Friedrich-Ebert-Stiftung London/Publications

THE UK AND GERMANY'S "PROGRESSIVE PARTNERSHIP= "

Launch speech by the Minister for Europe, Peter Hain MP
and Summary and Extracts from pamphlet
GERMANY AND BRITAIN - AN ALLIANCE OF NECESSITY
by Heather Grabbe and Wolfgang M=FCnchau
jointly issued by the the Centre for European Reform and the Friedrich-Eber= t-Stiftung London
February 2002

Working Papers 1(e)/2002

SPEECH BY THE MINISTER FOR EUROPE, PETER HAIN MP to launch the joint publication of the Centre for European Reform and the F= riedrich-Ebert-Stiftung

Wednesday, 13 February 2002, London

As Minister for Europe I see for myself the strong alliance betw= een Britain and Germany - the strongest it has been for many years - with a= close friendship between the Prime Minister and Chancellor Schr=F6der. In = Europe we share common goals, enlargement, security, economic reform and we= both want to see an enlarged EU that breaks down the historical divisions = in Europe.=20

Economic Reform

Britain and Germany can both gain from further reform. The single m= arket doesn't function in all areas; EU legislation sometimes puts an unacc= eptable burden on business; Labour markets lack sufficient flexibility and = too many state aids hold back competition. That's why it's crucial that th= e target we set for ourselves at the Lisbon European Council in March 2000,= to become the most dynamic and competitive economy in the world, remains a= key goal for the EU. And Germany can work with Britain to ensure that we c= an succeed.=20

This is not just reform for reform's sake. It matters. If the EU ma= tched US productivity levels, UK and German citizens could be =A35,000 a ye= ar richer and reform would help create 20 million new jobs in the EU. Our = progress so far has been good: five million jobs in the EU have been create= d, phone call costs halved and there are more Europeans online than America= ns - and that's only 2 years into a 10-year programme. We need to be an ou= tward-looking EU, learning from the US and Asia with whom we directly compe= te.=20

Despite the current economic climate in Germany, productivity remain= s higher than in the UK. Germany is the world's second largest exporter and= an economic powerhouse. And let us not forget that it was only a decade a= go that the Berlin Wall fell and the huge process of transition for East Ge= rmany began. I cannot envisage any country other than Germany capable of r= euniting, with a 5% GDP annual transfer from West to East.=20

Europe is Britain's number one client - we export three times as muc= h to the rest of the EU as to the whole of NAFTA; twice as much to Germany = than to Japan, Canada and Australia combined; more to France than to the wh= ole of the Commonwealth and more to the Netherlands than to South East Asia= . Over half our exports go to the EU, supporting three million UK jobs. T= hat's why we need a Europe that works for both UK plc, and the person on th= e street.=20

In or out of the euro, it is in the UK's interest for it to succeed.= A successful euro will boost the single market, reduce transaction costs,= boost competition, give greater price transparency and create new opportun= ities for trade and investment. But the economic conditions must be right a= nd these remain exactly as set out by Gordon Brown in October 1997. They a= re the five economic tests - convergence, flexibility, investment, financia= l services and employment & growth.=20

However we must ensure that Europe does not isolate itself from the = global market. Whilst the single market encompasses 375 million people tod= ay and potentially 500 million in the future, we still have a long way to g= o to ensure that European business and European consumers get the full bene= fits from trade. Otherwise we risk losing out to North America or the Asia= n Tigers. Trade between the US and Europe is $1bn a day and growing at a ra= te of 10% a year; together we share half the world's output. We need to en= sure that the latest trade round launched at Doha is driven forward to open= our economies to the Developing World.=20

Defence and Security

I particularly welcome the German Government's move to take a more a= ctive international role, especially in security and defence issues. Europ= e needs to enhance its capability of dealing with military crises and to ta= ke on a more active role in peacekeeping. Yet this can only work if all Eu= ropean partners pull their weight, so I welcome the recent German-led milit= ary mission in Macedonia and post 11th September, I welcome the German invo= lvement and commitment to Afghanistan. For example, the German offer of up = to 1200 troops for ISAF and the international policing effort.=20

The UK and Germany's 'Progressive Partnership'

