”The Future of the European Union” Ulkoministeri Erkki Tuomioja Eurooppanuorten Linnaseminaarissa Porvoossa 19.8.2012

·         The European Union is in the midst of an existential crisis. Economic and Monetary union – which was supposed to be a higher stage of integration – is in deep trouble. Today we contemplate possibilities that were previously unthinkable: will some euro area members leave the euro, can the euro break up.

·         Before, euro was fuelled by hope – hope that the euro would make the euro economies converge so strongly that big differences between economic performances would be ironed out. Now, the euro is kept together by fear – fear of the unforeseen consequences of collapse.

·         I want to make clear from the outset, that I am not advocating a breakup of the euro. But we would be totally irresponsible, if we did not take into account the possibility of a break-up, contrary to all our efforts and wishes.

·          It is clear, at least with the benefit hindsight, that the euro was, and still is, a good solid idea, but that our wish to make it into the flagship for European unity and integration was premature – it could only succeed with a high degree of economic integration and convergence which was not  and still is not there, and as part of a much further reaching financial and political integration. Political ambition forced the project through on the usually unpronounced hope, that the political will then lacking to set up the fiscal and political union for the euro to function would inevitable appear later in time to guarantee the euro’s success.

·         This has not been the case, and I don’t think the present crisis will create the will either – the lack of democratic legitimacy which has characterized the management , or perhaps more to the point the mismanagement of the crisis,  has made this less rather than more likely today.

·         This need not mean the end of the euro experiment. The euro has grave problems – a federal currency without a federation – but the cost of returning to national currencies is still estimated to be greater than saving the euro.

·         During the crisis a lot of right and necessary decisions have been taken, such as the passing of the six-pack of legislation for better economic coordination and fiscal responsibility and sanctions needed to enforce this, and the creation of the permanent European Stability Mechanism.

·         If these had been in place at the outset it is possible that the crisis could have been averted, and would certainly not have reached these proportions. We also have a good chance of preventing future crisis. However their worth will be tested and seen once we have made it through the present crisis.

·         So we need still to do more. One step is building a credible system for European banking supervision. Irresponsible lending is a major root cause of the euro area crisis and fear of banking collapses is the number one economic concern in the euro area. The financial sector needs stronger controls. Mervyn King has said that if a bank is too big to fail, it is too big. Another quote worth repeating from him is: banks are global in life, but national in death.      

·         Reforming financial markets is crucial. Our financial system has, in a sense, become too dynamic. Better European bank supervision is one step. Taxing financial transactions is another important tool in making a healthier financial system. Financial institutions should also be made to pay for their mistakes – investor responsibility for losses and collecting funds from the financial sector itself to deal with bad bank banks and solid deposit guarantee schemes. They should not be taxpayer liabilities. We have all seen what moral hazards have been created by making states the rescuers of first resort. Thus proposals for a Banking Union are right and necessary – provided that the primary responsibility for implementing and financing the commonly agreed provisions remain with the national governments.

·         One further – long-term – dimension in rebalancing the European economy is addressing this imbalance in the internal market – more should be done to develop the internal market in goods and services and promoting mobility.

·         Another step is macroeconomic rebalancing within the euro area – in practice: Germany has to pay higher wages and consume more. The euro area periphery will not recover without strong demand from the centre. Euro area demand is mainly generated from the euro area. I don’t really remember Germany complaining about debt-fuelled demand in Southern Europe before the crisis started.

·         I may at sometimes be critical of German economic policies, but the German government deserves great recognition for the fact that no populist anti-EU political movement has emerged in the German political scene. The pirate party has other things in mind. 

·         One should not be too pessimistic – history has been on the side of European integration. It had a crucial role in cementing peace after the Second World War. It assumed a central role in reuniting a divided Europe after the Cold War by enlarging east. European integration is also an important tool in dealing with globalisation – the central problems of the world cannot be addressed in the confines of the nation state. We need a supranational approach.

·         Perhaps one of the underlying tensions within the union has been the fact that the four freedoms underpinning the internal market are in fact at very different stages of integration – people, goods, services and capital are all supposed to move freely, but this is not really the case. In fact only capital has achieved  unhindered movement to an unhealthy degree, while the internal market in goods and services is incomplete.

