Some once said that football was a game where England played Germany over 90 minutes and extra time and then the Germans won on penalties.
Which is an inelegant way of saying that the UK and Germany are very much together on the reform team in the EU, with Sweden on side as well, of course.
Here are the key messages from our Foreign Minister’s speech last week in Germany. The full version can be found here.
The scale of the challenges facing Europe is serious. Let me touch on three: First, how we make our way in an ever more competitive global economy. Second, how we address the EU’s lack of democratic accountability. And third, how we ensure that the EU develops the flexibility to respect the diversity of its Member States.
Competitiveness and the Global Race
Germany has led the way in getting to grips with these challenges through a series of painful but impressive labour market reforms and through fiscal consolidation.
In Britain, our Government has reduced the deficit by a third over three years. The private sector has created one and a quarter million jobs. Employment is around record levels, exceeding the pre-crisis peak even though we have reduced the public sector headcount by more than six hundred thousand. We are rebalancing the economy towards high end manufacturing and exports.
Getting our finances and social models into shape is not, however, sufficient. We must also create the right regulatory environment for economic growth.
World-class German and British manufacturers are already capitalising on the opportunities that emerging markets present. We export BMWs made in Bavaria (one in four of which has an engine made in Britain) and advanced aircraft components engineered in Bristol and Bremen. But we also need to look at what comes next: the opportunities in exporting our knowledge industries and professional services.
The size of the global middle class is projected to increase by three billion by 2030. As prosperity levels increase, we want these new global consumers not only to drive an Audi and to fly in an Airbus, but to work in spaces designed by British and German architects, to negotiate international business through our law firms, and to finance those deals through London and Frankfurt.
This is one of the reasons why we are worried about the proposed Financial Transactions Tax. And why we are uncomfortable with the proposed cap on bankers’ bonuses. Not because we don’t agree that the global financial industry needs better regulation: it does, and this British Government is proud to be putting in place some of the most exacting reforms of all, following the Vickers Report. But that regulation needs to help us compete in the global race, not set our feet in concrete.
Lack of democratic legitimacy
The second major challenge is how we build the democratic legitimacy of the European Union.
I think the British people also want the EU to be a multiplier of our collective influence and values in the world, so that we can forge trade agreements that open new markets, tackle global poverty, or ensure the Iranian regime experiences real consequences for nuclear proliferation.
But they do not understand why Brussels has to interfere in how long junior doctors can work. Or why someone from another Member State should be able to continue to claim benefits in the UK even after they have moved back to their own country. I think we are all relieved that the European Commission is not going to ban Europeans from using olive oil jugs at restaurant tables. But it is extraordinary that such a decision should be within the EU’s power in the first place.
Too often, the British people feel that Europe is something that happens to them, not something they have enough of a say over. That the EU is happy speaking but does not seem interested in listening. That the EU is sometimes part of the problem, not the solution.
This is not just a British issue.
The latest Pew Research from earlier this month is a warning: a sharp fall in support for the EU across the continent. Eight points lower in Germany, at 60 percent. Two points lower in Britain, at 43 percent. 19 points lower in France, at 41 percent.
Trust in the institutions is at an all time low. The EU is facing a crisis of legitimacy.
The European Parliament plays an important role in holding European institutions to account. It can play a very positive role, as it has along with Commissioner Damanaki in the current reforms to the Common Fisheries Policy. But if the European Parliament were the answer to the question of democratic legitimacy we wouldn’t still be asking it.
I think instead that the solution lies in promoting the role of national institutions in European decision-making – because ultimately it is national governments and national parliaments that are accountable to our electorates. They are the democratic levers voters know how to pull. I want to offer some thoughts on how we might do that in a moment.
Need for flexibility
This idea of the right balance between national and European decision-making, and respect for the concepts of proportionality and subsidiarity, brings me to my third key challenge. How can we build a European Union that acknowledges and respects the diversity of its Member States? One that recognises that our national approaches to and ambitions for the European Union may sometimes differ?
These are relatively new concepts. We do not yet have the answers. But we need to start asking the right questions, as partners in a shared endeavour.
