12 May, 2014

Europe’s Challenges for the Next Five Years: Towards a Stronger, Better Europe

Speech by Jean-Claude Juncker, EPP candidate for President of the European Commission, at the Nueva Economía Fórum
Madrid, 12 May 2014
Jean-Claude Juncker, the candidate of the European People’s Party (EPP) for President of the European Commission, is in Madrid today for a day of campaigning alongside the Partido Popular (PP). This morning he delivered a keynote speech at the Nueva Economía Fórum.
Dear President Rajoy,
Dear Miguel Arias Cañete,
Dear friends, Ladies and gentlemen,

It is good to be in Spain today, a country that has a strong historical connection with my home country Luxembourg.

During many decades after the Eighty Years War, the kings of Spain were also the kings for Luxembourg, at a time when Luxembourg was part of the Catholic Netherlands.

For Luxembourg and Spain, to be united today in the European Union, is in many ways a continuation of our historic proximity, of our shared values and our common beliefs.

As you know, I am preparing at the moment to become the next President of the European Commission. I am therefore touring Europe to campaign.

My campaign has three objectives.

My first objective is to convince voters to participate strongly in these European Parliament elections. Because I believe these elections are an important test for European democracy.

Democracy can only be built with people who show up on election day. I am therefore campaigning to ensure that as many people as possible show up at the polls on 25 May to cast their vote in these elections.

In Spain, 44,9% of the voters participated in the elections in 2009, which is slightly better than the EU average. I hope that on 25 May, in the first European Parliament elections after the big financial and economic crisis, people will show they have understood that Europe matters. That decisions made by the European Parliament, by the European Commission and by the other EU institutions matter greatly for the daily lives and for the well being of citizens. And that voting in these elections is the strongest possible way to shape the future direction of Europe.

The second objective of my campaign across Europe is to learn as much as possible about how our continent looks like and how people feel at this moment in time, after the big financial and economic crisis. Because in a few weeks time, I will have to define my political priorities as Commission President for the next five year and to agree them with the European Parliament and the European Council. And I can only do so on the basis of a sound understanding of the current state of affairs in Europe.

I am not discovering Europe for the first time during this campaign. As you know, my relationship with Europe is long and deep. But Europe is also a permanent process of learning and rediscovery.

For example, I am learning in these days how the citizens in Poland, in Bulgaria or in the Baltic States see the Ukraine crisis – a crisis that is a wake up call for European values, European solidarity in energy policy and for Europe’s foreign policy.

Many had thought that the times in which we had to explain Europe as a matter of war and peace are over. The Ukraine crisis recalls to all of us the great importance of being part of a Community of peace and solidarity.

To learn about Europe – this is also the objective of my visit to Spain today. Spain, Europe’s fifth largest economy, has been gravely affected by the financial and economic crisis. A quarter of the Spanish workforce is today unemployed, and youth unemployment stands at more than 50%.

Whoever becomes next President of the European Commission has to know: Priority Number 1 in the next five years must be to tackle, in a concerted action together with national governments, the root causes of unemployment, and notably of youth unemployment.

We must do everything possible to avoid that we will see a “lost generation” in Europe.

Europe needs new sources of growth, and new jobs to overcome the economic and social consequences of the crisis. This is a first, and probably the most important lesson, that I will take back from Spain.

Spain is a country which in the past years was often at the centre of my daily work as President of the Euro Group, where I worked alongside my friend Luis de Guindos to find the best way for Europe to tackle the economic and financial crisis.

We all know that this crisis had not originated in Europe, but in the United States, where the fall of Lehman Brothers in 2008 had caused a financial tsunami of unprecedented and global dimensions.

The crisis exposed many structural weaknesses of our European economies and of our Economic and Monetary Union.

Here in Spain, we had to learn that a trade deficit amounting to 10% of GDP, as it had been built up by 2008, is not sustainable, but is a sign of a worrying lack of competitiveness of the national economy. We had to learn that Europe’s economies must become more competitive to weather such global storms.

We also had to learn that a real estate boom can be a sign of systemic financial instabilities. In Spain, house prices had increased by 200% in 10 years, and family indebtedness stood at 115% of family income in 2008. As we know today, the Spanish real estate boom had been in reality a property bubble. From all the houses built over the 2001–2007 period, no less than 28% were vacant as of late 2008. We had to learn that you cannot build growth on too much private debt.

In Spain, we also saw that having relatively stable public finances alone is very important, but far from being sufficient. In 2007, Spain had a public debt well below the EU average, standing only at 36%, lower even than that of Germany. Spain then also generated a budgetary surplus of 1.9%. However, when the financial crisis hit Spain and the property bubble burst, banks had to be rescued and the economy stabilised with taxpayers money. The deficit grew to 11.2% in 2009 and public debt stands above 100% today.