·         The mobility of people and labour has been very modest. People don’t move with jobs, they stay put. The difference with the Unites States – another big internal market – is striking. We can lament this from a theoretical point of view, but we should not underestimate or disparage people’s attachment to their language, culture and established networks – why else would we continue with regional policies in all our members states?

·         Four presidents (European Council, Commission, ECB, Eurogroup) have been tasked to prepare ideas toward a genuine economic and monetary union. They have already made some tentative proposals, of which those concerning a banking union must and can be addressed immediately.

·         Otherwise a remain deeply sceptical about entrusting these four with preparing much further reaching changes for how the Union works. We already suffer from a huge democracy and transparency deficit in the EU, which has grown during the crisis and is seriously undermining the democratic legitimacy of the whole European project. Continued bypassing of normal, open and transparent procedures with the full involvement of all member states and their national parliaments will only serve to hasten the demise of European democracy.

·         I think that no one in their right mind would argue that the June European Council and Euro Area Summits were great successes – big decisions in the early hours, opaque summit statements and an all-out communication war on what was really decided. No wonder citizens feel alienated by Europe.

·         One major lesson from the crisis is that we have to reform the way we manage our affairs. Resorting to summits and deals between the strong were perhaps necessary crisis measures, but at the same time we seem to have created a ’directoire’, decisions by the few, rubberstamped by the rest – this was not supposed to be how the union works and it needs to be countenanced by a strong community method: transparent preparation, joint decision-making. Fair decision-making is crucial for legitimacy.

·         I believe that sustainable EU decisions need a parliamentary anchor. And this parliamentary anchor is not the European Parliament, which has not been able to build a genuine link with the European public. Sure, it is elected, but do citizens really feel that their voice, their legitimate interests, are channelled by the European Parliament, or has it become another unaccountable institution detached from citizens.

·         In Finland parliamentary accountability is based on the national parliament and Finnish EU policy is genuinely built on a dialogue between government and parliament. We may have very strict – some perhaps feel unreasonably strict – views on how to manage the crisis in the euro area, but these views are strongly anchored with our parliament, reflecting a popular will. One way to improve the quality of decision making in the euro zone is reinforcing parliamentary accountability – this is one major way to improve governance and address the democracy deficit.

·         Many visions about building a genuine economic and monetary union are quite detailed on integrated financial, budgetary and economic policy frameworks but vague on strengthening democratic legitimacy and accountability. This is a serious, maybe even fatal mistake – we should start with strengthening our democratic framework and opening a genuine debate on the development of economic and monetary union rather than jumping straight to the conclusions.

·         Our aim in Finland is to start this process by joint deliberations between government and parliament and I would encourage others to follow suit. Then we need an open process, where outcomes reflect member state views, rather than technocratic preference.      

·         Dealing with the Euro area crisis raises a difficult question for the development of the union. Do we go ahead at 28 or should the euro – seventeen member states – form a firm core. The situation is not black and white – the euro is already a core, with its euro-institutions like the ECB and it has a genuine need to develop policies because a common currency necessitates a deeper degree of integration.

·         But we should be very cautious about creating any new unnecessary divisions. One key item is to keep EU and euro institutions integrated – the European Commission needs to be the central administration for both EU27 and €17. Any deepening euro area cooperation should remain in the union, not outside.

·         Judging from headlines the euro area crisis seems to be the only game in town, but we should not forget about other pressing global issues – climate change, sustainable development, human security, global governance and justice, peace.

·         The European Union is a unique global actor – not just because of its economic weight (biggest economy, trader, development aid provider), but because it can combine a wide variety of tools – not only traditional foreign policy instruments, but also things like aid, trade, visas, norms, immigration, technical assistance.

·         The Lisbon treaty was supposed to make a qualitative leap in reinforcing the Union’s capacity to act coherently using all the tools it has at its disposition by pooling all aspects of external action in the EEAS (European external action service) combining both issues belonging to member states and the Commission. But old habits and perceived interests are restraining this new order, and sad to say the EU is in fact weaker in its external policies than before.

