Chapter News

The Euro and the Future of Europe

Speech by Vice-President Dombrovskis at the Humboldt University: | Berlin, 21 September 2015

President, distinguished guests, fellow Europeans,

It is a privilege to be here at Humboldt University, where many eminent speakers have stood in the past and set out their vision on the future of Europe.

And it is wonderful to be back here in Berlin.

When I was here in April, I delivered a speech in the Axel Springer building.

I remember looking out at the view where the Wall once stood that separated this city.

As we all remember, it was a quarter of a century ago, when the Wall came down. And Germany was finally reunited.

Reunited after 45 years of separation.

I was a student in Latvia at the time.

I will forever remember the scenes of euphoric Berliners – reunited with their fellow compatriots on top of that wall.

And Germany was not the only country clamouring for change.

From the Baltics to the Adriatic. From Berlin to Bucharest.  Europeans were hungry for freedom, peace, security, and prosperity.

In my own country, the Republic of Latvia, independence was finally fully restored in 1991.

Freed from the Soviet oppression – like so many fellow Europeans – we turned our attention to building a better future.

We turned our attention to the European Union:

An inclusive community of nations. With the values we fought for at its core.

Greater economic and social prosperity, for individuals and society as a whole.

Security from foreign aggression.

Human rights promoted as a fundamental basis of people’s wellbeing.

And – fundamentally – peace.

Jean Monnet, Walter Hallstein and their contemporaries conceived the idea of the European Economic Communities not only to rebuild Europe’s economy, but also to ensure peace among nations that were at war just few years before.

Latvians saw membership of the European Union the means to fulfil these basic human aspirations.

Years later, we saw joining the Euro as a consolidation and confirmation of our anchor in Europe.

So – after twenty-five years of breath-taking change, how well has the EU delivered against this promise of peace through economic integration and prosperity?

Let me start with the achievements that are so often taken for granted.

Let me start with peace.

Hard lessons have been drawn from the two world wars, from the cold war and from more recent conflicts in the Balkans.

Through ever-closer cooperation, we have ensured that the closest contact with war for most of Europeans is through a history book.

In 2012, the Nobel Peace Prize was awarded to the European Union.

It gave formal recognition to the peace, human rights and democracy that has been carefully preserved across our continent.

Yet – it is constantly being tested.

Not a day goes by without us seeing tragic images of those fleeing war-torn countries – often risking their lives – in search of stability and security in Europe.

Conflicts are raging in our Eastern and Southern neighborhood.

Russia’s illegal annexationof Crimea and violation of Ukrainian sovereignty demonstrate that freedom, peace and security within our borders is not an abstract consideration.

Certainly not for the people of the Baltic States, which are particularly vulnerable and still live with vivid memories of the Soviet occupation.

In the case of Ukraine, the testimony of European solidarity and strong cooperation came in a unanimous decision of EU members to impose sanctions on the aggressor.

We stood by our values of democracy and the right to sovereign integrity of our close partner.

Freedom, peace and security must be preserved through a clear and united stance towards those who violate them.

But their essence will only be preserved through continued European cooperation, integration and solidarity.

That leads me to the EU’s economic achievements.

At the heart of the EU’s success is the promise to promote economic prosperity.

To make Europeans better off through greater integration.

The Single Market has achieved just that.

Between 1992 and 2008, the free movement of people, goods and services helped create almost 3 million new jobs.

These benefits could be doubled if remaining trade barriers were removed, and if the digital single market was boosted.

The EU is also about economic convergence.

352 billion euros – almost a third of the EU budget – are set aside for Cohesion Policy up to 2020.

EU regional policy funding has offered countless opportunities to the economically less developed parts of the EU.

It has invested in people, businesses, infrastructure and the environment.

This means re-training people to equip them with skills necessary to find new jobs.

It means building new roads or water treatment plants.

It means helping companies to become more competitive.


This is a tangible expression of European solidarity and inclusiveness.

European solidarity and inclusiveness is particularly important within the Euro area.