Spain has therefore become an illustration of the fatal link between financial instability and public debt. We had to learn that we need in Europe a common rule-book for our banks; and that we need to move from national prudential supervision to a common European system of control and supervision of all banks in the Euro area.

Spain is also a country which shows that in spite of many difficulties, national governments and the EU institutions together managed to take the right measures to address the crisis.

I am saying this very deliberately in the presence of President Rajoy, who has been the architect of policies which have brought Spain back on track towards stability and growth.

Most impressive is that Spain, after intense and often painful structural reforms, has become competitive again. In 2013, for the first time since three decades, Spain achieved a trade surplus. Exports reached a record of 34% of Spanish GDP, and the total number of companies active in export has grown to 10.2%, a historical record.

For the first time since 1998, the Spanish economy no longer needed external financing in 2013, with the current account having turned positive to 1.5% of GDP.

And Spain has also managed to stabilise its banking system. Spain only used € 41 billion of the €100 billion loan made available by the European Stability Mechanism, the solidarity mechanism created by Eurozone governments during the crisis. This has been seen as a positive sign by investors, and this has brought new confidence to the Spanish economy as a whole.

We see the first results of all these efforts in terms of growth and jobs.

In the first trimester of 2014, the Spanish economy started to grow again, with GDP increasing by 0.4%. This is still low, but the first positive data since 2011. The European Commission forecasts the Spanish economy to grow by 1.1% this year and by 2.1% next year.

In the first four months of 2014, a total of 72.000 people registered as new workers in Spain. In 2013, Spanish unemployment has fallen by 350.000. This does not mean that the crisis is over on the job market. Unemployment remains at an unacceptably high level. But, thanks to the labour market reforms made by the Spanish government, there are now first signs of hope.

I would like to encourage President Rajoy to continue with the reforms started. I see that at the moment, Spain is in very strong hands, and this is very positive. Because Europe needs a strong Spain to be a strong Europe.

Ladies and gentlemen, dear friends,

The third and final objective of my campaign across Europe in these days ahead of the European Parliament elections is to promote my vision of a stronger and better Europe.

Yes, I am not afraid to say that in some fields, we need more Europe, a stronger Europe.

We need a stronger Europe when it comes to foreign policy. The Ukraine crisis shows how important is that Europe is united when it comes to foreign policy. There is still a long way to go for this.

I believe we cannot be satisfied how our common foreign policy is working at the moment. We need better mechanisms in place to anticipate events early and to swiftly identify common responses. We need to be more effective in bringing together the tools of Europe’s external action: trade policy, development aid, our participation in international financial institutions and our neighbourhood policy must be combined and activated according to one and the same logic. The next High Representative for Europe’s Foreign and Security Policy will have to a be strong and experienced player to combine national and European tools, and all the tools available in the Commission, in a more effective way as we have seen it over the past months. He or she must act like a true European Minister of Foreign Affairs, in concert with our European Commissioners for Trade, Development, Humanitarian Aid and Neighbourhood Policy.

I also believe that we need to work on a stronger Europe when it comes to security and defence matters. Yes, Europe is chiefly a ‘soft power’. But even the strongest soft powers cannot do in the long run without at least some integrated defence capacities.

The Treaty of Lisbon provides for the possibility that those Member States who want to do so can pool their defence capabilities in the form of a permanent structured cooperation. That those Member States who want to do so can engage in joint EU missions in crisis zones if needed, as it would have been necessary from the start in Mali or in South Sudan. That Member States create synergies when it comes to defence procurement. In times of scarce resources, we need to match ambitions and resources to avoid duplication of programmes. More than 80% of investment in defence equipment is still spent nationally today in the EU. More cooperation in defence procurement is therefore the call of the day, and if only for fiscal reasons.

We also need more Europe when it comes to energy policy. We need to build a true Energy Union over the next years. Europe must organise an effective internal energy market where energy can flow seamlessly from one side of the continent to the other, whether from East to West or from West to East, whether from North to South or from South to North. This will in itself reduce our external energy dependency. When the price for energy from the East becomes too expensive, whether commercially or in political terms, we should be able to switch swiftly to energy supplies from the West or the South. Spain, with its good energy connections to the South, could play a key role in this – if we strengthen the connection of Spain with the energy grids of the rest of Europe.

I also believe we should develop over the next years a more effective European industrial policy. To me, such an industrial policy must become a horizontal matter, being felt across all EU policies that affect growth and jobs.

One objective of a European industrial policy is certainly to keep a strong and high-performing industrial base in Europe, as it would be naïve to believe that Europe could be built on the basis of services alone. We need to bring back industry’s weight to 20% of the EU’s GDP by 2020, from less than 16% now.

A second industrial policy objective must be to strengthen the role of new technologies, and notably of digital technologies, across the economy. For this, I have recently set out my plans for a true digital single market that is meant to trigger a new start up culture in Europe. I want the next Apples, Facebooks and Microsofts to be ‘made in Europe’. (On this issue, read my op-ed published in The Wall Street Journal, my Berlin speech and my Helsinki speech).

