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Prime Minister Jyrki Katainen: Finland’s success highly dependent on that of EU - Embassy of Finland, London : News & Current Affairs

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News, 15/09/2011

Prime Minister Jyrki Katainen: Finland’s success highly dependent on that of EU

Prime Minister Jyrki Katainen in the Panel Discussion on the Future of Europe

Government Communications Unit 9.9.2011

Ladies and Gentlemen, Dear Friends,

In last spring’s parliamentary elections, Finland’s European policy emerged as a key theme. This was somewhat surprising, since the EU is rarely mentioned in our national elections. Of course, on this occasion great interest was aroused by the debt crisis in the euro area.

Last autumn, I already stated that Finland needs a fundamental discussion on the future of the European Union. I am concerned that we lack a thoroughgoing public debate on Finland’s European policy. There is much talk, but too little dialogue.

That is why we are here today. At this very moment, the EU faces momentous issues which will also fundamentally affect Finland’s future. That is why we need an in-depth discussion of the matter.

Today, I would like to present my views on the future of the EU and, most of all, on how this will affect Finland’s future.

Finland’s success is highly dependent on that of the EU. Decision-making at EU level is therefore of huge importance to Finland’s success. For this reason, it is critical that Finland has an influence within the EU.

Finland cannot rely on its size for influence in international affairs. We must earn our seat at the table.

We can do so by managing our own issues in such a way that Finland becomes an asset to the EU. This can be achieved by participating in solving our common issues in a constructive and professional manner, and by establishing well-functioning personal relationships with our colleagues in other Member States and EU institutions.

In the EU, Finland has enjoyed more influence than its mere size would suggest. This has been true with respect to many issues, particularly in finance and economics. Such power has accumulated through impeccable management of our own affairs, as proactive and practical players who have understood others’ viewpoints, while being careful to avoid harming other Member States. We have shown both skill and the capacity to negotiate. We have also based our actions on a clear and predictable EU policy.

Ladies and gentlemen,

The European Union was originally created around common interests: to guarantee peace by removing unnecessary frontiers and increasing economic integration.

As is well known, the course of this integration has seen many phases, reflecting developments in nation-states’ domestic policies.

At the moment, domestic policy pressures are impacting on EU activities more prominently than ever. The reasons for this are quite understandable and justified. Emotions have been stirred by the debt crisis.

At the same time, we must achieve immediate control over the crisis, assess what has gone wrong and build new rules and operating models.

The present economic crisis has already persisted for a couple of years. It is a new type of crisis, of prolonged duration and changeable in form. Its resolution is not amenable to text-book solutions. It is therefore only natural that opinions vary on its management.

For many, it feels unjust that not everyone followed the common rules governing our Monetary Union. Many ask what right others have to live an undisciplined life and demand that we give them what is not theirs. Solidarity has a different meaning in different parts of Europe. To Finns, it means helping our fellow men and women when they are in trouble through no fault of their own. This sentiment must be taken seriously, because it could easily lead to loss of faith in our joint efforts.

When to this we add political opportunism and opposing ideological goals on the EU’s development, we have a challenging situation, to say the least.

In any case, the fact is that we must deal with the crisis: the EU must be developed and decisions must be taken. Five years from now, we will be able to look back and see who had presence of mind and who not. Who was capable of negotiation and showing the way, if anyone?

Without foreseeing the results, I regard it as important that we make decisions in a way which reinforces the impression of justice and equality within the EU. Forcing through solutions which create serious conflicts of principle between Member States and citizens must be avoided. By this, I mean both the contents of decisions taken within the EU, and the balance between institutions. Whether or not cooperation within the euro area is intensified, we must ensure that the EU27 remains a genuine community.

In the recent Finnish debate on European cooperation, too much emphasis has been laid on what Finland opposes. Now, it is high time that we focused on what Finland wants.

Ladies and gentlemen,

The future of the euro area depends on how well countries resolve their sovereign debt problems. The euro area’s main problem lies in over-indebtedness. Another problem lies in the fact that we have been breaking our own rules for too long, or at least interpreting them very flexibly. This has led to lack of faith in our decision-making. A solution to these problems can be found at national level. Each Member State can take its own actions to narrow its deficit and reduce its debt. Each state can also comply with the rules we have approved together. Although nothing can be achieved overnight, these are the measures we must take to remedy the situation.

While the community can alleviate a temporary liquidity shortage or market pressure, such measures cannot heal the illness. In the midst of this crisis, we have managed to create new rules for the euro, which will become official in the near future. The impact of these rules should not be underestimated. All we have to do now is comply with them. As we say in Savo, the project is almost done, we just need to get started.

The best remedy to the euro area crisis would be each Member State publishing a transparent programme, including tangible measures and defined schedules, on how to balance its budget, reduce indebtedness and enhance competitiveness. Italy, Spain and France are currently drawing up such programmes. I hope that these programmes and the equivalent in other countries will inspire firm confidence on the markets. We cannot afford to fail again.

The EU’s structure and balance of power have changed, making decision-making different to before. While difficult, such decision-making can be determined under duress.

