Prime Minis­ter Jyrki Katai­nen at the semi­nar on the future of Europe in Helsinki

(subject to chan­ges)

Ladies and gent­le­men,

Europe is a project of peace, free­dom and pros­pe­rity. This has to be remem­be­red, particu­larly during these difficult times. Our common value base is fragile: when times are better, we take such values for gran­ted. Howe­ver, in difficult times they seem very hard to defend, as this means taking difficult, some­ti­mes unpo­pu­lar measu­res. Still, such actions are neces­sary.

I very much hope that the history of the EU repeats itself ? that the Union emer­ges from the current crisis with a stron­ger value-base and a new direc­tion in which to evolve. After all, hasn?t the EU?s deve­lop­ment been a ques­tion of evolu­tion through crises?

This forms the background of our current series of semi­nars, launc­hed last autumn. The crisis we are now expe­riencing gives us the histo­rical momen­tum to do what is neces­sary to shape the Union. We must thoroughly analyse the factors leading up to the current crisis. Otherwise, we will end up repea­ting the same mista­kes.

It is a great honour to have Jean-Claude Tric­het as a visi­ting spea­ker. During my years as Minis­ter of Finance, I enga­ged in close co-opera­tion with Jean-Claude on Eurogroup and the Ecofin Council. I lear­ned to respect his vision of the Euro­pean economy, which stee­red the Euro­pean Cent­ral Bank?s mone­tary policy during many difficult crisis years. It will be a genuine plea­sure to hear Jean-Claude?s remarks and thoughts on these issues, especially since he can speak a little more freely now that his term in office is over.

Insight­ful analy­sis and open­ness about the problems we face is just the remedy we now need.

As one of the reasons for the crisis, I would refer to the failure to follow our own rules and wholly respect the trea­ties to which we signed up. For example, when the Euro area was origi­nally crea­ted, not all members fully fulfil­led the crite­ria. A second failure arose in not abiding by the rules.

It was the Member States who wate­red down the Stabi­lity and Growth Pact and its imple­men­ta­tion. I would argue that, as much as we need to strengt­hen the rule-base and imple­ment stric­ter sanc­tions, if we had respec­ted the Stabi­lity and Growth Pact as inten­ded, we would have avoi­ded this crisis.

Even a long set of new rules will be of little help if we do not follow them. This is where stron­ger insti­tu­tions, particu­larly the Commis­sion, come in. I will return to this a little later in my speech.

First, I would like to dwell a little more on the reasons for this crisis, and how to find a perma­nent solu­tion. Then, I will set out some conclusions on how to get us back on track by strengt­he­ning the Commu­nity Method, kick-star­ting new growth and brin­ging jobs to Europe.

Dear friends,

The primary reason for this crisis is the failure of Member States to do their homework. One cannot build sustai­nable growth on moun­ting debt ? public or private. Sustai­nable growth and pros­pe­rity can only be built on a compe­ti­tive economy. The financial crisis finally burst bubbles in both the public and banking sectors, in count­ries which tried to borrow their way to pros­pe­rity.

As I said earlier, this deve­lop­ment was caused by eurozone members? inabi­lity to follow their own rules. But there were also other, struc­tu­ral reasons for the crisis. In some Member States, the single currency crea­ted false confi­dence, based on credit that was too cheap for too long. As we can now see, inte­rest rates did not reflect the actual risk of losing money. But there is no such thing as a market economy without risk. The illusion of a risk-free deal destro­yed the pricing mecha­nism under­lying eurozone sove­reign debt.

A mecha­nism based on which it was lucra­tive to both lend and borrow provi­ded a comfort zone. For some member states this was a more popu­lar way of crea­ting welfare for citizens than under­going uncom­for­table struc­tu­ral chan­ges in order to create real compe­ti­ti­ve­ness and growth.

But then came the reality check and we had to change course.

Ladies and Gent­le­men,

The solu­tions to this crisis are confi­dence and growth.

