Rede von Dr. Wolfgang Schäuble an der Karls-Universität Prag am 2. Oktober 2014.

„We have experienced a profound transformation in Europe over the past quarter of a century. And one of the most wonderful and moving signs of this transformation is the fact that today, when I am here in the Czech Republic, I am no longer standing in a part of Europe under Soviet dictatorship. No. Here in Prague, I am now standing in a Central Europe that is free, in the heart of the European Union.

That’s how it was for centuries, and that’s how it is again today. And the Charles University – one of Europe’s oldest universities – was always a major centre on its own accord here in the heart of Europe.

In just a few weeks – on 9th November – we in Germany will be celebrating the 25th anniversary of the fall of the Berlin Wall. We Germans know – and we will never forget – that German re-unification was achieved because the people of Europe wanted to overcome the division of our continent. Because courageous people in Hungary, in Czechoslovakia and in Poland, in the years and decades before 1989, paved the way forward by standing up and demanding freedom and civil rights.

And all of you – the younger generation of today – can be very proud of what these popular movements accomplished. On behalf of my own country, I would like to say: Thank you!

Back then, we were convinced that the reunification of Germany would be followed by the reunification of Europe. We knew that this was essential. And the fact that all of us succeeded in achieving this goal – the fact that German unity went hand-in-hand with a wider and deeper European unity – is the most fortunate development in recent European history.

We experienced this development as another chapter in the expansion of peace that European integration has achieved since the end of the Second World War.

And it is true that, in recent years, we may have started to lose our appreciation of the peace that took so much work to build in Europe.

But now, as we face the crisis in Ukraine, we are seeing that Europe is regaining its relevance and its persuasive power as a model for building and ensuring peace. At the start of 2014, our thoughts were focused on the year 1914 as a reminder of Europe’s violent past and the peace that we have built. But that all changed on 20th February this year, when about 80 protesters were killed in Kiev.

Since then, it is not only the past, but also current developments, that are showing us once again how precious our peace in Europe is, and how urgent it is for the project of European integration to keep pressing forward: so that Europe can speak with one voice and successfully defend its values. Not only during the current crisis, but also in the future.

That is a powerful justification for European integration – but it is certainly not the only one.

It has become commonplace to say that today’s world is changing rapidly and dramatically, due to globalisation. But the thing that we call globalisation – has a direct impact on every single one of us. This accelerating process of linkages between economic, political and cultural systems – is changing today’s states and societies faster and more fundamentally than anything we’ve seen for over a century, since the peak of the industrial revolution.

Globalisation is bringing growing prosperity to many people in Asia, South America, and Africa too. In contrast, a lot of people in western industrialised countries are afraid that their prosperity is in decline.

But this fear is unfounded. Economic competition is not a zero-sum game. One person’s gain is not the other person’s loss. At least, this doesn’t have to be the case. Rather, we can all benefit from global competition – as long as we make sure that the rules are fair and apply to all.

And precisely this – the need for fair and equal rules – is one of the most important reasons why we Europeans need a strong European Union. Europe is in our own self-interest.

It is no accident that so many flock to Europe. It is because Europe offers a combination of freedom and social justice, of democratic participation and the rule of law that is unique in the world.

We need a strong Europe to ensure that our values and rules are respected and observed in the 21st century. We need it to maintain security and economic well-being for Europe’s citizens.

But we also need Europe because of its unique contribution to global prosperity. Because Europe places a priority on long-term, stable and sustainable growth.

Furthermore, we need Europe to ensure the provision of global public goods – that is, public goods which cannot be provided by individual states. Whether we are talking about the challenges of climate change, terrorism, the proliferation of weapons of mass destruction, hunger and disease, migration, or financial and economic crises – all of these challenges demand global solutions.

States, even empires, that are able to run their affairs within their own borders are increasingly incapable of dealing effectively with global problems.

Europe has correctly given up on the illusion that it can dominate the globe. But Europe can still make an important contribution to solving global problems. To do this, we in Europe need strong institutions and – of course – a strong economy.

During the last century, we Europeans succeeded in replacing the failed system of rival European nation-states with a supra-national system, the European Union, with European executive and legislative bodies.

Even if these European bodies are still incomplete, step by step we are improving and expanding the EU’s institutional framework.

For example, it’s a major step forward that the new European Commission President was one of the lead candidates of the European Parliament’s two largest political groups. This will boost the democratic legitimacy of European decisions.
In addition, the European Commission’s powers of economic governance have been enhanced in recent years through the steps to reinforce the Stability and Growth Pact.

And with the Fiscal Compact, we have set binding rules on debt limits that apply to all the signatory countries.

We also created the European Financial Stability Facility (EFSF) and then the European Stability Mechanism (ESM) – which institutionalised a crisis resolution mechanism that we previously didn’t have.

Now we face the situation, that the Lisbon Treaty reflects the European reality of 2014 only to a limited extent.

We have significantly deepened European integration – but not always using the Community method. That is the European decision-making process based on the European institutions and treaties, which is the approach that I would always prefer in principle.

But when we were unable to solve urgent problems with the European treaties in their current form, we often had to fall back on the intergovernmental approach in order to reach a swift solution.

For example, we had to adopt the Fiscal Compact, with its obligation to introduce national debt brakes, in the form of an international treaty.

This intergovernmental approach is only second best. It’s better than nothing. But in the long term, second best is not good enough for Europe.

We will gradually have to replace or supplement these second-best solutions with limited changes to the treaties. The new European Commission should develop proposals to this end in a way that will enable necessary steps towards further integration.

It is, however, rather unlikely that we will succeed in taking major steps towards deeper integration on the level of all 28 EU members in the near future.

