The Diplomatic Dispatch

The British Ambassador to Sweden blogs on The Local

Posts Tagged ‘EU’

EU sanctions: necessary, effective and timely

Friday, September 12th, 2014

Regular readers of this blog know I’ve written about the Russia-Ukraine crisis here. Today I’ve chosen to share an article by the UK Minister for Europe, David Lidington, with my readers:

This week the European Union imposed further sanctions on Russia. This decision followed months of destabilisation of Ukraine by Russia, and months of political and diplomatic efforts to restore peace and stability.

The EU did not take this step lightly. But we decided collectively that we cannot stand by, while President Putin tramples over international law and the rights of a sovereign neighbour. We cannot ignore the deaths and destruction that Russia’s actions have led to on our shared continent.

Sanctions are a critical part of the EU’s response. Not from choice, but because we believe that they are necessary, effective and timely. Let us take each in turn.

They are necessary for one simple reason: Russia’s actions in Ukraine are unacceptable. Russia refuses to recognise Ukraine’s independence and sovereignty. It has annexed Ukrainian territory at the barrel of a gun; first Crimea, and then sending its army into swathes of Ukraine’s eastern regions.

This is not an idle assertion. It is fact. We know that thousands of Russian troops and dozens of Russian tanks have been operating in Ukraine. I have heard eyewitness accounts; been presented with hard intelligence; and seen media reports.

We know from Europe’s history what can happen when an independent nation is threatened and undermined by military force. As Prime Minister Cameron and Chancellor Merkel said last week, Russia’s breach of international law cannot remain without consequence. I am grateful for the solid and consistent support of the Swedish government on this important point of principle.

Second, sanctions are effective. They are clearly having an impact on Russia’s economy, which shrank in the first quarter of this year. Growth is hovering around 0%, and inflation is predicted to approach double-digits. Not a single dollar, Euro or Swiss Franc was lent to a Russian company in July. Eurobonds issued to Russian companies since the start of 2014 have dropped by an incredible 93%. The rouble has hit an historic low against the dollar. Capital flight will be around $80bn this year.

Not only are sanctions biting; but Russia’s own decision to limit food imports has pushed up prices of certain goods by over 30%, and up to 60% in some extreme cases, creating a new black market in imports from Belarus. The economic impact of this conflict can be felt by every ordinary family in Russia.

Third, these sanctions are timely. While a ceasefire was announced last week, we need to see Russia and the so-called separatists it backs hold to that commitment.

In such circumstances, it was the right decision to proceed with sanctions, while discussion of a peace plan goes ahead. We could always take the decision to reverse them in the future. But that requires a fundamental change of direction from Moscow.

The ball is in Russia’s court. It could withdraw its troops and arms, stop arming the separatists, let Ukraine conduct democratic elections in October and respect Ukraine’s sovereignty and territorial integrity. Russia is a major power; it should live up to its international responsibilities.

The other option is continued meddling in Ukraine. Which would mean further violence, needless deaths and more hardship in the region.

The choice is with Russia’s leadership. I sincerely hope it avoids the needless escalation of economic measures, and the equally needless isolation of its own people.

As I discussed with Ukraine’s Foreign Minister Pavlo Klimkin at last week’s NATO Summit, the people of Ukraine deserve the support of the global community at this critical point in their history. And we all deserve a future of shared prosperity and stability.

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War and Remembrance

Tuesday, July 1st, 2014

28 June marked the centenary of the assassination of Archduke Franz Ferdinand – the event that set in train the outbreak of the First World War.

Of course the causes of the war were much more complicated than one violent act. Last week we hosted an event at the Residence where British historian Andrew Oldfield gave us a fascinating insight into the political, economic and cultural conditions which led to war.

The consequences are still with us, as I noted in my talk; if post-war Europe was a “landscape with ruins”, as one historian noted, the Middle East today remains a landscape with fault lines, some of them dating from the aftermaths of the First and Second World Wars.

So remembering our history and understanding its lessons, I argued, is crucial to effective diplomacy. That’s why the British government has invested in a range of events to mark the centenary of the Great War.