First, let us deal with the issue of confi­dence. For the member States in trouble, this crisis is about a lack of confi­dence. Convincing stabi­lity measu­res will be requi­red in order to regain credi­bi­lity. In addi­tion, confi­dence must be crea­ted in the poli­tical will of the affec­ted count­ries to stay the course. The markets follow a simple logic. When inves­tors have infor­ma­tion and trust in you, you are credible and can borrow the money you need at a reaso­nable rate.

As the Eurozone, EU, ECB and IMF, we have taken action and bought time for certain Member States to take measu­res to win back confi­dence. With respect to deficit reduc­tion program­mes, we can provide help in the form of liqui­dity. But only the country in ques­tion can rebuild market confi­dence in itself.

Despite argu­ments to the cont­rary, these program­mes work: Ireland is an excel­lent example of this. Ireland has even excee­ded the agreed measu­res, which has built confi­dence.

Greece is a special case. Winning back confi­dence, through a new programme over the coming years, will require very tough measu­res. Rejec­ting the programme would mean even more dras­tic cuts, but quit­ting the Euro would be an even more dange­rous route. Greece can survive if it stands behind its promi­ses and no new unplea­sant surpri­ses occur in Europe?s econo­mic outlook, the world and of course Greece itself.

Other Eurozone count­ries face simi­lar chal­len­ges ? inte­rest rates are the touchs­tone of confi­dence.

Dear friends,

I would now like to devote a few words to growth, jobs and pros­pe­rity.

Healing Europe essen­tially means retur­ning to sustai­nable growth.

We can win back confi­dence in the short term, but auste­rity reduces short term growth. On the other hand, when exces­sive debt is the main problem, adding yet more debt is not a sustai­nable way of stimu­la­ting the economy.

We need to go back to basics. Healthy struc­tu­ral growth is a precon­di­tion for the sustai­na­bi­lity of sound public finances. A clear and credible commit­ment to work on an ambi­tious growth agenda, both at natio­nal and EU level, is there­fore neces­sary to getting Europe back on track.

Member States must take full advan­tage of and imple­ment the fresh recom­men­da­tions given under the Euro­pean Semes­ter. Peer pres­sure, so-called ?naming and shaming?, must be used to acce­le­rate the struc­tu­ral chan­ges under­pin­ning compe­ti­ti­ve­ness in Member States.

It is no coinci­dence that the Member States in trouble are those in which wages increa­sed the most during the last decade ? bearing no rela­tion what­soe­ver to produc­ti­vity deve­lop­ments. In most cases, these same Member States have the most inflexible labour markets, with multiple bene­fits unre­la­ted to produc­ti­vity and many occu­pa­tions and busi­nes­ses func­tio­ning as licen­sed ?guilds?. In order to sow the seeds of growth and emplo­y­ment, these must be libe­ra­li­sed, as fiscal conso­li­da­tion progres­ses.

The Commis­sion also has its part to play. The Europe 2020 stra­tegy must be full of initia­ti­ves that open up markets and provide the elements of growth. Deve­lo­ping the single market is a key element in deli­ve­ring on Europe 2020’s objec­ti­ves.

Strengt­he­ning EU growth and compe­ti­ti­ve­ness requi­res high levels of ambi­tion in crea­ting open and compe­ti­tive markets, inno­va­tion, smart regu­la­tion and a strong single market. We need to remove all unneces­sary obstacles to entrepre­neurs who wish to expand their busi­nes­ses across borders.

To make progress in these fields, there are no alter­na­ti­ves to the Commu­nity Method. No progress will be made without good and thorough prepa­ra­tion. Heads of State and Govern­ment can give poli­tical direc­tion to the despe­ra­tely needed comple­tion of the Single Market, but they cannot propose or imple­ment direc­ti­ves that make these things happen in the real world. The role of the Commis­sion cannot be stres­sed enough in this respect.

In the Single Market area, some areas have huge poten­tial. Especially promi­sing is the Digi­tal Single Market. Here, progress should be made without delay to ensure that the EU is compe­ti­tive against other global players.