Rather, it is, in my view, precisely the eurozone that can serve as a driving force for deeper integration using the Community method.

This is one of the reasons why I would be delighted if the Czech Republic decided to join the eurozone in the near future.

Some of the treaty changes will reflect the new reality of the eurozone. But we need to be very careful to leave the door wide, wide open for member states which have not yet introduced the euro – especially for such close partners as the Czech Republic.
There are some things that we can do directly:

I can imagine there being a “eurozone parliament” comprising the MEPs of eurozone countries to strengthen the democratic legitimacy of decisions affecting the single currency bloc.

And why not have a European budget commissioner with powers to reject national budgets if they do not correspond to the rules we jointly agreed? We have a similar arrangement to make sure that countries stick to the rules, in the form of the competition commissioner. And it has been very successful. This new proposal would not violate budgetary law. Because the question of how the rules are complied with, whether by means of lower spending or higher taxes, remains the responsibility of the Member States.

Insisting that countries comply with the rules that we have agreed in Europe does not violate national sovereignty. Otherwise we shouldn’t agree on any rules in Europe at all.

The question “Do we want more or less Europe?” is misleading if it’s put in this form – as an alternative. On the one hand, we need a stronger Europe, particularly when it comes to major questions and cross-border issues that countries cannot deal with on their own.

On the other hand, we need a greater willingness to apply the subsidiarity principle consistently. Unfortunately, people often pay lip service to this principle without really taking it to heart. Responsibilities need to be more clearly attributed to the appropriate levels.

As many competences as possible need to remain decentralised and in the hands of local authorities, regions and member states. But those things that can only be decided on the European level need to be decided by European institutions.

The EU could mainly focus on ensuring a fair and open internal market and concentrate its policy action on trade, financial markets, currency issues, climate, environment and energy, as well as foreign policy and security policy – in other words, on those areas where only the European level can successfully take long-term action.

This way, we could achieve real “added value” for the European project. And if we limit our work on the European level to these major, higher-level tasks, it would create additional legitimacy.

I don’t believe that anyone in Europe wants a centralised super state. And I also don’t believe that the majority of people are willing to give up their nations.

In any case, that isn’t necessary. The issue is much more about having a system of competences that is suitable for tackling global problems.

Once we have clearly divided up the responsibilities, then each level should have proper democratic legitimisation for its tasks. Then each level would take care of those things that can best be tackled on that level.

What would we call this kind of future European system?

If you want to describe it in a more technical way, we would then be a “multi-level democracy”. Not a federal state whose centre of gravity would lie in the middle of a political structure that is almost like a nation state. But at the same time it should be much more than a confederation of states, whose connections remain weak and lacking in legitimisation.

Instead, it should be a complementary and inter-connected system of democracies with different scopes and competences: a system of double democracy that is both national and European.

This type of system can only be built step by step, pragmatically, and sometimes following the principle of trial and error. Until then, we have to keep working with the imperfect institutions that we have.

That makes it even more important to focus on the tasks that are our immediate priorities:

This is, first of all, the European Banking Union, which we are establishing this year, with a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM) for the euro area and any other EU member states that wish to join.

The single supervisor – located at the European Central Bank (ECB) – will supervise all financial institutions which are of systemic importance for Europe’s financial system. The European supervisory authority will ensure that banks no longer take on risks that could threaten the entire system.

The banking union is the biggest European integration project since the introduction of the euro. To make sure that the banking union starts out this autumn with healthier banks, the ECB is currently examining the balance sheets of the most important European banks it will be supervising in the future.

In anticipation of the new rules, banks have already made progress in raising their capital levels and boosting their own resilience. This will improve their ability to perform their true task, which is to provide financing for the real economy.

The credibility of supervisory authorities will be ensured through the creation of the Single Resolution Mechanism. In the future, troubled banks can be wound up on the basis of clear rules. Liability will be borne first by a bank’s shareholders and creditors, and then by the banking sector as a whole.

It is essential for Europe to put itself in a better economic position, and quickly. The Ukraine crisis once again underlines the importance of economic factors. If we want to continue to rely on the tools that we believe will be successful in the long term – by which I mean diplomatic and economic instruments – then it is all the more important for us to be strong.

The start of the new legislative term for the European Parliament, and the new European Commission with its new structure – especially with its new Vice Presidents, who now hold broader responsibility for high-priority, cross-departmental projects –open up the opportunity to focus now on what really matters.

Our efforts in the coming years must focus on policy areas that are decisive for boosting growth and employment. This means ensuring sound public finances, continuing to regulate financial markets, improving business financing and the conditions for private investment, reforming labour markets, making public administrations more efficient and effective, deepening the internal market, concluding a transatlantic free trade agreement, and curbing harmful tax competition. And it means building an energy union and a digital union in Europe.

We have to start tackling all of these tasks in Europe. And at the same time, we have to stop distracting ourselves with unproductive discussions about weakening fiscal rules and new government spending programmes. None of these discussions are going to bring us one step closer to sustainable growth.

But sustainable growth is what we need if we want to remain economically competitive in this world of accelerating globalisation and digitisation.

Our goal in Europe must be to secure the strength and viability of the Western world. It is essential for us to have the ability to respond effectively to economic and political crises, which can and will confront us in the future.

But we can achieve this ability only if Europe becomes even more united. The Europe that we have today – the Europe that we have built together thanks to the positive and fortunate developments of the past 25 years of our shared history, with the Czech Republic at its centre – can only be an intermediate step.

We must keep pressing forward, together. If we do, we can give Europe the strength it needs to meet the challenges of the 21st century, which are making themselves felt every day, in the Czech Republic, in Germany, and in Europe.“