WWI Podcasts

On 28 June the Foreign Secretary launched a series of WWI Podcasts based on original Foreign Office dispatches from the 28 June assassination to Britain entering the War on 4 August (the so called “July Crisis?”). In the interviews, the Foreign Secretary and former British Ambassadors to Austria, Belgium, France, Germany, Russia and Serbia help set the context for what was unfolding in Europe and describe what it must have been like for their predecessors during that period. ?The podcasts are available at

WWI Tweets

In another digital project to mark the July Crisis, FCO Historians will tweet, in real time, extracts from Foreign Office telegrams, dispatches and letters leading up to the outbreak of WWI. Eleven twitter accounts have been set up reflecting the key British diplomatic figures from 1914. They will tweet from their respective accounts and be re-tweeted from a central FCO account: @WWIFO. You can sign-up and follow the tweets as they come in real-time 100 years to the day. A blog has also been posted on the History of Government website on Gov.UK to provide the context and background.

UN Security Council

Finally, commemoration of WWI will be a major theme of the UK’s Presidency of the Security Council in August. The UK will co-lead with Australia a Security Council visit to Belgium on 9-10 August. The Council will hold a session on conflict prevention with academics, visit a multinational war cemetery and attend the Last Post ceremony at the Menin Gates. During our Presidency we shall also host an exhibition of WWI poetry in the UN Secretariat building which will feature poems from different countries.

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Europe: After the Vote

Monday, June 30th, 2014

Much ink has already been spilled (or many keys have already been tapped) in analysing the European Council’s decision to nominate Jean-Claude Juncker to head the European Commission.

My government has been clear that the decision was wrong in principle, as a matter as process and as an issue of policy.

For that reason the UK stood up for the principle that the European Council – the elected national leaders – should be the ones to propose the Commission President, not be dictated to by political groups in the European Parliament.

This was a position shared by all three main political parties in Britain. In the UK, as in most other EU countries, the so-called Spitzencandidates had been invisible in the elections. The notion that they automatically represented the conscious choice of a European demos is nonsense.

So it was important and welcome that the European Council agreed to review what has happened and to consider how we handle the appointment of the next Commission President. We need to ensure we get a choice of high-quality candidates in the future.

This whole process has reinforced my Prime Minister’s conviction, as he said in Brussels, that the EU needs to change to address the concerns of citizens across Europe and thus close the gap between people in Europe and the EU institutions.

For us, it’s clear that the status quo – “Brussels as usual” – is not right for the EU of today, let alone that of tomorrow. We won’t be able to sustain a diverse, flexible and competitive continent unless we look the challenges and opportunities of modernity and globalisation in the face.

The Prime Minister was clear that Britain’s national interest still lies in our membership of a reformed EU and that he is determined to achieve that through discussion and renegotiation.

He, with others, secured progress in a number of important respects at the Council:

For the first time all Member States have agreed that the EU will need to address Britain’s concerns about the EU in the next few years. We know these are shared by others.

Leaders have also agreed that “ever closer union” allows for different paths of integration for different countries and to respect the wish of those who do not want deeper integration.

We have also embedded Britain’s push for reform, which is shared by other Partners, in the Council’s mandate for the Commission for the next five years:

-prioritising work to building stronger economies and creating jobs.

-making clear the EU should only act where it makes a real difference – leaving it to nation-states where it doesn’t.

– giving national parliaments a stronger role.

– tackling issues that worry voters such as the abuse of free movement in certain countries.

Of course, this is only a start and more change is needed. The PM accepts that what happened in Brussels on Friday will make reform tougher and the stakes higher. But he’s clear that reforming the EU and the UK’s role within is necessary and also achievable.

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Critical Days For Diplomacy On Ukraine

Thursday, March 13th, 2014

Britain’s longest serving Foreign Secretary, Sir Edward Grey, famously looked out from his office overlooking St James’ Park in early August 1914 and, as war loomed, commented “the lamps are going out all over Europe”.

I often thought of those words in August 2008, during the Russian aggression in Georgia, not  least as my office, as International Security Director, enjoyed the same view over the Park.

I thought of them again yesterday in the Spring sunshine,  as I joined Carl Bildt in the Foreign Secretary’s office for his meeting with William Hague.

Ukraine was top of their agenda. Both Ministers see the present crisis as a defining moment for European security.

Yesterday’s G7 leaders’ statement makes clear that Russia’s annexation of Crimea would be profoundly destabilising, illegal and unjustified, as would a unilateral declaration of independence by Crimea.