Today, 19 Member States and over 330 million people share the Euro as a common currency.

The euro makes a powerful single market an even more attractive proposition to investors.

It has reduced transaction costs for individuals and for businesses.

It accounts for a quarter of global exports, more than 15% of global investment.

A quarter of global foreign exchange reserves are held in euro.

Some countries outside the Euro area use the Euro as their official currency, either with a formal arrangement with the EU, such as Andorra or the Vatican City, or more informally such as Kosovo and Montenegro.

And numerous countries peg their currency to it.

Not just EU Member States such as Denmark or Bulgaria, but also countries further afield such as Cape Verde or countries of West African and Central African currency unions.

For these countries, the Euro acts as a strong anchor, or reference currency.

Contrary to some misperceptions, the crisis has not fundamentally affected the Euro as a currency.

Most Europeans still support the Euro.

According to the most recent EU Eurobarometer survey, support for the Euro has almost reached pre-crisis levels, with 69% of those surveyed in favour of the Euro (compared to 70% in 2007).[1]

And the markets have maintained their confidence in our currency.

Even at the height of the Eurozone crisis, the Euro’s external exchange rate was closer to its historic maximums than to minimums.

More recently, markets reacted calmly to events in Greece. There were very little spillover effects to other countries and the stability of the Euro area was not questioned.

So, contrary to the sceptics, the crisis has not dented support for the Euro.


The Euro remains a ground-breaking political and economic project.

Over time, the sum of European achievements has been a remarkable journey towards economic development and convergence.

When 75 million Central and Eastern Europeans joined the EU in 2004, their average income of was half of the income of the old EU member states or EU15.

A decade later, it increased to 64%, almost two-thirds.[2]

Since EU’s enlargement to the east, the pace of change in countries like Latvia has been phenomenal.  Latvia’s nominal GDP has increased almost threefold[3].

In real terms, purchasing power has risen by over 50%.[4]

And this is despite the country having experienced the deepest economic crisis in the EU in 2008-2010.

Economic convergence has made the EU both attractive and unique.


But to continue powering convergence, serious change is needed.

I will offer just three reasons.

First, there are immense long-term challenges for the European economy to remain competitive and sustainable in the global economy.

Europe’s workforce is shrinking.

It has to create enough wealth to finance a non-working population, which will be growing in coming years and decades.

By 2030, only 1 out of 2 citizens will be of working age.

So we are faced with two real options.

Either we address our demographic challenges, with the resources and capacity that requires and we recognize the valuable input skilled immigration can make to reverse the trend.

Or our role in the global economy will continue to decline and it will be increasing difficult to maintain the European level of prosperity.

To give an example – in the past decade, Europe’s share of global output fell by 5 percentage points. Meanwhile China’s share of world GDP almost doubled.[5]

Global competition is fierce and it is becoming fiercer.

Chancellor Merkel often says that Europe has 7% of the world’s population, 25% of its GDP and 50% of its social spending.

Europeans work fewer hours and have higher salaries than most of their global competitors.

Europe’s welfare system is an inherent element of the European model.

At the same time, it is among the most costly in the world.

In coming years and decades we will have to address Europe’s demographic challenges and ever fiercer global competition.


Second, there was an uncomfortable lesson from the crisis.

Many Member States have not used the stability they gained by joining the Euro to adequately address their economic challenges.

Once the hurdles to join the Euro were overcome, efforts to reform quickly faded.

Nominally, Europe’s prosperity and convergence had been improving before the crisis.

Yet beneath this good news lay deep economic imbalances.

Imbalances ranging from large current account deficits to excessive public and private debt.

At the same time, the financial sector was ill-supervised.

It quickly built up large stocks of complex financial instruments – derivatives and so on – which later turned out to be not as safe investments as one thought. Lending practices were often irresponsible, without due evaluation of the risks.

Available financing was far too often directed to consumption, housing and asset bubbles rather than to productive investment.

