If I had known that the presentation of this prize was going to take place today of all days, I would have perhaps reconsidered. Because the European Central Bank is independent. And the independency of the Central Bank is of utmost importance. It calls for great restraint, particularly by those who bear responsibility in governments or parliaments.
For this reason, a finance minister should not even comment on decisions taken by the European Central Bank, let alone criticise them. This is why I’m not presenting the award, as it could be misconstrued as a possible blow to the Central Bank’s independence. So, what to do? Lord Mayor, you have just mentioned two great Europeans: François Mitterrand and Helmut Kohl. They were part of a generation of political leaders who, through Franco-German reconciliation and overcoming centuries of wars, forged a unified Europe out of the ashes of the Second World War. No more war. I still remember how Mitterrand – I think it was on the occasion of his last speech in Berlin in 1994 – said: “L`Europe, c`est la paix” – Europe is peace. If you try to explain to young people today why Europe is so important and you say it’s because Germany and France no longer wage war against each other, they don’t even listen. The fact that we have achieved this is one of the great successes of European unification.
In politics, as in life, being successful has certain, inherent risks. Because everything that a person has achieved is no longer so important. People’s perceptions are always based on what they have or do not yet have, or what they think they will lose. When I speak in my capacity as Finance Minister – something I am not doing today – of the debt brake we have in our constitution, I would have placed large bets at the beginning of the legislative term that we would never be able to observe this debt brake. We started 2010 with a deficit of 86 billion. Now, I’m being criticised because we still have 18 billion outstanding. You see how success can make itself redundant.
If the European project is to continue, if we want to continue to enjoy and win the support of our sovereign, the people of Europe and the European population, in accomplishing this goal, we must explain why Europe is still relevant in the 21st century. The answer is simple. And Mario Draghi is the ideal person for this award, as his life so far has been a shining example of this answer. He has long borne global responsibility at the World Bank, the Financial Stability Board and now at the European Central Bank, a major player in maintaining global stability. In this world of globalisation, we will all become irrelevant this century if we fail to transform Europe, step by step, into a capable and unified entity. That’s the real reason. That’s why we can say, if the European project hadn’t already begun 60 years ago, it would be high time to start it now. We have achieved much in the way of European integration. Simply put, we would not be here today if Europe were not united.
I was there – I must mention this here in Potsdam – when Louis Ferdinand brought a letter to Federal Chancellor Kohl from the then-Chairman of the State Council of the GDR with the salutation “Your Imperial Majesty”. The letter was written in perfect, golden letters. The question was clear: It had been Frederick the Great’s desire for Sanssouci to be his final resting place. Could his wish finally be granted? Afterwards, the three of us discussed together – I was head of the Chancellery then – what we should do and how we should respond. Louis Ferdinand’s answer was: when Germany is reunited. That was 1987. Helmut Kohl said, I will accompany his body on the train from Hohenzollern castle to Potsdam. He was criticised for this a few years later. But he had made a promise, and, as with most of the promises he made, he kept it. So quickly does history change.
But, back to the present. We’ve travelled a long way along the path of European unification. It was the right decision to do it gradually since people can only be convinced gradually. The most difficult challenge isn’t in creating a large nation, but rather in continuing to develop and reconcile the identities of the various nations with a new, more modern form of governance that Europe needs. Part of what was previously the responsibility of nations is now regulated at the European level. Step by step: ever closer union. Economic progress first and the rest will follow. This has been the story of European unification since the 50s. Tedious, complicated and bureaucratic progress, yet hugely successful.
Europe is easily the largest economic region in the world. And that’s why the decision to create a common currency for this great economy was the right decision – regardless of the current debate. Take a look at today’s monetary system and try to imagine a world without a European currency – the global economy would be in a much more volatile situation. The euro must play a key role. Of course it is difficult and of course economists cannot imagine that 17 member states – we started with 12, I believe – with 17 national fiscal policies now have a common currency. More wasn’t possible; yet this is how we have always begun in Europe. We also had a Stability and Growth Pact to help us overcome the lack of congruence between monetary and fiscal policies. Not everyone has always complied with the Pact, even the Germans from time to time – but this is not the place for that discussion. What Jean-Claude Juncker said at the introduction of the euro has come to pass: the euro will prove to be the driving force behind further European integration.
Now, we are becoming that which was then not possible through a political union – something that was unacceptable to sovereign nations – and we are accomplishing it step by step. True, we are experiencing a crisis with the euro. The euro crisis is, at its core, the natural consequence of the fact that a common currency for disparate monetary and fiscal policies was always going to be difficult. In the wake of lower interest rates, some have forgotten that the world of globalisation requires rapid adaptation to shifting competitive conditions, in other words, a strengthening of our capacity to compete. This is why different levels of competitive capacity are our biggest challenge, which in turn leads to the TARGET2 balances. It is a consequence of the disproportionate competiveness that cannot be allowed to continue in future.
