Tässä tänään Berliinissä 2nd Berlin Foreign Policy Forum -tilaisuudessa pitämäni puhe.

Speech – Check Against Delivery

2nd Berlin Foreign Policy Forum

Körber Foundation

Berlin, Germany

23 October 2012

Ladies and Gentlemen,

It is a great pleasure to be here at the Berlin Foreign Policy Forum among this distinguished audience. Sitting here with dear colleagues – Willian Hague and Guido Westerwelle – makes you really feel at crossroads, quite concretely between the core and the periphery of the Union. And, on a lighter note ? it?s nice to have us, the three big ones on stage ? together we represent nearly a third of the EU population.

My own academic background is with enhanced cooperation ? how a smaller group can go ahead within the Union. Actually, these groups within the Union are rather common: Schengen, Euro etc. The trick is how to manage enhanced cooperation in a way that is at harmony with the union at large. The basic requirements are openness, transparency and common institutions.

I have one major reservation with these avant-gardes ? they cannot become overbearing with participation in one core area becoming the overriding driver in the Union determining all other areas ? in very concrete and plain terms: participation in the euro area should not for instance become a divisive feature for the internal market.

Dear friends,

Europe is really at crossroads. The term is in frequent use, but this time it is no overstatement. The economic crisis has demanded unprecedented measures ? the ESM, robust economic policy coordination, firm fiscal rules, banking union, an active ECB – and with these steps we are making big institutional choices that will shape the Union for good.

Inaction is not an option ? either we fix the euro by taking further steps with integration or we face the risk of disintegration.

However, the key question at this crossroad is how to combine the necessity of deepening economic and monetary union with the EU at large ? the relationship between ?17 and EU27, soon to become EU28. I will make the case for minimizing this division ? the euro area should not build unnecessary hurdles for non-euro members and at the same time non-euro members ? actually, most of them are euro pre-ins ? should take a constructive pose with deepening EMU.

So one basic answer to the question we have today ? what kind of Europe do we want ? is to my mind a united Europe, where building a stronger EMU will lead to a stronger union at large, rather than building a deepening division between the euro area and the rest.

This is not the first time we have a major crisis, an existential challenge. So far, the European Union has managed to turn crises and challenges to its long-term advantage by taking bold new steps ? the internal market after the economic stagnation of the 1970s, enlargement to stabilize Europe after the division of the Cold War, economic and monetary union to make the EU stronger in a new global economy.

My personal assessment of the euro area crisis is that we are turning the page. We should look at our achievements ? the six-pack legislation on economic policy coordination is a major achievement. The soon to be finalized two-pack adds to fiscal discipline. The European Stability Mechanism is up and running. Public deficits are being stabilized. The ECB has taken decisive action. What we now need to add to these milestones is Banking Union. With banking union in place the corner-stones of euro area recovery should be in place.

I am not saying that things will be easy or recovery instantaneous. There are no miracles in economic life. But what I am saying is that the building blocks are there and with firm implementation, the euro will recover.

Distinguished friends,

Today, I have three concrete points to make. One, – how to build a banking union that will contribute to holding the Union together as a financial market. Second – how to manage the institutional deepening of EMU without clashing with the Union at 27. And third, – how to take steps in new areas of cooperation – like defense – to make integration stronger at 27.

My first point is on Banking Union. Banking union is a necessary step for improving confidence in financial institutions in Europe. Agreeing to its time-table was one of the big items of the European Council last week. Having a banking union is logic ? we have an integrated financial market so we also need integrated supervision. One major lesson from the ongoing financial crisis is that supervision needs great improvements ? European improvements.

The euro area has a common currency, but European banking does not stop at its borders. Ideally we should have integrated banking supervision for the whole union. This would be the best guarantee for the internal financial market. But if this is not possible at 27 ? and I am looking at William ? then we have to build banking union in a way that would encourage participation by as many non-euro members as possible. I am quite encouraged by the mood and results of the last European Council ? there is a strong commitment to make this work.

I speak from practical experience ? in Finland the biggest bank is Swedish and the third biggest is Danish. A banking union that would sharply divide the euro area from the rest is not desirable and could raise new problems.

My second point is on institutions. One important element in keeping the union together is upholding its common institutions. When the EMU deepens, the European Commission has to remain the common institution for euro area cooperation ? a unified institutional structure is the best guarantee for keeping the EU as a coherent entity.

The major tool for institutional development is changing the treaties. So the question arises ? do we need treaty change to makes things work, to improve the Union, make EMU stronger.

I have no problems with treaty change as such ? but we should be careful. Treaty change has shown to be an unpredictable and time-consuming process. I belong to the persuasion ?never-say-never?, but the case for treaty change would need to be absolutely compelling for the risk being worth taking. The safest and most practical way ahead is to work with the treaties we have.

And let?s be practical ? a treaty change would probably be derailed by referenda. And let me add another dimension ? would it not tempt our British friends to question their involvement with Europe ? a move that would be a tragedy for both the United Kingdom and Europe. With a half-British family I feel entitled to speaking boldly on the subject.

The third point I want to make ? since we are in a foreign policy forum ? is on European defense. And the point I am about to make is intimately tied with the economy.

European military capabilities are quite poor. We are no match to other world powers. One basic reason is the fact that the way we organize our military capabilities are narrowly national. With our public purses constrained and military equipment costing more-and-more we either choose being irrelevant in military terms or rethink the way we organize our military procurement. The European Council plans to discuss European Security and Defense policy. Pooling and sharing is at the heart of the issue.

This is a field where we can actually take great lessons from British leadership. Britain has been a consistent driver of more cooperation in security and plans between France and Britain on military cooperation are bold.

The Nordic experience on pooling and sharing is encouraging. Defense cooperation between the Nordic countries is a fairly new phenomenon but gaining speed. The constraints are identical ? national capabilities cost too much and the only way to keep these capabilities in the future is by pooling and sharing them. With a high-level of trust there are no political constraints to doing it. And since the approach is very practical, different military allegiances ? three of the Nordics are in Nato and two are not ? pose no difficulties. Agreeing on joint standards and solutions is one practical key for allowing pooling and sharing.

Pooling and sharing should be the norm in the European Union as well. And strengthening our military capabilities is also about our defense industries and the internal market.

We need a more competitive European defense industry and in this field size is a big advantage. And this is me speaking both as minister for Europe and External Trade. Therefore it was a pity that the EADS and BAE merger did not go ahead. Having a more European dimension to procurement by pooling and sharing would strengthen the European defense industry ? less fragmentation, bigger volume.

And defense procurement should be an internal market as any other ? offsets in defense procurement should have no place within Europe.

Ladies and gentlemen,

Let me finish by just saying how glad I am to be here with you today and have the opportunity to debate this topic with my distinguished colleagues. A good debate sometimes needs provocation, so let me do my part:

William: please join Banking Union and keep Britain in Europe. We love having you in, don?t sit on the fence.

Guido: at this juncture treaty change is like opening Pandora?s box, putting too much strain on the union. Treaty change at this juncture risks dividing the EU further.

William and Guido: let?s work together in building European defense capabilities. Without pooling and sharing Europe risks becoming irrelevant in military terms.

Thank you.