These trends concealed that – in reality – many Member States were producing less and less competitive goods or services, and ran bigger and bigger trade deficits.

This lack of productivity and competitiveness – concealed by unsustainable borrowing – was laid bare by the financial crisis. A deep recession rapidly followed.


And third, while the Economic and Monetary Union should be a means to address our long-term challenges, it did not prevent the buildup of economic imbalances. Economic and Monetary Union is as yet incomplete.

The EMU is incomplete by the standards of economic theory on optimum currency areas.

And the EMU is incomplete by the standards of those who proposed it in the first place.

In 1989, when Jacques Delors set out his vision of an economic and monetary union, he was very clear.

And I quote:

“Monetary union without a sufficient degree of convergence of economic policies is unlikely to be durable and could, in fact, be damaging to the European Community.”[6]

The Delors report recommended clear fiscal rules for Member States.

It also recognized that – and I quote:

“In order to reduce adjustment burdens temporarily, it might be necessary in certain circumstances to provide financing flows through official channels.”, but (…), “on terms and conditions that would prompt the recipient to intensify its adjustment efforts.”[7]


So how does the Economic and Monetary Union score against this?

When the Euro was introduced, in order to join the new common currency, Member States had to fulfill a set of key convergence criteria.

But the economic and fiscal policy coordination that followed remained weak. No financial backstops within the Euro area were envisaged.

Only in response to the Eurozone crisis were a number of these weaknesses addressed.

In the response to the crisis, we have introduced:

an upgraded macro-economic governance framework to better coordinate economic policy among Member States, the European Semester.

A macroeconomic imbalances procedure to detect and address economic imbalances early on.

more sophisticated fiscal rules, the six-pack and two-pack regulations  and the Fiscal Compact.

a financial backstop – the European Stability Mechanism to provide temporary fiscal support to Member States in difficulty, against necessary policy conditionality.

we have created a Banking Union to weaken the bank-sovereign loop and ensure financial stability.


Now, a word on theEuropean Central Bank’s monetary policy tools.

After all, it was the famous Mario Draghi’s “whatever it takes” that helped to calm down financial turmoil in Europe.

“Whatever it takes” was referring to outright monetary transactions – ECB’s commitment to buy Member States’ bonds in the secondary market in unlimited quantity if necessary.

Recently, the European Court of Justice confirmed that outright monetary transactions are within the mandate of the ECB.

The ECB is also helping the economic recovery with accommodative monetary policy, not least with quantitative easing.

But there is still a long way to go to achieve economic convergence.


Ladies and Gentlemen,

Against these threefold challenges:

Immense long-term challenges.

Underlying economic weaknesses.

A yet incomplete EMU.

it is no surprise that Europe’s economic recovery has been slow and uneven.

Effects of growth are still to translate into enough jobs and enough money in people’s pockets.

Unemployment is expected to fall this year to 9.6% in the EU and to 11% in the Euro area.

Around one in ten still out of work.

This is clearly unacceptable.

Only last year, growth in the Euro area started to pick up.

This year, real GDP growth is expected to be 1.8% in the EU and 1.5% in the euro area.

As we see, economic recovery remains slow.

It is being bolstered by temporary tailwinds: low oil prices, a favourable Euro exchange rate and an accommodating ECB monetary policy.

Even more of a cause for concern is that many people are losing trust in the European project.

We must stop these trends. Rresolve tensions.  Restore trust.  And come out stronger and united.


To do so, we need to get back to the basics.  We need to return to an economic and societal vision that has withstood the test of time.

We must base our work on the simple objective of economic convergence towards higher living standards.

As the Delors report highlighted, economic convergence is absolutely necessary to make Europe’s Economic and Monetary Union sustainable over the long term.

We now need a new push for economic convergence to provide real value added to Europe’s citizens.

To preserve and raise their living standards.

We have to convince people from Riga to Berlin, from Athens to Paris that they are better off WITH the EU, its internal market and a strong common currency than WITHOUT it.