In this respect, I should mention that our Minis­ter of Foreign Trade and Euro­pean Affairs is currently in Silicon Valley, with a large group of start-ups and small IT and game design compa­nies. Finnish IT and game design compa­nies find it far easier to enter US markets, with more promi­sing deve­lop­ment pros­pects than here in Europe. This is somet­hing that we clearly must change.

It is for this reason that we must build a Digi­tal Single Market: for the sake of the EU?s growth, compe­ti­ti­ve­ness and emplo­y­ment. To harness the EU?s unused poten­tial, we need ambi­tious legis­la­tive initia­ti­ves from the Commis­sion.

Urgent action is needed in the copy­right sector in particu­lar. This is a poli­tically sensi­tive and legally complex area, but it must be tackled nevert­he­less. In the US, you need to follow only one set of rules to enter a market of 300 million consu­mers. In EU, you need to follow 27.

In order to keep pace with our global compe­ti­tors, we need to acti­vely promote the establish­ment of cross border sche­mes for licen­sing work, enabling Pan-Euro­pean licen­sing. We also need to deve­lop new licen­sing mecha­nisms. Simpler licen­sing would provide new busi­nes­ses with the possi­bi­lity to thrive.

It is worth repea­ting that the comple­tion of the Single Market is in everybody?s inte­rest and should be an abso­lute prio­rity in the EU. In this respect, it is very worrying that, on the cont­rary, there seems to be a new tendency of rolling back the Single Market in areas such as financial services. Instead, we need to move forward in certain areas. We should only backt­rack when it is clear that we have not succee­ded in crea­ting a true Single Market, as in the case of the Services Direc­tive.

We can also create growth by opening up global markets. The Euro­pean Union must take a new step forward by ente­ring free trade agree­ments with its part­ners. The EU-Merco­sur, EU-US and EU-Japan agree­ments are just a few of those which need to be acce­le­ra­ted.

It is unde­niable that bigger markets create more wealth and pros­pe­rity. This is not a zero-sum game. More trade means a grea­ter divi­sion of labour, which leads to jobs, growth and pros­pe­rity. A few years before Adam Smith, these econo­mic facts of life were presen­ted by the Finnish Anders Chyde­nius.

Open global trade is crucial to us in Finland, since almost half of our GDP is export-based. One could argue that the Finnish welfare society is depen­dent on an open global market. But the same is true of the whole of Europe. The longer we keep our borders closed, the furt­her behind we will fall in terms of compe­ti­ti­ve­ness with players such as the US, China, South Korea, Japan or emer­ging count­ries such as Brazil.

Of course, these ideas are far from being new. But it is time to begin taking them seriously. We need rapid action from the Commis­sion within its various fields of compe­tence. The Euro­pean Council has stated these issues clearly in its reso­lu­tions. It is now time to act on them.

Ladies and Gent­le­men,

As I said in the begin­ning, Europe is funda­men­tally about shared values. In the future too, we in Europe must safe­guard and strengt­hen our values of peace, free­dom and pros­pe­rity. Lately, it has become popu­lar to state that we need more Europe. I share the opinion. We need more Europe based on better and more credible rules, which are to be strictly applied and adhe­red to. We need more Europe to pay grea­ter atten­tion to compe­ti­ti­ve­ness. We need more Europe to enhance the single market. We need more Europe to strengt­hen free trade. We need more Europe to repre­sent our common goals in inter­na­tio­nal and foreign rela­tions.

Those deman­ding poli­tical union should lead the way. Resol­ving to follow our current rules and trea­ties is more impor­tant than conti­nuo­usly crea­ting new ones. To me, ?more Europe? and ?poli­tical union? means commu­ni­ta­rian methods and strong insti­tu­tions. It also means consis­tent rules and interpre­ta­tions, no matter whet­her a large or small member state is in ques­tion.

To protect these values, we must be deci­sive in our actions to regain and nurture confi­dence. To promote these values, we need to be a growing, not a dege­ne­ra­ting, conti­nent. From us, this requi­res the courage to face the facts, state the truth and act accor­dingly ? both at natio­nal level and as a Euro­pean Union.

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