Calming the economic situation has required decisions to change the dynamics of the EU. Instead of developing under its own initiative, the EU has had to respond to crises of external origin.

Key decision-makers have included the euro group, the European Council involving the Heads of State, as well as a new organ of the Heads of State, 'the euro council', an unofficial but nevertheless a decision-making body.

Within the activities of the euro council, situations have occurred which have shaken institutional power relations. The Commission’s role as a preparative body has been challenged and the community method forgotten.

For small countries, this is alarming. The situation is not only about power politics between Member States of various sizes, but about the unity of the entire EU27. The more decisions are taken outside structures, or with no basis in the rules, the more lacking in transparency decision-making becomes. This aggravates the risk of fuelling the feeling of injustice. Democratic decision-making is also at risk.

Member States are now divided more clearly into various groups. The most prominent dividing line lies between euro area countries and the other Member States. Within the euro area, a differentiation exists between creditworthy countries and those relying on support programmes. Countries with the best credit rating, AAA, form their own group. Other traditional divisions include the new and old Member States, net beneficiaries and net contributors, or Schengen and non-Schengen countries.

There are strong signs that integration is becoming increasingly differentiated. Countries participate in various ways. A good example is the propositions made by Federal Chancellor Merkel and President Sarkozy on establishing regular summits of euro area Heads of State, and appointing a permanent president for them.

The Lisbon Treaty has already been in force for more than a year. However, its reforms – including new players and simplification of decision-making – are only partially functioning. In the Common Foreign and Security Policy in particular, it is evident that the Lisbon Strategy target has not been met as hoped. The European External Action Service has been too slow in getting started. A key reason for this lies in the struggle with ongoing economic problems, which has sidelined many other important issues.

Ladies and gentlemen,

As a member of the EU, Finland is more prosperous and secure than it would be as a non-member.

The EU has been a successful peace project. Promoting peace and stability still lie at the core of its activities, the enlargement process being a key tool in this. Peace and stability are promoted not only by the trade and customs union – the EU is also a politically integrated community.

It is justifiable to say that the peace project has been the most important common denominator in integration, to the extent that it has seemed to excuse the bending of other jointly agreed rules. I firmly believe that the current EU27 is a solid community whose bonds can withstand adherence to these rules. It is possible to require a reduction in indebtedness without compromising peace and stability.

The European Union, with Finland as a member, is once again at a crossroads. Nobody is fully aware of what lies ahead. Finland must use every means of exercising its influence on the EU, but in doing so we must know what we want.

Finland cannot turn its back on Europe, nor does the answer to Finland and Europe’s challenges lie in returning to the past.

Why? Because a functioning EU is beneficial for a small country. For a small country like Finland, it is much harder to succeed alone.

For myself, European cooperation has always been a choice based on values and principles. Above all, however, it is a practical tool for promoting Finnish welfare. Cooperation is a means of reviving troubled national economies, as well as finding common answers to challenges such as population ageing, intensified international competition and climate change.

The answer to these challenges lies in improving Europe’s ability to function, rather than in ’less Europe.’

What kind of European Union does Finland want?

Finland wants a European Union in which each country takes care of its own public finances.

On an exceptional basis, we have had to help the countries in crisis, Ireland, Greece and Portugal. This has been necessary in order to avoid economic paralysis throughout the euro area. But loans to help other Member States must be the exception – a rare exception – and never the rule. In the first and last instance, each country is responsible for its own economy.

We need more effective coordination of economic policy. More effective cooperation would benefit Finland and other countries that are managing their economies successfully. It would enhance discipline, predictability and our capability to intervene in time.

At the Euro Area Summit in July, the President of the European Council was asked to prepare proposals for enhancing the efficiency of working methods and crisis management mechanisms.

Federal Chancellor Merkel and President Sarkozy have already presented their ideas on this subject. They propose measures such as regular summits for euro area leaders, to oversee the implementation of the Stability and Growth Pact.

Initiatives like these are exactly what Europe needs. Although crisis management and bearing responsibility never top popularity polls, we must be bold in our attempts to negotiate this crisis.

I warmly support many of Mrs Merkel and Mr Sarkozy’s ideas. Regular summits between euro area leaders could strengthen the integrity of the euro area and clarify decision-making. However, within the framework of the current treaties, this requires the agreement of clear rules for the summits. Their preparation and follow-up should lead to no new bureaucracy – support should be sought from existing Commission resources.

Merkel and Sarkozy also propose the inclusion of a debt brake in Member States’ constitutions. While I think this is a good idea, I believe that thought should be given to the most appropriate mechanism for each Member State.

I made a proposal of my own to President Van Rompuy, for more-robust representation of the euro area at G20 and other international forums. For Finland, strong advocacy of the views of all euro area countries is essential, even when only a few Member States are represented.

Lately, common euro area bonds, or eurobonds, have also been a subject of lively discussion. This idea would see euro area countries jointly seek financing on the markets, based on a common interest rate.

I find this idea problematic in many ways. First of all, eurobonds would not ease the current situation, since their creation would take years. Secondly, eurobonds would encourage a spendthrift fiscal policy, even if accompanied by incentives for strict fiscal management. Thirdly, I am deeply troubled by the idea of joint responsibility for debts.