Economic convergence is not about uniformity. Economic policy must be adjusted to the specifics of each Member State, its economic structure and its economic cycle.

Economic convergence is about creating in every Member State economic structures that are resilient and can adjust to change.

They should allow businesses to grow and people to seize opportunities – sometimes against the resistance of special interest groups.

They should support people when economic difficulties hit them and help them get on their feet again.

You can also think of it as convergence towards a highly competitive Social Market Economy.

An economy that, as Alfred Müller-Armack put it, “on the basis of competition unites free entrepreneurial initiative with social progress”,[8]

An economy that protects diversity while creating unity and stability. An economy that is globally competitive. And that, in the words of President of the European Commission Jean-Claude Juncker, “works for the people, and not the other way around”.


These challenges are not confined to one Member State alone.

They are faced by all Member States, big or small, north or south, east or west.

So let Europe, and its Economic and Monetary Union be a catalyst to address them together.  Let’s support countries to capitalise on their comparative advantages.

And converge towards the top.

Not race to the bottom.

Rebuilding trust and converging towards a highly competitive social market economy is one of Europe’s major challenges today.

The hard part is how to get there.

Economic convergence is at the heart of the recently-published report by the Presidents of five EU institutions.

The report sets out a common vision towards completing Europe’s Economic and Monetary Union.

As the Commission’s Vice-President for the Euro and Social Dialogue, it is my duty to coordinate this process.



Ladies and Gentlemen,

Many of the speeches delivered at this university over the years, have set out visions to change Europe.

What Europe indeed needs is a big vision, and also many small steps to get there.

This is also the approach of the Five Presidents report.

Let us start ‘deepen the EMU by doing’. Reform the structure of our economy and strengthen economic governance within the existing Treaty.

But let us keep a clear sense of purpose – economic convergence.


To strengthen economic recovery and to facilitate convergence we concentrate our effort in three areas – boosting investment, implementing necessary structural reforms and maintaining fiscal responsibility.

Investment in Europe has fallen by 15% since the crisis. And it did not recover as fast as, for example, in the US.

The level of investment in Europe is still substantially below its longer-term “sustainable” level of around 20-21% of GDP.

To fill this shortfall, we have launched the Investment Plan for Europe, also known as the “Juncker Investment Plan”. It will mobilize €315 billion of public and private investment over the next three years.

A European fund for Strategic Investment will support projects in areas such as infrastructure, research and innovation. A substantial part of the Plan is directed to support lending for small and medium sized enterprises.

We are also working to diversify sources of financing for the real economy.

In addition to bank lending, we should facilitate financing from capital markets. The Banking Union will be complemented by Capital Markets Union, a single market for capital for 28 countries.

Boosting investment alone, however, is not enough.

It will only result in jobs and growth if we combine it with structural reforms to strengthen economic competitiveness.


There are structural reforms to be implemented at both EU and Member State level.

At the EU level, this is largely about deepening the Single market, especially in areas like services, energy and digital market.

The Single market is Europe’s strongest lever to create new opportunities for economic growth and jobs creation. It is also an essential ingredient for economic convergence within the EMU.

To name just one example, completing the Digital Single Market could contribute €250 billion to our economy over the next five years and create hundreds of thousands of new jobs.

Structural reforms at EU level also means better regulation, doing at EU level things with clear European value-added.

Economic integration can create many opportunities. But it is structural reforms that enable Member States to grasp these opportunities and to make their economies more resilient.

Thus the main responsibility for structural reforms lies with Member States.

Product and service markets need to be made more efficient.

It is simply unacceptable that people are shut out of jobs because of some professions remain closed.

At the same time, we are calling for the tax burden to be shifted from labour to areas that are less detrimental to growth.

Areas such as consumption, property or capital.

Labour markets and social policy must be reformed so they allow workers to seize opportunities and help them get on their feet again.

In many countries, we need to address the problem of a segmented labour market – with strongly protected jobs for some and very weak protection for others – mainly newcomers to the labour market.

The result is very high youth unemployment in these countries.