I believe we are building a 'progressive partnership' together - fro= m the EU, to wider Europe, to NATO and the wider world - as demonstrated in= Afghanistan. This 'progressive partnership' is more than just an alliance = between political leaders, it's about a commitment to make a real differenc= e. That's why, for example, I am going to Berlin next week to meet my Germ= an counterparts on the EU's Convention to discuss the Future of Europe deba= te. I hope that we can continue to build on this alliance, both within the= EU framework - dealing on issues like enlargement, reform of the CAP, and = the Future of Europe - and beyond the EU's borders, continuing our joint ef= forts in the Balkans, Afghanistan and beyond.=20

Last year, Britain reopened its Embassy in North Korea, where we sha= re our diplomatic compound with Germany. I hope we can continue this sort o= f co-operation. Because Britain and Germany, as key players in Europe, must= be ready to work together and promote the shared values that we both hold.= =20

We frequently look to each other as a source of ideas. We both want= full employment, nutritious and cheap food and a Europe that promotes pros= perity for all its citizens. We both want a Europe for the people, with de= mocratic accountability. Above all, I believe that the UK and Germany can = form a 'strong partnership' in Europe, which will lead the way to the EU de= livering real benefits to real people, in a clear and easy to digest fashio= n.=20

Conclusion

I hope Germany can join the UK in the fight against red-tape and bur= eaucracy. There is a real need to encourage plain speaking on EU policies = and not let our citizens become disengaged due to 'Eurobabble'. I hope tha= t we can work on this together and that Germany can join the UK in presenti= ng facts, not myths on Europe. For both our countries, 'Europe' is our num= ber one client and 'Europe' gives us a louder voice in the world. The Briti= sh-German alliance is much more than an alliance of necessity. It is a par= tnership of choice and we are both stronger for it.

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GERMANY AND BRITAIN - AN ALLIA= NCE OF NECESSITY
by Heather Grabbe and Wolfgang M=FCnchau

FOREWORD TO PAMPHLET

The Centre for European Reform and the Friedrich-Ebert-Stiftung are deli= ghted to publish this pamphlet on how Germany and the UK can forge a closer= alliance, one that would greatly benefit the European Union. With monetary= union achieved and enlargement imminent, the Union needs to make huge chan= ges to its institutions and policies. In this new period of flux, the Union= badly needs - but currently lacks - bold leadership.

The opportunities for the UK and Germany to work together at Europea= n level are the best they have been in a political generation. Prime Minist= er Blair and Chancellor Schr=F6der, two reformist leaders of the centre-lef= t who get on well, have led Europe's response to the new global challenges = that have arisen since September 11th. Each has a keen understanding of his= country's interdependence with the rest of Europe and the wider world.

These two pro-European governments should take a common approach in = many policy areas, and thus help to lead a reform agenda for the EU. We wel= come this paper, for we believe it will spur politicians in Brtiain and Ger= many to strengthen and deepen their co-operation, in their interests and th= ose of the whole of Europe.

Charles Grant	Gero Maass
Director	Director
Centre for European Reform	Friedrich-Ebert-Stiftung London

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SUMMARY OF PAMPLET

The European Union needs a closer relationship between Germany and the U= K. The Union has to make fundamental changes to its institutions and budget= , and its economies require deep structural reform. But it lacks leadership= . The Franco-German relationship, which drove major policy initiatives like= monetary union, is weaker than it has been for many years. It is now as li= kely to hinder as to help the Union's development. A strong partnership bet= ween Germany and the UK - two large, reform-minded member-states - is vital= to overcome the EU's inertia on tackling these crucial issues.=20

In many areas that need urgent attention, Britain and Germany have c= ommon interests. They both want the EU to enlarge eastwards and to take on = new foreign policy responsibilities. Both are keen on liberalising foreign = trade and tackling agricultural reform. In other areas, however, they remai= n far apart. This paper considers where closer co-operation would be easy, = and where difficult. We put forward ideas for how the two countries could r= econcile some of their differences and work together to further their own i= nterests as well as those of the broader Union. This alliance is a working = partnership, rather than one of born of history and emotion like the Franco= -German alliance. But it is thoroughly necessary to push through long-delay= ed reforms of the EU.

