Speech by Dr Helmut Kohl Chancellor of the Federal Republic of Germany at the opening of the World Economic Forum Davos, Switzerland January 29, I998

Volume XXI, No. 1

I.
Professor Schwab,
President Cotti,
Excellencies,
Ladies and Gentlemen,

I gladly accepted the invitation to open this year's World Economic Forum. Its general theme - "Priorities for the 21st Century" - tells us what matters as we approach the millennium. It is a time when big decisions have to be made in Germany, in Europe, and throughout the world.

Germany is well prepared for the challenges which the future has in store. I say this quite deliberately in view of media reports on Germany which often have pessimistic undertones or express regret, and occasionally show a touch of Schadenfreude. Ladies and gentlemen, don't let yourselves be influenced by such reports. The fact is we have launched Germany on a course of reform, and you can take it from me that we will keep to it.

My country's economic prospects are good. Growth at the beginning of I998 is 2 I/2 to 3 per cent which, according to OECD forecasts, is a higher rate than that of many leading industrial countries. Germany is the second-largest exporting nation in the world after the United States. Last year, after a long "drought," as it were, we reclaimed some of our lost market share, especially where high-tech products are concerned. Here we are back on top of the world league, with nearly a fifth of the world market. We are also leading the field again in exports of environmental technology.

Biotechnology, too, is now taking off in our country. In I995 we had 75 companies operating in this field, today 300 - four times as many. All this makes Germany the second most powerful base for innovation after the United States. Another area where we have worked ourselves back into first place is that of patents, a very important element of international trade.

German bonds are more in demand than ever. Our public securities, especially our thirty-year government bonds, are attracting great interest all over the world, in spite of low interest rates. This is proof of the trust which both domestic and international investors place in our enduring political, economic and social stability.

We have achieved this success in spite of the huge extra financial burdens resulting from our country's reunification in I990. We inherited the old debts of the former German Democratic Republic totalling 350 billion marks. And each year we have made available more than a hundred billion for economic recovery measures in our new states in that part of the country. This adds up to a total net transfer of public funds to the new states of 900 billion marks since I99I - the equivalent of four per cent of our annual GNP. That money has been well invested. As a result, the most up-to-date transportation and telecommunications infrastructure in the world is emerging in that region.

There are increasing reports of companies who had switched production capacity abroad going back to Germany. Yet another indication of growing confidence in Germany's industrial base. All this is largely due to our policies. The results of those policies will have a favourable impact on the labour market this year again, but only slowly, unfortunately. Nearly all experts believe unemployment in Germany will be lower at the end of I998 than it was at the end of I997. This notwithstanding, the number of jobless, as in many other countries, is still far too high. We therefore intend to continue our reforms.

We are investing in those things which have always stood our country in good stead, namely enterprise and innovation, a powerful small business community, highly qualified labour, and modern infrastructure. We are adjusting our social security systems in preparation for a dramatic demographic change. Through our pension and health reforms we have increased public appreciation of individual responsibility, and we have created a reliable basis for long-term reductions in the non-wage costs of employment.

In all western industrial nations, declining birth rates and rising life expectancy will cause the proportion of older people to grow appreciably in the next few decades. In Germany, the number of people older than 65 will increase from the present I3 million, which is I5 per cent of the total population, to probably I9 million in the year 2030, which would be 26 per cent of the population. That is why we are taking the necessary action now in order to keep the welfare state affordable and sustainable.

We are easing the tax burden on citizens and investors. As a first step we have abolished the taxes on capital because of their drag on investment and employment. Other steps will follow. Our aim is to bring direct taxes on individuals and companies in Germany down to a competitive level, and also to make the tax system simpler and more equitable.

True, we didn't attain this goal at the first attempt, but I have no doubt that our overall tax reform project will materialize. The electorate will make their judgement at the autumn general election. In a nutshell, Germany is and will remain an attractive place for investment in the heart of an integrating Europe.

II.
A core project for the building of Germany's and Europe's economic future is the European Economic and Monetary Union. The euro's punctual launching on the 1st of January I999 will further improve the climate for investment and jobs in Germany and Europe. The euro will give investors more planning security because it will eliminate the exchange rate risk for member countries. This will save companies all over Europe about 90 billion marks a year. The new euro area will facilitate trade among participating states further still and enhance Europe's role in foreign exchange markets.

The euro will be a currency of lasting stability. This is assured by the independence of the European Central Bank, whose foremost task will be to maintain that stability. lt will also be guaranteed by the strict stability criteria of the Maastricht Treaty as well as the Stability Pact designed to keep budgetary policy on a sound footing. I am in no doubt that the euro will arrive on the 1st of January I999 as agreed.

All speculation about the membership of the Monetary Union is superfluous. There is a fixed time-table. Every country has to do its homework. Those who pass the examinations will receive their certificates at the commencement ceremony to be held at the beginning of May in the presence of the Heads of State and Government of the European Union.

