Lecture in Oxford 2014: The UK, Germany and the European Union

Lecture on 7th November 2014
St.Anne’s College, Oxford University

Disclaimer: there may be small differences to the speech as it was held to the audience because I left out a few phrases in the speech which I include in this text. Headlines are added – which where not part of the lecture.


First of all let me thank St.Anne’s College for the invitation to speak here to this distinguished audience. The idea of the University as the place for free and open academic debate is a very European idea. It started in the Middle Ages in Bologna, Paris and Oxford receiving students and teachers from all over Europe. Now you are receiving the world. Thank you to Thomas Reuss and Christina Toenshoff, thank you, Principal. It is a great honour for me to participate in the debate here at St.Anne’s college.

Let me add a disclaimer: This is the first time I am speaking publicly in the United Kingdom after leaving my mission as Ambassador in London and retiring from our Foreign Service. I will only speak for myself. I do not speak for Germany.

The European Project must adapt

The European project was the answer to the destruction of Europe in two world wars. It supported the reconstruction and strengthened the cohesion of Western Europe during the cold war. Later most former communist countries in Europe became members. This helped to stabilise all of Europe.

When Prime Minister David Cameron spoke at Bloomberg’s in London on January 23, 2013, he said that the peace project was no longer a motivation for Europe because it had successfully fulfilled its historic role. I found this rather premature. The European Peace Project is still very important and may even become more so with the new challenges coming up in the East.

But the Prime Minister was absolutely right stressing that the main purpose of the EU now is bringing more prosperity to the people.
The single market must be further developed and the efficiency of the Union must improve. The Commission is too big, their regulation is not always convincing, the European Parliament is too far away from their voters – and still it has no right to take the initiative for legislation.

Enlargement was important. But the European institutions did not adapt well to the consequences of the great increase of the number of member states during the last decade. Therefore it is understandable that the EU has recently introduced a new criterium for the accession of new members: the EU itself must be in a shape that it can adopt a new member without endangering its own stability.

The European Union already shapes our life

However on a day-to-day basis the European Institutions are functioning. They shape our daily life.

EU Trade Policy is needed to keep Europe’s position in a globalised world. The competences of the Commission give Europe a strong voice in International Trade Negotiations. Only the EU-Commission has the power to see eye-to-eye to the United States or China.

We look forward to the Free Trade Agreements with Canada and the United States of America. If we get a good deal this may create more new jobs than any protectionist subsidy. Germany and Britain should support the Agreements.

Germany and Britain are committed to a strong climate policy. The EU was a leader in the Climate debate in the last decade. Europe needs a common position on this or it will loose all influence on global climate policy.

Energy security has now become a serious issue for Europe especially for Eastern Europe. Russia has been a very reliable partner for energy supplies to Western Europe even in the worst days of the cold war. But now Russia is flexing muscles. So it should not be surprised that this leads to a proper reaction. Germany and Britain should work closely together for better energy security.

The Common Agricultural Policy CAP has been popular with farmers, much less with other sectors. Without going into any details I only want to stress that the CAP has undergone deep changes during the last decade. And let us not forget: The CAP brought Europe a food security it never had for centuries.

The Structural and Cohesion Funds give lower-income-countries within the EU a chance to catch up improving their infrastructure and conditions for productive investment. Germany and Britain were always more on the giving than on the receiving side. That is solidarity and not a reason to ask the money back.

The single market of 500 Million customers is at the core of what makes the EU successful. Enterprises need a level playing field with the same set of rules, where standards are harmonised or mutually recognised.

The single market comes at a price. A level playing field needs regulation and control. Capital moves to where it gets most return on investment. Countries with costly social systems attract people and deter capital.

Some arbitrage on investment conditions inside the EU helps competition. But it must be fair competition. Tax arbitrage by member states using subsidies from the EU to pay tax breaks to attract investment away from other member countries is not fair, neither is social arbitrage or environmental arbitrage.

There are assets of the EU where Britain does not participate. To travel in the Schengen area from Finland to Portugal without stopping at border controls, without customs officers looking into your luggage, is very popular. It is a pity that you still have border controls for European citizens at the British border.

In times of huge youth unemployment the single market also needs flexibility for workers who must be willing and able to work in all parts of the single market where jobs are available. They need open doors in Europe.

A common Foreign and Security Policy is necessary

We need a common European Foreign Policy. The world has always been a dangerous place. The crisis in Ukraine or the ISIS attacks in Syria and Iraq are actual examples, other conflicts must not be forgotten.

New challenges have grown by international terrorism and extremist movements, by piracy or outright transnational organized crime. We need more common answers to the global threats.

In name the Common European Foreign and Security Policy is already in place – the high representative is served by an external action service of the EU with ambassadors abroad. But foreign policy is mainly made in the capitals of the member states.