Moreover, there is no basis for the claim that Kosovo’s UDI in 2008 is a precedent. For one thing, the process to determine the future status of Kosovo was authorised by a chapter VII UNSCR (which I had a small part in negotiating) back in 1999. It involved extensive negotiations supported by the international community, not unilateral actions which most of the international community have rejected.

There are big issues at stake here. A fundamental principle of post-Cold War Europe has been that borders cannot be changed by force. If that is now being called into question, the implications are grave. Tomorrow’s meeting between Ministers Kerry and Lavrov comes at a critical moment.

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Towards a More Balanced and Effective European Union

Friday, February 14th, 2014

The head of the UK Diplomatic Service (my boss’s boss’s boss!) was in Stockholm this week and talked at UI about Britain’s agenda for EU reform.

To help support and underpin the reform debate in the UK (and more widely), our government initiated a review of the so-called Balance of Competences between the EU and the UK. In other words, how does the current distribution of power between Brussels and the Member States impact on the UK in various areas.

This week the second batch of reports were published. They cover: the free movement of goods; asylum and non-EU migration; trade and investment; transport; environment and climate change; research and development; tourism, culture and sport; and civil judicial cooperation.  They draw on a wide range of evidence to analyse the impact that EU action has on the UK national interest, and the future challenges that may arise. The review process is Government-led but involves extensive consultation with a wide range of interested parties including think tanks, academia, business and Parliament. The reports can be viewed here.

Together, the first and second semesters have received over 1,000 submissions from a broad range of organisations across the UK and beyond. Once complete, the review will provide the most extensive analysis of the impact of EU membership on the UK ever undertaken. By bringing all the evidence together in one place for the first time, it will enable people to judge for themselves what works well and where there is room for improvement. The review is an analytical, transparent and evidence-based process that will not make policy recommendations.

To date, much of the evidence echoes the UK’s ongoing arguments for EU reform which focus on helping to deliver greater growth and prosperity for all Member States. This includes for example, the need for a broader and deeper Single Market, greater competitiveness and flexibility, and better, and less, regulation.

They also identify benefits that EU membership can bring – not least the positive economic impact of the Single Market. Evidence cited in the reports suggests that, from 1996-2006, EU import prices for textiles and clothing fell by 27.5 and 38.4% respectively in real terms as a result of liberalising measures.   But contributors highlighted that more could be done to maximise the potential that liberalised markets offer to consumers and businesses.

The need for better, and less, EU regulation is a theme that runs through several of the reports. They highlight areas in which EU legislation is considered to be too prescriptive or not sufficiently proportionate or risk based. Some contributors noted that the EU ought now to focus on implementation and enforcement, rather than new legislation, and concerns were also raised over the transparency around, and level of, consultation with industry by EU institutions in proposing legislation, including the quality of underlying impact assessments.

The next set of reports is due to be published this summer.  The debate about EU reform will doubtless continue well beyond that!

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The Green Growth Group Summit