·         Member states are not giving the EU High Representative and her service all the support needed. From my current and earlier experience as Foreign Minister, I have to say that in some respects, the political will of the member states to work through joint institutions, act together and speak with one voice has diminished in recent years.  

·         Another problem is the continuing disagreements over institutional roles within the EU. For instance, it seems that the Commission wants to see the EEAS as an old second pillar actor – dealing with CFSP (Common Foreign and Security Policy) issues only.   However, reducing external action to CFSP  would totally undermine the EU’s capacities to advance stability and prosperity in the European neighbourhood as well as to have influence on the global stage.

·         Soft power, especially the perspective of a membership for European countries has been EU’s most effective foreign policy tool ever. In these times of crisis for the EU, there is all the more reason to work especially hard to keep the Union strong in its values of democracy and human rights – required of every member state – as well as to keep the Union economically and socially competitive.

·         The needs and expectations for the EU as a global actor are growing. The world is undergoing enormous changes of ever-increasing interdependence which is nurtured by globalization, population growth and technological, demographic and environmental developments. A change of this magnitude has to reflect fundamentally in how international security is defined and what is done to achieve it. This is centrally relevant to the relative merits and efficiency of hard and soft power .

·         Without the soft-power EU, so to speak, many key processes tackling major challenges of our time may not have started or survived. Take for example the Kyoto Protocol on Climate Change, the International Criminal Court, the upholding of international efforts in the Middle East peace process, or the launching of the Doha Round at the WTO. European Union is also working to influence Iran’s decisions on the nature of its nuclear programme. These are relevant examples also because work in these areas need sustained and reinforced efforts as difficulties persist.

·         Throughout its membership in the EU, Finland has consistently supported efforts to strengthen the Union’s global and international role. This is true also for security and defence policy. Membership in the Union is, among other things, a fundamental security policy choice for Finland.

·         Finland’s strong commitment in this regard will be reaffirmed in the new white paper on security and defence policy which is due by the end of this year. Finland has contributed actively in the development of the EU’s Common Foreign and Security Policy. The CFSP, and the Common Security and Defence Policy as part of it, has progressed step by step. It needs strengthening in a way that is up to date and commensurate with the challenges of our time. 

·         Since the framework for what currently is the CFSP was set up in Helsinki in 1999, altogether well over 20 crisis management operations, including both civilian and military crisis management operations, have been undertaken by the EU. Today, efforts need to be continued, among other things towards setting up permanent civil-military conduct capability so that EU instruments can be used in a more coordinated and comprehensive manner. The recent achievement of the full operational capability of the EU Operations Centre for the CSDP missions in the Horn of Africa is positive development.    

·         As security problems continuously growing more diverse, less visible and less predictable, what is needed more is comprehensive approach, more coherent use of EU’s instruments and better cooperation between the Union and third countries and organizations. Among those security challenges that are growing in severity for the EU – or for NATO for that matter – are proliferation of weapons of mass destruction and the related materials and means of delivery, failing states; terrorism; cross border crime; cyber attacks and threats to communication, transport and transit routes. 

·         The evolving threat assessments have to be taken into account also in national defence planning and in civil emergency planning in European countries. Civil-military co-operation needs strengthening both home and internationally. And as the importance of international crisis management, international interoperability and security of supply continues to increase, proportionately more attention needs to be paid to these areas of work. Capabilities for receiving and providing international assistance are needed in each European country, regardless of, and without prejudice to, the choice of the national defence solution.

·         Defence forces in Europe face a double challenge: growing budgetary pressures and adaptation to the changing security environment with requirements growing in some areas of work. To facilitate this situation, national defence forces should increase multinational development of capabilities, or ”pooling and sharing”. More efficient ways of building European capabilities need to be identified and encouraged. This will require a systematic way of co-operating on the long-term basis, which brings up the issue of multinational solutions requiring a high level of trust. For Finland, Nordic countries are a close community capable of such co-operation, along with the wider international frameworks provided by the EU and NATO.

·         With forward-looking views, which I have in this short while illustrated to some extent, Finland will continue its active role in the strengthening of the CFSP. Continuing development in this area counts for our country as one of the priorities in improving and deepening European integration and cooperation in a way that has the support of our citizens.