It is not probable that national states in Europe will soon give up their right to decide on war and peace. Europe must pool its power and influence on issues where consensus exists or can be reached.

The recent reversal of Russian policy has revived a feeling of threat in Europe. Some Russian nationalists may be proud to be feared – the consequence is a progressive breakdown of trust. This makes a common policy of the EU towards Russia an imperative. NATO is still a necessary alliance. Strengthening EU-NATO cooperation is getting urgent in the actual situation.

Member states who experienced Soviet power ask for our solidarity – and we are obliged to support them. At the same time we have to be very careful not to embark on an irreversible path of escalation of words and deeds.

The EURO

When the single market started, Germans were asking how this could work without a common currency. The Bundesbank saw a common economic and financial policy as a prerequisite of a common currency.

The majority including Chancellor Helmut Kohl thought that introducing the Euro first would make a common economic policy unavoidable. The close link between a currency and financial and economic policy has been corroborated by the recent development.

The economic and financial crisis of 2008 brought to the surface that European institutions were too weak. The trouble about the Euro is rooted in the fact, that national financial and budgetary policies were not compatible with a common monetary policy. The need for structural reforms became obvious.

The EURO-zone has made huge progress in building new institutional structures like the Banking Union and the European Semester. Opinions differ on the best way to steer Europe out of trouble – in democratic societies the debate is normal and necessary.

The dilemma is that most popular solutions are not viable and most viable solutions lack popular support. In the end politics has to decide and then bear the consequences. Blaming others for own shortcomings is very popular but not helpful.

Brussels: bureaucracy, over-regulation, asking Britain to pay ?

The Brussels bureaucracy is a beloved target for anti-Europe movements. We should not forget that the rather small European Union bureaucracy consists of the best and the brightest from all member states – and not of aliens from space. We owe them more respect instead of primitive bureaucracy bashing.

In his speech at the Conservative Party Conference the Prime Minister said, that he does not need the EU to decide what strength a vacuum cleaner must have in England. He should at least have mentioned that this makes British vacuum cleaners sell all over Europe, because they keep European standards. Either we have a single market with single rules – or a fragmented market with national standards returns.

Let me stay with the example for a moment. What would happen if Britain would not be in the EU any more. The EU-Commission – under some Free Trade Agreement – would send their rules on vacuum cleaners to the British government and the government then must ask the British Parliament to copy these rules into British legislation. Parliament is free to say no and the EU is then free to stop the import of non complying vacuum cleaners from Britain.

The government will then recommend British industry to export to other countries, may be to China. Good luck.

The industry – most of them transnational companies may just leave the UK to produce for the big single market.

The Commission in a not too sensible way sent Britain a bill after recalculating the membership fee. British civil servants knew it, but politicians may have ignored it. The whole mechanism how the contributions of each member state are calculated and recalculated is a consequence of the complicated system of rebates introduced after Margaret Thatcher successfully “got her money back“.

The need for more redistribution is also a consequence of the accession of some rather poor countries, supported by all members including Germany – and very much pressed for by several British governments.

European citizens are not immigrants

In Britain there is a permanent confusion of the free movement of European citizens with immigration from outside of the European Union.
European citizens are not immigrants. The four freedoms of movement for people, goods, services and capital, have nothing to do with immigration. They are rights coming from the core of the EU Treaties.

A small minority not wanting to work is attracted by our social benefits – German or British citizens certainly never have such strange ideas – This can be handled by legislation without throwing the baby out with the bath.

The German magazine „Der Spiegel“ last week published an article saying that Chancellor Merkel will not be able to help David Cameron in his pledge for EU reform any longer if he is continuing to question the foundations of the Union, and free movement in the EU is one of these foundations. I do not know what they really talked to each other – normally their tone is rather friendly. But the problem is serious.

The democratic deficit and the eurosceptic parties

Common knowledge says that there is a democratic deficit in the EU. But there are quite different views on what this deficit really is:

The German Constitutional Court believes that the European Parliament is not fully representative until it has an equal representation of all voters in Europe. A German MEP needs much more votes to win than somebody coming from Estonia or Malta.

Some criticise that the EP has only limited rights to nominate the persons for the highest office, and that the unelected bureaucrats in the Commission are not responsible to the Parliament (by the way do national governments not have unelected bureaucrats ?).

Others complain that intergovernmental methods too often prevail over the community method.
But let us face it: If Europe is not perfect, it is because the member states do not want it to be perfect.

However the EP elections of 2014 for the first time had top candidates of the main party families. Finally the result of the elections is now reflected in the top office of the President of the Commission. Those who continue to insist on naming the other Commissioners by member governments instead of the EP should not cry over a democratic deficit.

