Speech by Minister Rösler ― Economic Policy in Challenging Times: Promoting a Comprehensive Approach
Dr. Philipp Rösler
Federal Minister of Economics and Technology
at a luncheon discussion in Washington, DC, on the invitation of the Friedrich Naumann Foundation for Freedom and the Congressional Study Group on Germany
(check against delivery)
Mr. Congressman Kolbe,
ladies and gentlemen:
It is so good to be back in Washington!
You can have state-of-the-art means of communication, but they can’t replace being here and meeting face to face.
I therefore would particularly like to thank the Friedrich Naumann Foundation and the Congressional Study Group on Germany for inviting us to this luncheon.
You have chosen an especially appropriate setting for our meeting. After all, the “Willard Group” – a forerunner of the G20 – was named after the Willard Hotel.
Back then, people had already realised that, whilst the world is closely networked, it has a long way to go before it grows together.
Economic policy has to provide the right responses to this. Let me illustrate this in more detail, taking three current examples: the challenges in the eurozone, energy
policy and trade policy.
Yesterday, the Greeks were called on to turn out and vote again. Rarely was the concept of a “fateful election” so appropriate.
One thing is clear: only if Greece has a functioning government will it be possible to continue along the path of reform and consolidation.
I am therefore particularly encouraged by the provisional results of yesterday’s election. They show that the Greek people wants to continue the reforms.
The eurozone countries will continue their co-operation with the new Greek government on the basis of the agreed adjustment programme. We are sticking to what we promised, but it has to be clear that we can only deliver if Greece delivers. This also means that we expect the new government to implement the promised reforms. It has now been given a clear mandate to do so by the electorate.
The case of Greece and the developments in certain other countries show that we need stronger co-ordination of economic policy in Europe.
In the last two years, we have already made remarkable progress by reforming the decision-making, control and governance structures in the eurozone.
Both solidarity and solidity have been equally strengthened. The fiscal compact is a further central building block on the road to a joint union of stability.
It contains important instruments to consolidate the public-sector budgets.
I am therefore very glad that a large majority voted in favour of ratifying the compact in the referendum in Ireland.
But we do not regard budget as an end in itself. Nor is it the opposite of a pro-growth policy, as some people claim. On the contrary: consolidation and growth belong together. They are two sides of the same coin.
Promoting growth via deficit spending can’t work in the long term. And it certainly won’t work if the causes of the crisis are structural.
In such a situation, growth which is fuelled by borrowing will only make the problems worse. After all, the crisis in the eurozone is primarily a crisis of confidence. Unsound public finances and troubled banks have damaged confidence in a number of euro countries.
I therefore welcome Spain’s decision to apply for assistance from the euro bail-out system. That can help to create transparency and stabilise confidence on the financial markets.
If we are to generate more growth in Europe, we need to put the right policies in place.
Our goal is smart budget consolidation via structural reforms which create confidence and unleash potential for growth. A budget consolidation which sets the
right political priorities. The markets reward this. We have already seen this elsewhere, such as in Ireland or in Portugal.
A credible, transparent and predictable policy of budget consolidation can create the confidence which will strengthen investment, employment and consumption. If Europe is to be able to master this crisis, we will need to keep on finding joint solutions for these and many other questions. If that happens, the crisis can strengthen integration without restricting the principle that countries are responsible for their own actions.
And greater European integration is the unshakable goal of the German Government.
This is also true in the field of energy policy. Last year, we in Germany decided to massively expand renewable forms of energy. And to entirely phase out nuclear power by the end of 2022 at the latest. We are currently working hard to implement our energy reforms.
The main fields of action are:
- expanding the existing grid and power plants, and building new ones,
- measures for greater energy efficiency,
- research into innovative energy technologies, and
- cost-efficient expansion of renewables.
This involves substantial challenges. We know that we need to work closely
together with our European partners.
In principle, the member states are responsible for the electricity mix in Europe. But when Germany, for example, has a particularly high amount of electricity generated from renewables, power stations are switched off in our neighbouring countries. So our energy reforms can only work as part of a common European system.
Here, our focus is on ensuring free trade in electricity and on the expansion of the infrastructure needed for this.
Take the grids, for example: they don’t end at the national borders. We need to be linked to our partners and friends in Europe.
And we also need a common approach on renewable energy. Our energy reforms do not aim to separate us off from our European neighbours. On the contrary: we want, and we need, a single European energy market.
We are also bearing international energy relations in mind. After all, Germany is highly dependent on imported raw materials for its energy supply. We are working to achieve transparent global markets which are based on competition. To this end, we are active in multilateral organisation and forums like the International Energy Agency and the International Renewable Energy Agency.
Our approach to trade policy is similar.
Open markets are quite simply a key condition for growth and prosperity – especially when a nation is a strong exporter. For me, the multilateral approach is
the best way forward.
The World Trade Organisation in Geneva creates clear and transparent rules which basically apply to everyone. But it is plain to see that the Doha Round has got stuck.
At the same time, the number of bilateral free-trade agreements is increasing rapidly. The WTO estimates that it has quadrupled in the last 20 years. Both the USA and the EU are driving this development.
The question has become a classic in trade policy: are free-trade agreements building blocks or stumbling blocks for the multilateral trade system?
I think we need a smart combination of both: global rules and regional integration. Even the WTO is increasingly talking of a co-existence of multilateralism and bilateralism. In fact, many FTAs cover issues which the WTO either does not address, or does not address in the same way.
Examples include labour standards, competition issues or environmental questions. Many of these rules are nondiscriminatory by their very nature - that is to say that they are also applied to third countries.
On the other hand, we must not overtax our companies with a spaghetti bowl of different rules. And, finally, the WTO should remain the central forum for the liberalisation of the world’s markets.
Striking the right balance here remains an ongoing task.
We also have this balance in mind as we deepen the transatlantic economic partnership. Our Transatlantic Economic Council has been able to abolish a series of
non-tariff trade barriers.
For example, in recent times we have:
- mutually recognised customs simplification and security programmes,
- agreed on the “energy star” certification, and
- adopted a joint working plan on electric mobility.
We are sure that we can achieve even more together.
The High-Level Working Group on Jobs and Growth was established at the last summit between the EU and the U.S. It will examine options for a further deepening of transatlantic economic relations before the end of this year.
Germany is calling for a comprehensive and ambitious new initiative. After all, there is a lot more potential here too, even if we already have the world’s largest – and most integrated – economic area. Important aspects like tariffs, and also technical barriers to trade, services, IPRs and government procurement are to be negotiated in a package. The subnational levels are also to be highly involved. That is the only way to make major progress on the transatlantic marketplace.
Our transatlantic co-operation reaches beyond this marketplace. As emerging economies like China and India develop, our transatlantic partnership is becoming more significant. All too often, German, European and American companies are all affected by the unfair business practices of other countries.
We are fighting together in international bodies against problems like non-tariff barriers to trade, restrictions on investment, or the violation of intellectual property rights.
Europe and America need to stand together as they battle for fair competition and free market access. No country in the world, no matter how strong, can master these challenges alone. Together, the EU and the U.S. have the clout that is needed to bring about progress in international negotiations.
Ladies and gentlemen,
The euro crisis, energy and global trade are just a few of the major challenges of our age.
For me, the transatlantic partnership remains crucial as we seek common answers to these challenges. Personal contact and open debate are major elements of this partnership. So I am now really looking forward to our discussion.