Britain in Europe
I know that our friends in Germany and across the Continent follow closely the vigorous debate on Europe that we have in Britain. They could perhaps at times be forgiven for asking themselves about our commitment to making European Union work.
But the Prime Minister couldn’t have been clearer in his speech in January.
He said that Britain’s national interest is best served in a flexible, adaptable and open European Union.
That such a European Union is best with Britain in it.
And that he will campaign for such an arrangement with all his heart and soul.
So now we want to get on with the business of delivering that reformed EU.
And here, Britain and Germany must lead the way.
A shared reform agenda
Let me set out four areas on which I think we might focus together:
First, deepening the Single Market so that we’re making the most of the growth opportunities in digital, energy and services.
Development of a digital single market by 2020 could result in a four percent increase in EU GDP. With the European e-commerce market forecast to double in size to 625 billion euros by the end of 2016, we need to start by strengthening cross-border e-commerce.
On energy, we need to go further in increasing competition across the single market, liberalising gas and electricity markets, developing new low carbon energy sources and supply corridors, and strengthening interconnections between countries to enable EU-wide trade in clean, low carbon electricity. Cheaper energy would boost British and German companies alike.
On services we need to start by ensuring that the Services Directive is fully implemented across all EU Member States. The European Commission estimated last year that just ensuring that all Member States improved their implementation to at least the current average level would add 0.4% to EU GDP. Full implementation of the Services Directive could add 2.6% to EU GDP.
Second, making regulation work for business, not hold it back.
Here we are asking businesses what proposals they want to see from the Commission for reducing the regulatory burden – where SMEs need to be exempted, where rules need to be simplified, and where regulations need to be withdrawn altogether. We look forward to identifying common priorities with Germany and other partners.
Third, building new trade relationships.
Concluding all on-going and potential free trade agreements could boost EU GDP by two percent. Germany and Britain have worked hard over the last year to put the Transatlantic Trade and Investment Partnership at the top of the agenda. It could be worth 119 billion euros a year to the European Union and 95 billion euros to the United States. But perhaps more importantly, with a combined population of almost half of global GDP and nearly a third of global trade flows, Europe and the United States will be able to shape international trading standards for decades to come.
This is why it is important that we grasp the opportunity to launch ambitious negotiations next month, in time for President Obama’s visit to Northern Ireland for the G8 Summit. And why we should not limit the potential of those negotiations by excluding certain sectors from the start. On audio-visual, for example, we should have the confidence to recognise the opportunity that the American market offers us, worth 400 billion euros and growing at five per cent per year.
And fourth, starting to make the EU more democratically responsive.
I do not want to go into great detail at this stage, not least because David Lidington, our Minister for Europe, set out some ideas in his speech at the Europaforum in Berlin earlier this month. But my strong sense is that we need to recognise that most people across Europe look to their own national institutions. We need to rediscover the role of national governments and national parliaments. Because, as Chancellor Merkel pointed out recently, Europe’s value is not measured by the growth of the acquis communautaire.
In Britain, we are looking at the balance of competences between the EU and the national level. We want this work to contribute to an informed and serious debate in the UK. We also hope it will be of interest to our European partners, as similar discussions take place in other member states.
At the same time, we should do more to help our parliaments exercise their right to work together to raise a yellow card to object to legislation where action should be taken at a national rather than a European level, in line with the principle of subsidiarity. We should explore whether the yellow card provision could be strengthened or extended to give our parliaments the right to ask the Commission to start again where legislation is too intrusive, and fails the proportionality test. And we should think about going further still and consider a red card to give national parliaments the right to block legislation that need not be agreed at the European level.
Finding the right balance between integration in Europe for those who need it, and flexibility where it is best for our economies and our democracies, is the great challenge of German and British diplomacy over the next few years. Taking our voters with us, at the same time as we modernise our economies and states, is the great challenge for German and British politicians.
The more closely we work together, the more successful we will be in building a European Union fit for the 21st Century, and one which can truly earn the support and trust of people across our Continent and beyond.
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