It is not surprising that a severe economic and financial crisis brings down public support for the EU. The media blame the EU for a too weak response to the crisis. Anti-Europe parties benefited from this mood also in the European elections of 2014.

On the continent most of the anti-Europe parties come from the extreme right of the political spectrum, some are outright Neo-Nazis, a few come from the extreme left. It would be dangerous if the established parties feel tempted to take over part of the extremist agenda hoping to win back voters they lost to the extremes of the political spectrum.

There is now a German eurosceptic party called the „Alternative für Deutschland“(Alternative for Germany). The AfD is stressing that it wants to abolish the Euro, but is not against the EU as such. The party started as an elite project of professors of economics and former big business people. Now they are struggling with entryism: members entering from the extreme right attracted by nationalist views. AfD is not represented in the German parliament – but they won seats in the EP-elections.

Ideologies and convictions – right or wrong – influence our view of the world. After the Second World War at least in Germany nationalism was discredited.

Today nationalism is growing again in parts of Europe. I hope that nationalism does not become the prevailing ideology of the 21st century in Europe. We should remember the sentence of Francois Mitterand, former French president, that „nationalism kills“. Look to the Balkans, look to the East: it is still true. But we know there is a general feeling of a crisis of legitimacy of politics not only in Europe but in all national states.

The British Problem

The British Prime Minister David Cameron has made clear, that it would be a pity to give up what was united for such a long time, to give up a strong position as a relevant power in this world, to give up the common currency. Thus he spoke about Scotland before the referendum took place.

A German newspaper quoted the Prime Minister and asked if the same is not true for Britain as part of the European Union.
Britain joined the ever closer union only in 1973 without a national consensus on the question how far the country could and should give up part of its sovereignty. Now this question comes back with a eurosceptic turn in the United Kingdom.

It is absolutely legitimate to criticise the policies of the EU, it is legitimate even to fight for leaving the club. The debate on Europe needs respect for different opinions but also respect for facts. Lamentably facts are often replaced by prejudice.

Some British newspapers with huge circulation have hammered in anti-European prejudices for thirty years. Few politicians dared to stand up against this demagogy. The negative attitude towards Europe is self-reinforcing. It is often underestimated how from small beginnings big rifts may emerge over the time. Chaos theory would well describe such effects.

Whatever the result of the next British election next May, the topic of Britain’s position in and towards the EU will not vanish from the agenda. If the Conservatives win, the way out of the EU is a real possibility. If David Cameron really wants to stay in the EU and if he wants to reform the Union he will find allies, not least in Germany. But is he really looking for allies ? Or will he insist on positions that would destroy the foundations of the EU and the single market ?

The fear of UKIP seems to have crept into the veins of all parties, possibly with the exception of the Liberal Democrats. If Labour wins the election the Conservative opposition could move to a much more anti-European position. Will Labour be able and willing to stand up against such a trend ? Whatever the outcome, it has to be respected. But respect does not exclude regret.

One of the most dangerous political moods is victimism. It seems that part of the Tories and the interested press paint the image of Britain as the victim suffering from all the others on the continent ganging up against Britain.

Nobody in Europe is ganging up against the United Kingdom. And nobody wants to isolate Britain. The dividing lines in the European debates can be very different, depending on the issue. There may be an east-west or a north-south-constellation, or rich-poor, industrialised-agrarian, deficit-lovers against austerity-preachers, big against small and many other possibilities, but „Britain against the rest of all“ is either a phantom or Britain’s own choice. Britain has always been an important player in all constellations – British influence is only limited by self-inflicted self-isolation.

Britain and Germany

The British-German relationship has become very crucial in this situation. It is good that the mechanisms of British-German dialogue have been strengthened during the last four years. Many complaints about overregulation or too much EU activity in fields which should be left to member states or even regions, are shared between our two countries. Germany has seen Britain as a potential ally for pressing the EU to go further in its efforts to become more efficient. Britain and Germany have more in common than many know.

Chancellor Merkel wants to keep Britain as an important member of the EU and a key player in Europe. But there may be illusions about how far Germany and Chancellor Merkel can support British views on change in Europe. If the price for keeping Britain in the EU is destroying the core ideas of the European Project then this price will be too high.

The British policy of distancing itself from the EU has strengthened Germany’s relative position in Europe – some even fear German hegemony. I think that the country which fears rising German power more than any other country is Germany itself. Stephen Green gave his excellent recent book on Germany the title: „The Reluctant Meister“ – this is a good description of German fears. That is why Germany wants to continue the way to an ever closer union.

Where will Europe go ?

The idea of a federal United States of Europe was very popular in the six member states in the 1950s. It had never been a very realistic view. But after several rounds of enlargement this idea is dead. The heroic fight against the European superstate is fighting a ghost – leave that for the wizards in Hogwarth.