A third industrial policy objective is to review the application of Europe’s common competition rules to markets that are on the way to integrate across borders. I am thinking mainly of the telecoms market. Here, Europe continues to afford the luxury of having more than 500 telecoms operators on our continent, while the U.S. has only 5. I really do not think that this is a sustainable basis for a competitive and consumer-friendly European telecoms sector. I also see that as a result, European consumers continue to pay roaming prices when using their smart phone abroad, even though the EU managed to reduce them considerably since 2007. Over the next five years, we need to achieve a situation where companies can team up across borders and connect their networks. And where as a result, we all can use our smart phones seamlessly and for a fair price wherever we are in Europe. But for this, we need to move away from the logic of national markets in telecoms regulation and in the application of competition law. I am glad to see that Chancellor Merkel agrees with me on this important policy orientation for the next five years.

More Europe also continues to be needed when it comes to the Eurozone. We have made bold moves in the past years as regards stronger economic policy coordination and common supervision and resolution mechanisms for banks in the Eurozone. But we need to continue to strengthen the foundations of our single currency.

I would like to see the rules of the Fiscal Treaty that entered into force on 1 January 2013 – also thanks to the support from Spain – to be integrated into the framework of EU law. Because I believe that we need truly enforceable rules on fiscal governance in the Eurozone. I also believe that we should explore further the idea of a fiscal capacity shared by the Eurozone to counter-balance asymmetrical shocks affecting our economies.

The President of the Euro Group should become a full time job soon; this is not a side job, and also the U.S. Secretary of the Treasury does not look after the public finances of Ohio during the day and after the federal finances only after work.

I would also like to see the Eurozone having a joint representation at the International Monetary Fund. We have seen during this crisis what an important financial and economic role the IMF is playing. However, Europe’s voice at the IMF is still weak. If we combine our voting rights at the IMF, the Eurozone would be the largest shareholder of the IMF, and we would thus have a stronger voice in Washington D.C. As Commission President, I will work on this over the next years.
Being in Spain today, I also want to repeat what I recently said in Malta: I also believe that we need more Europe and a stronger Europe when it comes to addressing irregular migration, organising legal migration and strengthening our external borders (Read my five-point plan on immigration). Europe is a rich continent, but even a rich continent cannot afford to host everybody in need or distress. However, Europe also cannot afford to let people drown who are trying desperately to reach our shores. We need to combine here elements of solidarity with clear rules of the game. Asylum seekers and political refugees must always find a place to stay in Europe. But the inevitable cost of this must be shouldered by all Europeans, and not only by those who are geographically exposed. And we must develop a true legal migration policy. I see that the Blue Card initiative, meant to allow qualified workers from third countries to come to Europe, is not working very well in practice. We need to address the gaps in the implementation of this initiative. And perhaps we need to look again at the underlying legislation. Because we can only address the challenges of irregular migration if we offer concrete and workable legal alternatives.

As you can see, I am an advocate of a stronger Europe in many fields. But I do not believe in more Europe for the sake of more Europe.

I want a better Europe. A Europe that is big on big things and small on small things.

Over the next five years, we need to focus on the important issues I have outlined: foreign and defence policy, industrial policy and strengthening the internal market, further integration of the Eurozone, legal migration.

However, at the same time, we should stop with regulating each and every corner and every aspect of the daily lives of our citizens.

The current Commission has managed to abolish around 6.000 pieces of EU regulation, thereby reducing the regulatory cost for businesses by € 32 billion a year. As Commission President, I would like to continue and step up this important work.

To be bigger on the important issues, Europe will have to be more modest and smaller on many other issues. Not every stakeholder interest must be satisfied in Brussels.

And let me assure you: As a Luxembourger, I have some experience with being small on small issues.

Ladies and gentlemen, dear friends,

Some people have told me during my campaign across Europe that the euro and I are the only survivors of the Maastricht Treaty.

I have to say that I am quite proud to be in this unique companionship with our single currency.

Our EU Treaties say that the euro is irreversible. And we have seen during this crisis that all EU countries have decided to stand behind our currency. And thereby made the euro irreversible not only in law, but also in reality.

I have no intention of becoming as irreversible as the euro itself. But I believe that over the next five years, Europe needs a safe pair of hands. Europe needs experience to tackle the huge challenges we currently face.

This is why I campaign to become the next President of the European Commission.

I want to re-unite Europe after the crisis.

I want to build new bridges where the crisis has weakened or destroyed links.

I want Europe to emerge stronger from the crisis. Both in the North and in the South.

I want a Europe that works together again. Of which our citizens can be proud again.

This is what I want to work for as Commission President.

And I would be glad if you could help me with this. To help me to rebuild Europe. To help me to make all of us proud again to be Europeans.

Thanks a lot for your attention.