? But first, we need to answer a different question: What kind of European policies should they pursue? This will be the best way to fight against increasing euroscepticism and to be more convincing in our efforts to strengthen European integration.

In my opinion, there are three main areas in which we need to make progress.

  1. First of all, we need to strengthen Europe’s economic recovery.
  2. Second, we need to continue to develop Europe’s institutions and integrate Europe more efficiently.
  3. Third, we need to maintain Europe’s overall attractiveness in a world that is not hanging around waiting for us.

We have already made some progress in the first of these areas, namely supporting Europe’s economic recovery. The countries most affected by the crisis have started to improve their economic environment by implementing reforms. Deficits are falling. Competitiveness is rising. Growth is returning. Assistance programmes are being concluded successfully.

The Banking Union is starting this year. That is a huge step towards European integration: first the internal market, then the euro, and now the banking union in the form of a joint banking supervisor, followed by common resolution rules and a single resolution mechanism with a clear bail-in pecking order. Healthier, better-capitalised banks will be able to fulfil their important role for the real economy more effectively and will be able to contribute to a stronger Europe and to sustainable growth.

But we need new, different jobs. Conventional government programmes are not the answer. Instead, we need to create the right conditions that will generate innovations and strengthen our competitiveness. We need to maintain open and free markets. They provide powerful incentives for innovation and change. We should preserve a solid framework for competition policy in the EU. We should not fear opening up transatlantic markets with the Transatlantic Trade and Investment Partnership. This will release fresh impulses for innovation and growth. And we need to have targeted investments in research and innovation.

My second point is about developing Europe’s institutions and making European integration more efficient. The crisis in Ukraine shows that this is not just about economics. Europe’s common foreign and security policy needs to become stronger and, more importantly, Europe needs to make this policy more visible. In recent years, we have strengthened the monetary union. We have improved institutions and created new ones. We have established stricter rules on sustainable fiscal and economic policies. And we have introduced better supervision over budgets and economic policies in individual countries.

Now we face the situation, that the Lisbon Treaty reflects the European reality of 2014 only to a limited extent. We have significantly deepened European integration – but not always using the Community method, which is the approach that I would always prefer in principle. But when we were unable to solve urgent problems with the European treaties in their current form, we often had to fall back on the intergovernmental approach in order to reach a swift solution. This intergovernmental approach is only second best. It’s better than nothing. But in the long term, second best is not good enough for Europe. We will gradually have to replace or supplement these second-best solutions with limited changes to the treaties. Some of the changes will reflect the new reality of the eurozone. But we need to be very careful to leave the door wide, wide open for member states which have not yet introduced the euro.

There are some things that we can do directly. For example, we need a more effective Euro Group. To do this, we could amend Protocol No. 14, that was concluded alongside the Treaty on the Functioning of the European Union and which governs the work of the Euro Group. This first step can be taken without any treaty changes – or with only limited changes.

We need a more efficient European Commission. Many procedures could benefit from being tightened. I am also in favour of the idea of giving a limited number of Commission vice presidents overall responsibility over combined areas, with the remaining commissioners reporting to them on their portfolios.

I also can imagine there being a “eurozone parliament”. The European Parliament should be involved more effectively in eurozone decisions.

I also think it would be possible for us to use the EU budget as an instrument for setting priorities in individual member states.

The question “Do we want more or less Europe?” is misleading if it’s put in this form – as an alternative. On the one hand, we need a stronger Europe, particularly when it comes to major questions and cross-border issues that countries cannot deal with on their own. On the other hand, we need a greater willingness to apply the subsidiarity principle consistently. Unfortunately, people often pay lip service to this principle without really taking it to heart. Responsibilities need to be more clearly attributed to the appropriate levels.

Full speech

© Bundesfinanzministerium

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