Nearly 50 years after the foundation of the EU, Germany and the UK a= re still far apart on the principles of European integration. They play dif= ferent roles in the Union and these have become institutionalised to some e= xtent over the past decade: the UK stands outside the euro-zone and the Sch= engen area, while Germany is less actively involved in defence integration.= The distance between their visions of the EU is still great, with the two = countries' leaders setting out divergent scenarios for the Union after enla= rgement.=20

Political cultures and public attitudes are very different too. Germ= any's European policies are little affected by who is in power. By contrast= , a change in government in the UK to the Conservatives (however unlikely a= t present) would result in a complete shift in EU policy. The British gover= nment is also much more sensitive to the views of a Eurosceptic media.=20

Despite these divides, however, there is considerable scope for grea= ter co-operation between the two countries. On the questions of budgetary r= eform, enlargement, internal security and defence, the UK and Germany face = similar short-term challenges, and share long-term goals. Working together = on these issues would not only further the interests of both countries, but= also make the Union function better.=20

The days have gone when the Franco-German motor pulled all the other= countries along. Germany's relationship with France is more distant than i= t has been for many years, and Germany has sought other alliances to supple= ment it. But it is hard for see the UK as a serious partner as long as it r= emains outside the euro and Schengen. The UK has never been very interested= in proposing grand new initiatives - the 1998 Franco-British Saint Malo de= claration on European security and defence policy was extremely unusual.

The establishment of an institutionalised relationship to rival the = Franco-German duo is probably unnecessary. There are very few areas where t= he EU can expect grand new initiatives on the scale of the single market or= monetary union. However, British ministers should be less dismissive of th= e value of regular meetings, because they can be important in building long= -term partnerships. For example, the British and German foreign ministers -= Jack Straw and Joschka Fischer - meet just a couple of times a year, where= as Fischer usually meets his French counterpart, Hubert V=E9drine, every we= ek. Although Fischer and V=E9drine may not always have much of substance to= discuss, this constant dialogue - echoed at the level of their officials -= facilitates a convergence of views and concentrates minds on the resolutio= n of differences.=20

We argue that both Germany and the UK would benefit from a closer al= liance on a number of key areas of EU reform. Two recent events have caused= both countries to rethink their positions on EU integration, and made co-o= peration more likely. The first was the attacks of September 11th 2001, whi= ch provoked both countries to look anew at historically sensitive areas. Fo= r Germany, that area is defence, and for the UK it is European integration.= As UK Prime Minister Blair told the SPD Party Congress at Nuremberg:=20

"For you, Europe is relatively easy as an issue; the commitment of military= forces hard. For us, the opposite. To commit our military, relatively unco= ntentious; to commit to Europe causes deep passions."
(Tony Blair, speech to the SPD Party Congress in Nuremberg, Novem= ber 20th 2001)

In November 2001, Chancellor Schr=F6der committed German troops in suppo= rt of the US military campaign in Afghanistan, overcoming the doubts of man= y of his supporters and allies. Blair has argued persuasively that interdep= endence in security is a reality, and that it requires Europe to integrate = more closely.

The second change was the launch of euro notes and coins on January = 1st 2002. This move has made many in Britain realise that its future role i= n the EU depends on whether it joins the euro-zone. The UK's status - as a = future member or a definite outsider - defines its approach to a range of i= nstitutional and policy issues. Conversely, Britain's position outside the = euro shapes the reactions of Germany and other member-states to UK initiati= ves.=20

The scope for joint action with Germany depends in part on the outco= me of the 2002 elections. Will Schr=F6der renew his commitment to economic = reform if he is re-elected, bringing Germany closer to the UK? What kind of= economic reforms would a CDU/CSU-led government under Stoiber put forward?= Both Schr=F6der and Stoiber are careful political tacticians, and short-te= rm expediency does not favour large-scale economic reforms at present. The = most likely scenario is that German will continue with selected pieces of r= eform, including of its labour market, but at a slow pace. The UK, meanwhil= e, is in danger of losing influence in economic policy-making if it maintai= ns its euro-agnosticism for much longer. Every year that it stays out of th= e euro-zone, the UK's voice will grow fainter.=20

This paper concludes that there is considerable scope for greater co= -operation between the two countries in enlargement, reform of the CAP and = EU institutions, internal security and defence. Although British-German co-= operation will never replace the Franco-German alliance, there is a promisi= ng relationship at working level. But to realise that promise, Germany must= work much harder on economic reform and the modernisation of its defence f= orces, while the UK has to adopt the euro and change its attitude to Europe= .