Youth unemployment is one of the most pressing social problems today.

In the EU, we have already created programmes such as the Youth Employment Initiative to provide employment or training for young people.

When dealing with labour market reforms, flexicurity should be the common leitmotiv.

This means:

A more flexible labour market enables workers to quickly grasp new job opportunities, encourage companies to recruit when they can, and allow them to adjust their workforce when necessary.

Better social security systems that matchlabour market flexibility with measures that support those who are suffering from the effects of harsh economic developments.

Equipping workers with the right skills to quickly find another job in rapidly evolving working environment.

Provide targeted financial support to those at risk of poverty.

As regards labour market reforms, social partners – employers and employees have an important role to play. They are well-placed to ensure the right balance between economic opportunities and good employment conditions.


Ladies and Gentlemen,

Many reforms are ultimately the responsibility of Member States.

But reforms are in the interest of the entire EU.

How can this be reconciled? How can economic convergence be achieved?

The European Semester of economic policy coordination is an important part of the answer.

Every year, based on the European Commission’s economic analysis, and together with Member States – national parliaments, governments and social partners, we identify reform priorities in each Member State.

We systematically monitor their implementation.

European Commission is doing everything it can to use the full potential of the European Semester, to make it more focused, improve transparency, and involve stakeholders.

For the first time this year, we have broadly consulted on our analysis before giving reform recommendations. The rationale is to strenghten national ownership of reforms and, thus, improve their implementation.

I have myself travelled to most Member States, including Germany, to discuss our economic diagnosis with governments, parliaments and social partners.


One of the key elements to ensure economic convergence is competitiveness.

As Five Presidents report puts it, and I quote:

“Euro area governance is well established for the coordination and surveillance of fiscal policies. It needs to be improved in the broader and increasingly central field of competitiveness”.

To strengthen competitiveness, the Five Presidents’ Report suggests that a national competitiveness authority should be created in each Member State to follow both wage and non-cost competitiveness developments.

But we may need to go further, beyond the European Semester and a strengthening of national structures.

We may need to make the economic convergence process towards more resilient economic structures more formal and binding over time.

We need to develop common benchmarks and standards for functioning product, services and labour markets, competitiveness, business environment, public administration and certain aspects of tax policy.

This is a challenging task, with numerous questions for economists and lawyers.


If economic reform is the heart of economic convergence, then fiscal responsibility and financial stability are the legs on which it stands.

Fiscal responsibility and financial stability are preconditions for economic growth and convergence.

There is no such thing as a sustainable economic growth without sustainable public finances.

And we certainly should avoid a repeat of the recent sovereign debt crisis.

There are significant differences between EU countries.

While Estonia has the lowest public debt level in the EU – just over 10% of GDP, Greece has now reached some 180% and Italy is around 130%.

We need to take into account different situations in different Member States.

Member States with excessive deficits need to continue their adjustment, while those with available fiscal space can use it to stimulate investment and the consumption side of the economy.

For good reasons, the EU has strengthened its fiscal rules in the wake of the crisis.

With the introduction of the six-pack and two-pack EU regulations and with the Fiscal compact we have stepped up fiscal governance.

We need is to ensure responsible and growth-friendly fiscal policies.

This applies all the more in a currency union.

But these rules have not resulted in a stronger consensus on fiscal policy across Europe.

For some people in Europe, the European Commission is an enforcer of ruthless austerity. For others – not least in this country – we are far too generous in the application of the rules.

Let me reassure all sides that the Commission faithfully applies the rules.

Today, the heavy lifting in terms of fiscal consolidation is behind us.

The Euro area overall fiscal stance is now broadly neutral.

But efforts are needed to reduce the debt burden over the long term.


Ladies and Gentlemen,

Reforms are often difficult. It takes time until they take effect. But they do pay off.

That is my experience in Latvia. There are three lessons I take home with me:

One, we frontloaded the necessary adjustment and reforms.

It helped to regain financial stability quickly and with this to return to economic growth quickly.