Monday, October 28th, 2013
Today on the 28 October in Brussels, a large group of key EU Ministers and business people, including UK Secretary of State for Energy and Climate Change Edward Davey, and Swedish Environment Minister Lena Ek, will meet to discuss green growth. They all have a stake in resolving a challenge which, although it is crucial to the countries represented, stretches far beyond them. How can countries in Europe tackle climate change, ensure secure and affordable energy supplies, maintain businesses’ competitiveness and, importantly, keep domestic bills down?
The Green Growth Group of Ministers from 13 like-minded EU Member States, including the UK and Sweden meets regularly to help drive Europe in a low-carbon, pro-growth direction. Together it represents 75% of Europe’s population, 85% of Europe’s GDP and 60% of the votes in the Council of Ministers. As set out in its joint publication today, Going for Green Growth: the case for ambitious and immediate EU low carbon action, the group believes that we can turn the necessary action to tackle climate change into an opportunity, not a burden.
The latest report from the International Panel on Climate Change makes the situation crystal clear. If we continue to pump greenhouse gases into the atmosphere at the rate we are now, we’re heading for a world potentially 4°C hotter than today. According to UK Government-commissioned analysis published today, to keep climate change within the 2°C threshold scientists agree will be manageable, by 2030 the EU will need to reduce emissions by at least 50% on 1990 levels.
Europe has made a good start in making the necessary transition to a low carbon-future. But more needs to be done. The 2020 climate and energy targets are fast approaching their sell by date and need to be projected forward to 2030 and beyond. The EU Emissions Trading System needs radical surgery if it is to achieve all that it was put in place to do. In two years, world leaders will meet to agree a global and comprehensive climate change agreement; we do not have long.
Constructing modern low-carbon energy infrastructure across Europe will provide jobs for EU citizens, profits for EU businesses and growth for EU economies. It will also improve the EU’s energy security, reducing dependence on expensive fossil fuels imported from risk-ridden regions, in favour of home-grown energy. In the long-term, this course we have chosen will help keep our energy bills down.
Low carbon business is big business: globally, it is worth around €4 trillion a year; 4% annual growth is expected for the next five years; it supports almost 8 million jobs across Europe, with the capacity for millions more. EU Member States have a 22% share of this global market, compared with a 19% share for the US, 13% for China and 6% for both India and Japan. This is worth over €900bn a year.
So the prizes are significant.
But the EU’s competitors, led by China and the US, are aggressively targeting the low carbon goods and services market. Global clean energy investments have grown sixfold since 2004 to nearly €195bn. In 2009, the EU gained 40% of that investment. Last year that share had fallen to just 25%. This is why we must act together – and ambitiously – to maintain and build on our leading position in clean technology.
As a priority, we need to provide confidence and stability for potential investors. Businesses want a good reason to continue investing in low-carbon Europe, which is why the Green Growth Group is clear on the need for an ambitious EU 2030 Energy and Climate Change package, which would give businesses and investors the confidence to invest now.
We will also need to complete the internal energy market. To function properly and integrate a new generation of low carbon electricity supplies,
we must ensure the free and unhindered flow of low-carbon electricity across Europe’s borders.
And this must be done at a cost that is as low as possible – to our citizens and to our businesses. This means that countries need the flexibility to decarbonise in the way that best suits them. But specific help may also be needed. Like many countries, the UK has put in place measures to ensure that our energy-intensive industries are supported through the transition, in line with state-aid rules. We also keep under continuous review the impact our domestic green policies are having on energy bills. This is of primary importance in these financially difficult times.
There is simply no possibility of achieving our shared aims – energy security which both our societies and our planet can afford – without working together. When negotiating with the super-economies of the US, China and others, by acting as one on climate change, the nations of the EU are vastly more influential than if they were acting alone.
Mette Kahlin, Political Attaché

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To regulate or not to regulate, that is the question …

Friday, October 18th, 2013

Guest blog by the Embassy’s Economic Attaché

One thing we hear a lot about these days is regulation. Regulation this, regulation that, it can be good or bad, national or international, too much or not enough. Views may depend on where you stand: employer or employee, big multinational or local SME, left or right or centre. But there does seem to be a growing consensus that regulation should be ‘smart’, or ‘better’, or ‘common sense’, or whatever you’d like to call it.

In EU circles the European Commission last week presented its REFIT programme, looking at areas where it made sense to regulate more, less or not at all. The UK welcomes this and has just carried out a similar exercise, but gone even further, with a Business-led Task Force set up by the Prime Minister launching a new report on cutting EU red tape.

Six top business leaders proposed a new set of principles that could be used as a checklist – or a kind of ‘common sense filter’ – against which new rules could be tested before they’re agreed. These so-called COMPETE principles would check, for example, that rules passed a Competitiveness test, and that they would be Measurable and Proportionate. (If you want to know what the rest of the letters stand for, you’ll just have to click on the link!)

In producing the report, the Task Force consulted 90 businesses and business organisations in the UK, and  a further 20 business groups across Europe. They were asked what would help in creating jobs and growth. Their answers helped the Task Force compile 30 recommendations for cutting red tape, including giving employers and workers more flexibility to agree between themselves how certain issues in the labour market should work; improving guidance on the chemicals Directive REACH, so smaller companies find it easier to apply; and making it easier to provide services across borders within the EU.

The UK has already done a lot of work at home to reduce the impact of domestic regulation whilst preserving the benefits, for example, through the Red Tape Challenge. And no, that’s not a sporting event, but rather a consultative exercise that promotes open discussion on how to ensure regulation achieves its aims in the least burdensome way possible. The UK has also introduced a One-In, One-out (and now One-in, Two-out) principle, so for every new regulation introduced, one (or now two) old ones should be withdrawn.