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EXTRACTS FROM PAMPHLET

Synergy and Conflict on Europe

Broad synergies=85.

Enlargement
Both want enlargement to happen, and see it as more important than preservi= ng the current budget and institutions.
The EU budget
=20 Broad agreement on the need for major reform, in opposition to France and t= he net recipients. Both want reform of the CAP, but they differ over what k= ind of agricultural policy should emerge.
Defence
A complementary relationship: the UK leads, Germany follows. But there is = friction on financing, which will make defence integration difficult.

=85 and serious conflicts

Monetary union
Uncertainty about UK entry and major differences on methods of monetary pol= icy-making.
Economic reform
No further German effort likely before the September 2002 elections, and pr= ogress afterwards depends on the composition of the ruling coalition.
Tax harmonisation
The UK is implacably opposed.

Scope for convergence

Institutional reform
Conflicting grand visions, but many similar ideas on reforming the European= Council, the Council of Ministers, and making EU foreign policy-making mor= e effective.
Justice and home affairs
Both countries are pushing forward the EU agenda on internal security. But= the UK is still partly outside Schengen, while Germany is blocking progres= s on a common asylum and migration policy.

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Summary Of Policy Recommendations

Germany and the UK should form the core of an alliance to push eastward= enlargement over the next two years. Such a push is essential to overcome = the objections of interest groups and the reluctance of other member-states= like Austria, France, Italy and Spain.
Blair and Schr=F6der should put forward some common ideas o= n reforming the EU's institutions for the 2004 inter-governmental conferenc= e. Their cabinet ministers should meet more regularly to identify common in= terests and narrow their differences.
In pushing for reform of the Common Agricultural Policy, Ge= rmany must stand firm against the French. The UK and Germany should push fo= r fundamental changes to the EU's budget. The UK should give up its rebate = in return for a fairer overall system. Both countries should advocate the r= e-nationalisation of the EU's agricultural policies, and focus regional aid= on the poorest areas in the enlarged Union.
Germany needs to step up the pace of reform in its armed fo= rces and contribute more to European defence, both politically and financia= lly.
The UK should join the Schengen area fully in order to enco= urage faster EU progress in justice and home affairs co-operation. Germany = should be prepared to compromise with more liberal member-states in migrati= on policy.
Britain has to join the monetary union. With every passing = year it will become more marginalised in European debates on economic polic= y. Britain could play a positive role in pushing economic reform in the eur= o-zone, and in helping Germany to liberalise its economy. These goals can o= nly be achieved if the UK adopts the euro.

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Heather Grabbe is research director at the Centre for European Refor= m
Wolfgang M=FCnchau is editor-in-chief of the Financial Times = Deutschland

The pamphlet "Germany and Britain - an alliance of necessity" (ISBN 1 90122= 9 28 9) is issued jointly by the Centre= for European Reform and the Friedrich-Ebert-Stiftung London.
=20 It is available from the Centre of European Reform, 29 Tufton Street, Londo= n SW1P 3QL
Tel: +44-(0)20-7233 1199. Fax: +44-(0)20-7233 1177. email: info@cer.org.uk

The opinions expressed in publications of the Friedrich-Ebert-Stiftung L= ondon Office are those of the author(s) and do not necessarily represent th= e views of the Foundation.

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THE UK AND GERMANY'S "PROGRESSIVE PARTNERSHIP= "

Launch speech by the Minister for Europe, Peter Hain MP and Summary and Extracts from pamphlet GERMANY AND BRITAIN - AN ALLIANCE OF NECESSITY by Heather Grabbe and Wolfgang M=FCnchau jointly issued by the the Centre for European Reform and the Friedrich-Eber= t-Stiftung London February 2002

Launch speech by the Minister for Europe, Peter Hain MP
and Summary and Extracts from pamphlet
GERMANY AND BRITAIN - AN ALLIANCE OF NECESSITY
by Heather Grabbe and Wolfgang M=FCnchau
jointly issued by the the Centre for European Reform and the Friedrich-Eber= t-Stiftung London
February 2002