We were back to y-o-y growth already in the second half of 2010 and, for several years, Latvia was the fastest-growing EU economy.

We also accelerated the use of EU funds as a way to stimulate the economy.

Two, we worked very closely with social partners and other stakeholders – throughout the process.

And three, while doing the adjustment, we created an additional social safety network to address the social consequences of the crisis. To help those mostly affected by the crisis – first and foremost the unemployed.

Reforms are paying off.

That is also the experience from Ireland, Portugal and Spain.

All these countries had to undergo very deep, unpopular economic reforms.

Today, like Latvia, they are among the fastest growing economies in the EU.


And it is the experience even from Greece. For years, adjustment and reforms were delayed.

But while delaying the reforms Greece was not able to ensure financial stability.

And without financial stability it was getting into deeper and more protracted recession.

However, last year things started to change.

Greece was broadly track with the programme; the Greek economy was finally growing; investment started to pick up; unemployment was declining, around 100’000 new jobs were created; Greece was delivering on the fiscal targets and even tapped the financial markets.

We were even discussing with the Greek authorities how with a help of some precautionary arrangement Greece will return to the market financing.

The political dynamics, however, led Greece into different scenario.

As a result, Greece’s economic performance worsened once again, fiscal and financial instability returned, capital controls were introduced.

At the beginning of the year, we were forecasting 2.5% growth for Greece this year. Now the forecast is some 2 – 2.5% recession.

But the underlying growth potential is still there.

If the reforms agreed in the new ESM programme are properly implemented, Greece can grow again quite quickly.

The European Commission continues to support Greece in this process, with both financial and technical support.


Let me offer the example of Poland and Ukraine.

Let’s remember Poland and Ukraine at the beginning of the 1990s.

Two neighboring countries of roughly similar size and GDP levels.

In the 1990’s, Poland was implementing major structural reforms – so called “shock therapy”.

Ukraine was delaying the reforms and allowed oligarchs to gradually take control of the economy.

Today, we can compare the results.

In 1990, the Polish economy was just 20% bigger than the Ukrainian economy.

By 2012, the Polish economy was three times bigger. Polish per capita incomes are now five times bigger than in Ukraine.

Poland is a prospering Member of the EU. Its former Prime Minister, Donald Tusk, is the President of the European Council.

Ukraine’s economy is suffering.

Giving Ukraine the perspective of EU accession is a remote idea and beyond what many EU Member States could currently accept.

And here we are comparing the situation before annexation of Crimea and conflict in Eastern Ukraine, which are adding another dimension to Ukraine’s woes.


Now let me move to the fourth element of convergence – financial stability.

The Delors report[9] was based on the assumption that, in an internal market, the banking and financial system would integrate more or less automatically.

But the crisis has shown us clearly that this is not the case.

As long as the banking sector remains under national control it will remain fragmented, with serious risks for the EMU.

There was little alternative to building a Banking Union, with its Single Supervisor and Single Resolution Mechanism to wind up failing banks.

Banking Union also sets clear bail-in rules in case of the bank failures, instead of bail-out.

This ensures that taxpayers are not first in line to pay for banking sector mistakes.

Ideally, the Banking Union also requires that depositors’ confidence in banks does not depend on the financial situation of individual Member States.

In a monetary union, confidence in the banking system is not just a matter for Member States. It is in the interest of banks and citizens in the Euro area as a whole – to avoid financial crises.

This is why the Five Presidents’ Report puts the European Deposit Insurance Scheme back onto political agenda of the EU.

In the coming months, the European Commission will announce proposals for a European Deposit Insurance Scheme, starting with a re-insurance scheme for national deposit guarantee schemes.


Ladies and Gentlemen,

Sooner or later we will need to consider a Treaty change.

The Commission goes into this process with an open mind.

We are the facilitator in this process.

Many Member States, academics, social partners have shared their ideas over the summer.

At the end of the day, we will have to shape consensus around common projects that are shared by all Member States, and – most importantly – to which the European people are willing to subscribe.