When the EEC was founded, Britain formed the EFTA free trade area together with Scandinavian countries and Austria and Switzerland. But the EU was a successful motor of the economy while EFTA was no solution for Britain’s structural problems, so in 1973 the UK joined the EEC. Now some seem to come back to EFTA as a choice for the UK. I doubt if the outcome would be any better than it was before 1973.

Europe of different velocities is a reality. It means that some member states join new steps of integration later than others. The principle that all rules are valid for all member states is kept, but the timeline is more flexible.

Europe with different geometries is also a reality today. This means that not all rules must be the same in all member states but that some difference is tolerable for each country. Members that permanently opted out of certain integration steps construct different geometries.

While different velocity takes place on the timeline, different geometry takes place in the territorial space. The Schengen system and the EURO are examples of both different geometries and different velocities at the same time. Some will enter the systems later, others permanently opted out.

The need for a balance between flexibility and stability

The British government made a big effort to study the “Balance of competences“ : this was important. But there are more balances to observe: The balance between interests of states, pressure groups, or social classes, the balance between regions and central states, between majorities and minorities, the balance between the legitimacy of sovereign countries and the legitimacy derived from popular vote. There is no simple answer to the balancing problem.

Different geometries must be balanced by rules for mutual recognition. Different velocities must be balanced by a timeline how and when the differences are superated. Different options can only be balanced by strong comittment to the European project.

There has to be one basic balance between stability and flexibility. If stability gets too rigid the system cannot adapt, if it gets too flexible the system will be destroyed.

Ideas for a new more flexible balance

In my view the EU needs more flexibility. Since membership in the EU is voluntary, an exit must be possible, but stability would be destroyed if it would be allowed to exit and re-enter every four or five years depending on electoral results. Different geometries and different velocities should not be ruled out, but what is agreed has to be kept and is not under the reservation of renegotiations.

Flexible options should be possible – but they must guarantee a stable relationship. A model of Europe à la carte would be bureaucratic, complicated and uncalculable and in the end self-destructive.

On the other hand I fear that a balance between stability and flexibility may not be possible to strike under the rule of one and only one form of membership any more.

Many countries, most of them inside the Eurozone, feel a need for an accelerated integration and enhanced cooperation and solidarity. Core Europe in that sense is not a question of geography but of political orientation.

But there are other positions about the future of the European Union. Whatever positions there are, the call for: “all – or nothing“ – is always damaging our common interest. To be rigid may be the best guarantee to get to nothing. In history you need time and patience.

We should not force those who have a different view to choose between all or nothing. If variable geometry and variable velocity help, this should be used. But there may be at least one member state, Britain, and I add at least one country applying for membership, Turkey, that have an understanding of sovereignty that needs more flexibility than any core Europe could give them. It would be a grave error to leave the Exit as the only way out.

Core Europe Membership and Flexible Membership

I dare to propose a compromise: We may need a Flexible Membership coexisting with Core Europe. It would offer a way to stay in the Union or enter the EU for countries which cannot accept to give up more sovereignty in an ever closer union. The existing acquis should be kept wherever possible: why throw away the achievements of the last 60 years ? But each Flexi-member may negotiate a different and more flexible treaty for this kind of membership.

Flexi-members should fully participate in all meetings. They stay at the table with a full vote whenever the agenda is about questions where they chose to fully participate in the Union. They stay inside without a vote but with a voice where this is not the case. They only have to stay outside whenever there is a conflict of interest between the Flexis and the Core members. There cannot be any veto of flexi-members on more integration for the core members.

Flexi-members would have more influence than any of the European Economic Zone member states have today. Therefore it may be attractive for Norway and Switzerland to upgrade to a Flexi-membership. It may be comfortable for Britain to get more flexibility without leaving the Union and it may be interesting for potential members like Turkey to become flexi-members without giving up more sovereignty than they believe they can afford.

What can YOU do ?

You may often hear the criticism that Europe is an elite project. Some of you will become Europe’s future elite, others the global partners of the EU. The European Union will not become popular if the elites do not make it their own project.

I appeal to you: take Europe as your project – make it more popular, build up a European public opinion, take the effort and time, try to convince others that solidarity and sticking together is good for everybody, for England and Scotland as well as for the UK, Germany and the European Union.

Membership is voluntary – but being in the club means keeping the rules of the club. Everybody has the right to leave. But let us be consistent: nobody can have the full benefits of the club not being a full member.

Our future in Europe – good or bad – is a common future. Building a better future together needs permanent critical review, only blaming Europe for national deficiencies may be popular but is utterly unfair. So let us stop that.

There is no free lunch: EU means compromise and compromise means everybody must loose a little to make Europe the great winner. That has worked quite well for the last 60 years. Flexibility is better than to risk the whole project by rigorous positions on all sides. The way to a better Europe will be difficult and stony, but it is worth the effort.