The Business-led Task Force was keen to publish its findings now, given that European leaders will be talking about Better Regulation when they meet in Brussels on 24-25 October. We hope that this report can provide an important contribution to the debate.

So, to regulate or not to regulate? That is, of course, always the question …

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Wednesday, July 24th, 2013

Many people hold strong views about the Europe Union based on different perspectives about its role , but perhaps we don’t think enough, in the round, about the impact of EU membership and current EU rules and laws on the UK as a whole.

Therefore in July 2012 the UK Government launched the so-called “Balance of Competences” Review.

This is a two year project to examine the totality of the UK’s membership of the EU. Not a policy-making exercise, but an evidence gathering and analytical programme of work.

This week saw the publication of the first round of reports, covering areas such as the single market, health, development co-operation and humanitarian aid, foreign policy, animal health and welfare and food safety, and taxation.

Another three rounds of reports will issue before the end of 2014. Taken together, it will be the most extensive analysis of the EU’s relationship with the UK, or indeed any member state, ever undertaken.

Over the last six months the UK Government has been consulting extensively across the UK and with other EU Partners. We have listened to businesses, civil society and a range of organisations.

The first reports, drawing on this evidence, give a detailed picture of the effect of the EU’s competences (ie the powers the EU exercises in relation to member states). The initial reports have highlighted a number of the benefits that EU action brings, while also looking at some of the trade-offs and constraints it imposes. A number of themes are already emerging:

  • evidence of the economic value to the UK of being part of the Single Market, and of the UK’s important role within it, although views vary about whether the Single Market necessarily requires the current volume of EU-wide employment and social policy. Such questions will be explored in later reports.
  • tension between the case for EU-wide regulation and the scope for national flexibility. Harmonisation ensures consistent standards for British consumers. But the reports identify areas where harmonisation comes with costs, particularly for small businesses, and where giving space for more national flexibility could make sense. How to strike the best balance here will be a theme of our continuing efforts to secure better regulation as part of a more competitive, business-friendly EU for the future.
  • areas where collective action can be effective – from tackling public health issues, to co-ordinating overseas aid, to controlling animal diseases. But the reports also highlight areas where Member States need to retain national control –in taxation, for example, or in defence, where each Government has a veto on the launch of EU military missions.

We remain open to contributions from across the EU. Evidence has been published alongside the reports, with the aim of making this process as transparent and inclusive as possible.

There are still twenty-six reports to be written and I encourage you to send in any evidence that might be relevant. The opportunity to contribute to the next round of reports continues until next month. You can read the first batch of reports, as well as access more information on what and how to contribute to future reports here.

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Justice and Home Affairs: Opting Out to Opt In

Tuesday, July 9th, 2013

The Home Secretary made an announcement to Parliament on 9 July on the UK’s policy towards Justice and Home Affairs in the EU.

There’s a lot of law and jargon involved, but I’ll try and keep it as simple as possible!

The bottom line is the UK government remains committed to working with EU partners to advance and protect shared interests in the JHA area.

The EU Treaties require the UK to decide by the end of next year which of the JHA measures currently in force it wants to take part in. If it doesn’t want to take part in all of them it needs to “opt out” of them all and then opt back in to those it wants to rejoin. That requires the European Commission and in some cases other EU states to agree.

Our Ministers have decided on the list of measures they want to continue taking part in, such as Europol and Eurojust and the Prisoner Transfer Framework. The measures cover co-operation in a range of areas, including to support the Schengen arrangements, even though we’re not a member of Schengen.

We will also use UK legislation to improve the working of the European Arrest Warrant. We think this is an important tool, but, like other countries, we have some concerns which we need to address, through our own laws and in the longer term working with others on reform, to make sure it works better.

The package of measures we want to continue working in represents all the key measures which we believe are important in maintaining the excellent co-operation between the UK and Sweden and to support practical co-operation between the Member States more generally, to combat cross border crime and to keep our countries safe.

It reflects a lot of discussion with EU partners and with the EU institutions and those discussions will now continue.

Our aim is to have all the necessary agreements in place in good time next year, so we can continue both to carry out the essential co-operation against crime, but also to work together to reform how the EU works so that our co-operation becomes even stronger and more relevant to the challenges we face today.

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Europe: UK and Germany Partners in Reform

Monday, June 3rd, 2013

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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