III.
The single European currency is one of the main supports of a solid and weather-proof European House. European integration and the strong link with the Atlantic Alliance guarantee peace and freedom in Europe. lt is chiefly to European integration that we owe the longest period of peace in German history, a process to which we also owe the reunification of our country in peace and freedom.

Our neighbours and partners in Europe and around the world trusted in our solid entrenchment in Europe. They rightly believed in Germany's irrevocable pledge not to try and go it alone as it had in the past. In the future, too, therefore, they can continue to bank on united Germany's European orientation.

As the country with the most neighbours in Europe, we Germans surely have a greater interest than anyone else in being surrounded by stable, allied democracies. Consequently, we and our friends and partners in the European Union and the Atlantic Alliance have recently taken major steps to chart this continent's path towards permanent integration.

I would mention the signing of the Founding Act between NATO and Russia and the Charter between the North Atlantic Alliance and Ukraine; the agreement admitting Poland, the Czech Republic and Hungary into NATO- and the specific time-table for the European Union's eastern enlargement adopted by the European Council meeting in Luxembourg in December.

None of these developments would have been conceivable ten years ago. Then, NATO and the Warsaw Pact stood in confrontation and the issue was whether to modernize NATO's short-range nuclear weaponry (Lance). Today we can point to a new Europe emerging over the old chasm. That Europe will be a Continent of peace in which future generations will be able to live in freedom.

IV.
The ending of the East-West-confrontation, which had dominated the world for decades offers Europe, indeed the whole human race, a magnificent opportunity to build a world in which we can all solve global problems together. The community of nations must attune itself to drastic change and, on the threshold of the 21st century, find new answers to the challenges of a new epoch.

The world population is growing constantly. Today it numbers six billion, in the year 2020 it will already be more than eight billion. That is a very brief period. Those born today will be only 22 years old in 2020. Even here, in East and West, in North and South, we have a responsibility to safeguard humanity's natural sources of life for this new and for subsequent generations.

Increasing environmental pollution, which poses a threat to the world climate, among other things, is a problem not simply for individual countries but for humankind as a whole. Its solution demands ever closer transnational and transcontinental cooperation. The Climate Conference in Kyoto at the end of last year was an important step in this direction. The industrial countries undertook for the first time to substantially reduce harmful greenhouse gases. This process must continue.

In the past, the conflicting interests of North and South often stood in the way of tangible efforts to protect the environment on a global scale. That is why I took the initiative last year and, together with my colleagues from Brazil, South Africa and Singapore, put forward specific proposals for eliminating such differences. Together we showed that North and South are capable of a agreement on joint action to solve these central problems of global environmental protection.

We must continue resolutely along this path. What we need is a comprehensive North-South partnership for environment and development, for environmental protection and economic development belong inseparably together. Only when people's survival is assured will they become aware of their responsibility for the environment.

The most important contribution the industrialized nations can make towards positive development in the Third World is to commit themselves to a liberalized system of world trade. The products of developing countries must have a fair chance on world markets. Freedom is the best way to assure a just distribution of global wealth. We know from experience that a clever protectionist system achieves the very opposite, that it diminishes rather than enhances the prosperity of nations.

The successful conclusion of the Uruguay round of GATT negotiations and the founding of the World Trade Organization four years ago was a major breakthrough. Both these events also gave fresh stimulus to the globalization of economic relations. Ever more countries of Africa, Asia and Latin America are seizing their opportunities on world markets. They are manufacturing competitive products and building up a substantial market share, also in the industrial countries.

Think of the young, up and coming industrial countries in Latin America and Asia. In spite of all the problems currently besetting the nations of South-East Asia, I am firmly convinced that precisely on account of their tremendous achievements in recent years that region will summon the strength to carry out the necessary reforms and adjustments and has good future prospects.

Globalization, of course, creates adjustment problems in all countries, including Germany. Yet this dynamic process also creates huge opportunities for new markets, new trading partners, new areas of activity, and hence new jobs. We must exploit these opportunities, each country for itself, and all together.

More and more nations realize this and are acting accordingly. The World Bank noted recently that not for many decades have there been such promising opportunities for promoting growth and reducing poverty in the Third World as there are today. A considerable improvement in living standards is expected in the newly emerging industrial countries and in the OECD countries as well. This shows that, in spite of all the unsolved problems, we are on the right track.

V.
It is my sincere hope, indeed I am very confident, that the 21st century will be a century of peace, freedom and economic prosperity everywhere. We can achieve this goal if we only want to. Two years from now we Germans intend to give the starting signal. Hanover, right in the middle of united Germany, will be the venue in 2000 for EXPO 2000, the main theme of which will be Man, Nature, Technology.

On that occasion Germany will host the world - one decade after receiving the wonderful gift of national unity. We want to show the world that we are outward-looking, that we are a peace-loving country helping to further progress in all areas of human culture. Germany is in the process of change. We are facing the challenges of the 21st century. Our prospects are excellent, and we are determined to make the best of them. The Cassandras who, as so often in the past, predict our doom, will be proven wrong this time as well.

I wish this year's World Economic Forum fruitful discussions and good results.

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