From a personal perspective, let me mention four principles that underpin this process:

First, any further steps must take into account the nature of the EU as a system based on unity in diversity, as a “homeland of our homelands” as Vaclav Havel once put it.

The Delors report was very clear on this: “even after attaining EMU, the Community would continue to consist of different nationals with differing economic, social, political and cultural characteristics.

The preservation of this would require (…) a balance to be struck between European and national interests.”[10]

Any attempts to steer and control the European economy fully through central institutions in Brussels will fail.

European economic policy-making must continue to be based on clear rules and commitments, and on a system of checks and balances.

The EU institutions will have a strong role to play. But so will national governments and parliaments. And so will market forces which can give warning signals when policy makers go astray.


Second, more risk sharing must go hand-in-hand with stronger rules and more sovereignty sharing.

This fundamental principle has underpinned everything we have done since the crisis: like the creation of a European Stability Mechanism as a robust firewall, at the same time strengthening the EU fiscal and macroeconomic framework.

Let me give an example:

As President Juncker said in his State of the Union speech a couple of weeks ago, over the medium term, Europe may need to develop the ESM to better deal with shocks that cannot be managed at national level alone.

But we can do so only if Europe is prepared to take further steps towards joint decision making.

A future Euro area treasury could be the place for stronger collective decision making.


Third, completing EMU must not open up new rifts with those Member States that do not share the common currency.

Deepening the EMU we must be open and transparent with non-Euro countries.

Initiatives concerning the EU internal market should be done in the framework of 28 EU Member States.

And fourth, any further step towards European integration needs clear democratic control and accountability.

The closer we come to core elements of public policy, the stronger this need becomes.

With these four principles, and powered by the potential of the European economy – still the largest in the world – we can restart the convergence process inspired by the principles of a social market economy.

And build a genuinely resilient Economic and Monetary Union.

Ladies and gentlemen,

I cannot resist the temptation to conclude this speech with a reference to the founder of this university, Wilhelm von Humboldt.

One of his key essays was about an attempt to define the limits of the effectiveness of public action – “Ideen zu einem Versuch, die Grenzen des Staats zu bestimmen”.

Very much in the liberal spirit of his times he defined these limits a bit narrower than I would see them today in a social market economy.

But in a way our task for the coming years to complete EMU is a similar one:

– To define where independent decision-making at national level may reach its limits, if we do not want to undermine the stability and prosperity of the Euro area and the EU as a whole;

– But also to define the limits of centralising decision-making at EU level without undermining flexibility and adjustability of economic policy making to the still different national circumstances in our Member States;

– And – what is probably most difficult – to develop a consensus on these limits, shared from north to south, from economic policy makers to Europe’s citizens.

A consensus that puts Europe’s common currency and its economy on stronger foundations.

Economic growth, job creation and social security is our best way rebuild trust of Europeans and our best answer to those who claim that the European project is failing.

From a broader perspective, Europe will need a strong economy so that it can live up to its responsibilities: Decisively address the migration challenge in Europe.

And support peace and prosperity in its neighbourhood, especially by supporting those in our neighbourhood who are fighting for European ideals.

So that all the people who fought to be part of Europe 25 years ago, here in Berlin, and back home in Riga, can be proud of it.

Thank you for your attention.

[2] (CEE10 average GDP per capita level in purchasing power standards (PPS), see p. 7.

[3] 2004: EUR 5 200 per capita, 2014: EUR 12 000 per capita

[4] 2004: EUR 10 600 per capita, 2014: EUR 17 600 per capita

[5] based on current international PPP, see,_2002_and_2012_%28%25,_based_on_current_international_PPP%29.png

[6] Report on Economic and Monetary Union in the European Communities of 17 April 1989, para 21.

[7] Para 30.

[8] Alfred Müller-Armack, Wirtschaftslenkung und Marktwirtschaft

[9] Para 22.
[10] Para 17

Courtesy of the European Commission