A common currency puts all national economies under much more competitive pressure. The same could be said for fiscal policy. That’s why the way out of this crisis, despite the difficulties, is exactly the one we are following. The sources of the problems must be addressed where they occur. They originate in the financial and economic policies of the individual countries, and that is where they must be tackled. This is not callousness or a lack of solidarity or vision, or anything else. We do not have the same kind of dynamic reserves as the emerging countries or, hopefully, as the United States of America in the future. Therefore, we can only ensure sustainable economic growth through stable fiscal policy. Our leeway is smaller. We cannot simply grow our way out of debt. That will not work. If Europe does not provide stability, people will not put their trust in Europe or in the European economy.
Therefore, we must solve the problems systematically. In this respect, we have made a lot more progress in Europe than people realise – particularly when they are constantly bombarded with news about the crisis. If you look at the reform measures, even in the fiscal policies of Greece, Ireland, Portugal, Spain, Italy and other countries, the progress is impressive. And everything which has been set into motion with structural measures to improve the competitiveness of several countries is much more than most could have imagined a few years ago. This is also happening. And that is why it is right that we tackle this job by helping people to help themselves – as they say in development cooperation – and by using the mechanism of conditionality – in the language of the fiscal policy maker. There shouldn’t be any false incentives.
Democracy is based on the will of the majority. Democracy tends, therefore, to go with decisions that prefer the easier, rather than the more difficult, path. That’s why, for example, the Central Bank is independent: so that the easy way of avoiding decisions by printing money stays beyond the reach of politicians. It is self-limitation in the terms of checks and balances in our Constitution, and it’s a good thing. If we were to begin to try to solve the problems we are having a hard time solving through fiscal and economic policy via the most convenient means of monetary policy, we would be making a grave mistake. This is why it is independent. And that is why we defend its independence, respect it and put our trust in it – that is the basis for it.
Efforts at reform must be made on the national level, and they are happening. That is the first step. Furthermore, we must develop a better decision-making structure in Europe. This is why we need that which we started with the fiscal treaty, with the Euro Plus Pact and with other treaties: a strengthening of fiscal and economic policy decision-making structures in Europe. That is the second step. This all takes time. And that is why we need a third step, a bailout plan to assist countries in bridging the time it takes for measures to take hold. These three things are clear.
Our problem is that confidence in the financial markets is quickly lost, but slow to win back. And our problem is that Europe is so complicated and the process of decision making in Europe so complex that you can not even explain it to a financial investor before they lose interest. They cannot accept such complex issues, and, unfortunately, they’re correct not to. However, this is how democracy works. I always hear the argument, yes, but is policy fast enough for the markets? Ladies and gentlemen, if policy is not fast enough for the markets, then the markets simply have to wait. There is no other way. We will not abolish democracy just because it may not suit the markets.
In any case, it is not easy to establish trust. But we are heading in the right direction and will have the necessary time. Therefore, we must make a clear distinction between short- and long-term measures. The decisions depend on this framework. They fit together, and what many doubt will come to pass: the euro is and remains a stable currency that will not break apart. Anyone who bets against the euro is going to lose. We will do this step by step. However, it won’t happen overnight.
By the way, I must say that we are not taking irresponsible risks. We are doing everything clearly within the limits of the law and of the Constitution, and that is why I am more nervous about the upcoming elections in the Netherlands on Wednesday – I believe on 12 September – than I am about the delivery of a judgment in Karlsruhe. The ESM does not contravene the Constitution. Not a single one of our European treaties – also in the continuity of jurisprudence of our Constitutional Court – have ever been considered to contravene the Constitution.
We will continue along this path. Step by step, we will strengthen integration, and hopefully soon. The European Banking Authority is the next step. This shows how much confidence people have in the ECB: Everyone agrees that confidence in European banking supervision can only be established when the ECB is heavily involved. There are many challenges facing this task, but supervision of European banking is going to happen. In addition, the four presidents – one of whom we have with us today – are working on proposals to speed up institutional reform in Europe. I think it will happen much faster than many believed possible a few years ago. Of course we will have to take additional steps, but I am confident that we are making progress.
And that is why the word ‘crisis’ doesn’t scare me. Yes, ladies and gentlemen, in our affluent society, we are only able to make decisions – in terms of change – if the need arises. This is what has become known as crisis. Because we live in a world of globalisation with incredibly fast changes and a high pace of innovation. Sometimes we might even wonder: Is mankind actually able to cope with this rapid evolution? This might be a good topic for next year, Lord Mayor. Everything is faster and faster; this impacts our social structures as well as our political structures. In any case, we must not only stand our ground but stand the test of time in this world by constantly adapting. Nothing we have gained in the past is secure in the future. This is nothing new; Goethe spoke of this long ago – if you would allow me to quote: “What you have inherited from your fathers, you must earn over again for yourselves, or it will not be yours.” As Popper taught us, a free, open society is superior to a society that is not free because the former has the opportunity to always learn something new from its failures and mistakes: trial and error. And when we have people who bear their responsibility in such an exemplary manner and are committed – and Europe has always had such people – then I am not worried about the future of Europe. I am not worried about the stability of the European currency. And that is why I am pleased, Mario Draghi, that we are paying homage today to a great European with this prestigious award. Thank you!