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The Single Market and its four freedoms have helped make today’s Britain. There are over 1,000 British companies in Germany, together employing more than 200,000 people. Total British Foreign Direct Investment in Germany currently amounts to nearly €40 billion. As one commentator has noted, someone in Britain can go through a day wholly dependent on it... Others may preach Europe but Britain practises it.
If we do not succeed in making our economies globally competitive and generating sustainable growth then whatever else we do, whatever treaties we sign, whatever structures we build, whatever declarations we sign, will all ultimately be irrelevant. There will be no Social Europe, there will just be an Excluded Europe. If Europe becomes a neighbourhood of economic decline we will not matter in the world and we will have betrayed the peoples of Europe. I know that Germany and Finland understand this clearly. This is a mission for the EU27 and the UK will be at the forefront of this effort.
There are three great problems of Europe’s future we need to solve if we are to ensure that a wider European Union has the flexibility, the legitimacy and the agility to succeed in the 21st century:
But while developing a governance of the eurozone that really works we must equally ensure this leaves the Single Market coherent and intact. The debate on establishing a full banking union shows that this will be complex and sometimes difficult. There are obvious issues for countries not in the eurozone, for whom it will never be acceptable to have a situation in which the eurozone acts as a bloc in Single Market institutions in a way that determines the outcomes before the others have even met. This is not just an issue for eurozone outs. The balance of power within the eurozone, in particular between the more liberal economies and the more interventionist, will be different from the balance in the EU as a whole.
Part of the answer to the problem of legitimacy and democratic disconnect must lie in giving national parliaments a much greater role in the EU. No other institutions compare to their lasting democratic authority. Germany’s Constitutional Court has insisted on decisions being taken by the Bundestag for that reason. We need a system that makes it easier for a citizen of one of our countries to know how they should vote at a national level and whom they should speak to, to get things changed. That is the essence of democracy.
The EU is already a diverse place and with further enlargement it will become more so: by the time all the Western Balkan nations join there will be more than 30 countries in it. Its peoples do and will want different things from the EU. Some will be in the eurozone and some not. Some are comfortable with ideas of federalism, other are not. Some, like Britain, play an active part in foreign and security policy, others find its practice difficult. Some yearn to go further in opening up markets. Others find the idea threatening.
We should recognise and embrace that diversity – it would be a dangerous denial of reality to wish it away. We must respond to what our people and democratic institutions are saying – not just in Britain, but across Europe. We ignore them at our peril. Extremist parties have enjoyed no significant success in Britain or Germany but worryingly that is not true of every EU Member State.
This Coalition Government is committed to Britain playing a leading role in the EU but I must also be frank: public disillusionment with the EU in Britain is the deepest it has ever been. People feel that in too many ways the EU is something that is done to them, not something over which they have a say. The way in Britain Lisbon was ratified without any consultation of the voters has played a part in that. People feel that the EU is a one way process, a great machine that sucks up decision-making from national parliaments to the European level until everything is decided by the EU. That needs to change. If we cannot show that decision-making can flow back to national parliaments then the system will become democratically unsustainable. Subsidiarity must really mean something. Those points may be felt most acutely in Britain but they are not felt only in Britain. We need to approach these hard and multi-faceted issues calmly, honestly and inclusively.
We respect the serious and methodical way in which Germany is tackling them. The British debate tends to be rough and raucous. After so long working together we should know enough to accept those differences. We must each avoid the trap of thinking we know the mind of the other without properly talking it through. We need to talk about Europe because both our perspectives matter to its future. That is why the Körber Foundation’s conference is so timely.
It is obviously in Britain’s interests for the EU to succeed in the tasks I have described and for Britain to play a leading role in it. The eurozone countries must do what they must to resolve the crisis, but the way forward for the EU as a whole is not more centralisation and uniformity but of flexibility and variable geometry, that allows differing degrees of integration in different areas, done in ways that do not disadvantage those that do not wish to participate in everything, and preserves the things we all value.