Finland wants a European Union where it pays to work, innovate and manufacture products – a Europe where it pays for enterprises to invest and hire more employees.
We need the ability to overcome intensifying international competition. Europe is falling behind the emerging economies. Growth calls for structural economic change and a well-functioning, Europe-wide internal market.

Even within the internal market, the financial crisis has led to introspection. The EU simply cannot afford this. The Commission must act more forcefully to make the internal market a reality. In particular, potential growth sectors, such as a digital internal market, must be energetically promoted.

Europe abounds with ideas and innovations. Our educational institutions and enterprises are world-class. Take, for instance, Aalto University or Finnish gaming companies. However, compared to, say, our American competitors we are beset by a key impediment: even small companies based in California’s Silicon Valley have direct access to markets with over 300 consumers, whereas we in Europe still run into national barriers.

With renewed urgency, competitiveness must also become a permanent preoccupation of the European Council. Regular, country-specific reviews of competitiveness gaps, and the conclusions drawn, are already in the new economic rule books. But nothing has been decided on their practical implementation. Added pressure via peer review is a minimum requirement. In addition, in certain cases, would it even be possible to impose sanctions on an uncompetitive Member State that is endangering its own and the entire Union’s economic stability? The fact that differences in competitiveness are a key reason for the euro area crisis shows that such differences are not solely the problem of single countries.

The European Union’s budgeting process is too unwieldy to meet modern world challenges. Spending must be made more flexible. More funds should be targeted at research, incentives for creativity and development of world-class expertise. Funds distributed within the framework of cohesion and structural policy must promote competitiveness. The Commission is responsible for ensuring that this happens. To be eligible for structural funds, Member States should comply with the rules governing fiscal discipline.

Dear Friends,

Recently, the economy has dominated the European agenda. But there is much more to the EU. In this context, I would like to briefly highlight three themes I regard as important.

One is energy and the climate. It sometimes seems that climate change has been forgotten. Go back a few years and no topic was more important, at least in the public eye. Now it has all but disappeared from view.

However, the problem itself remains. In fact, the clock is ticking relentlessly – we cannot afford to compromise on the EU’s common efforts to curb climate change. That is why the Finnish Government has prepared a climate policy EU strategy in support of attaining our climate targets.

Another theme is immigration policy – both asylum policy and work-related immigration. Europe must continue to be attractive to young people who wish to work and build a common future. With our own people rapidly ageing, we need new blood. It would be very short-sighted to close our borders.

However, this does not reduce the importance of effective border control – on the contrary. In a Europe characterised by free mobility, Finland’s borders are controlled in Valletta, Malta as much as in Vaalimaa, Kymenlaakso.

That is why we need skilled border guards, common rules and fluent communication.

I am extremely worried by the anti-immigration sentiment being voiced around Europe. While open discussion of immigration policy must be possible, the issue of human dignity cannot be called into question. Unconditional human dignity is inviolable and universally applicable.

Thirdly, a few words on the EU’s global role. We have not proceeded as hoped in developing a joint diplomatic capability, despite high expectations after the Treaty of Lisbon. Europe is in danger of remaining on the sidelines in international politics.

For me, closer relations between the EU and Russia are important. These relations have not always been problem-free, and it is not always easy for foreign enterprises to operate in Russia. On the other hand, hundreds of foreign companies operating in Russia are very comfortable about their market prospects. The European Union is Russia’s largest trading partner. Russia is a resource of such magnitude to us, that closer cooperation would pay. I am confident that Russia’s membership of the World Trade Organisation marks the beginning of a new phase in EU-Russia relations.

It is equally important that we develop the partnership between the EU and the United States. But we must also understand the changes that have occurred in the United States. Their gaze is focused farther afield than previously, particularly on Asia. Americans no longer feel so clearly responsible for Europe’s security.

We Europeans must assume more responsibility for the security of ourselves and our neighbouring regions. The recent turmoil in Northern Africa is a topical example of why this is important. The EU must play a major role in supporting the efforts of the people of Libya, Tunis, Egypt and other nations in achieving stability and democracy.

In uncertain times, politicians must affirm people’s confidence in the future. Such confidence is based on responsible action, which is not always easy.

I strongly feel that Europe’s best days lie ahead. The key issue is our ability to renew ourselves. We need to act in a way that convinces both ourselves and the outside world. Over the next few years, because public debt and deficits can only be solved at national level, nation states will play a prominent role in this respect.

We need stricter rules and stronger discipline.

The EU plays a key role in terms of growth, competitiveness and innovation. Can we use our resources effectively and will we permit unobstructed internal markets for new ideas?

To take new steps in deepening and enhancing integration, we need to foster the feeling of a fair and accountable Europe. Institutional balance and use of a governing structure will play an increasingly important role in this.

For Finland, membership of the European Union and monetary union has been a choice worth its weight in gold. Thanks to the EU, we are in many ways a stronger, more prosperous country. As an EU member, we have a say at tables where issues that affect us will be decided in any case.

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Updated 20/09/2011


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