Taking on the challenge

03 July, 2009 17:07:00

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The EU must become more outward-looking and take on greater responsibilities in today’s world.

Fredrik Reinfeldt

Europe is facing some difficult challenges. We need to talk about these challenges and how to address them. I am firm in the belief that every challenge is an opportunity. And that is what the Swedish Presidency of the European Union is about — taking on the challenge.

In our Statement of Government Policy, we established that: “Sweden must have a clear and unquestioned place at the heart of European cooperation.”

These words inspire high expectations. And I see no better time to fulfil such expectations than during our Presidency.

That said, let me make it clear from the outset that the challenges we are facing are not a task for the Swedish Presidency alone. They are a joint task for the whole of Europe.

Working together is the very essence of the European Union. And when the world is in turmoil it is time to use this tool of cooperation, work together and show our citizens the added value of being part of a union of nation states.

Last autumn the financial and economic crisis spread around the world in just a few days. The hunt for easy money, unhealthy risk-taking and, in some cases, pure greed created a financial hurricane. And even though we had been warned about it, it came as a surprise; in particular the extent and the depth of the crisis.

So, considering the circumstances, the Union did quite well in handling the acute situation by agreeing on some ‘traffic rules’ for support to the banking system and a joint Recovery Plan.

This was part of the immediate, acute crisis management. In the autumn we will be facing the need for continuing crisis management. And at the same time we will have to start tackling the issue of long-term recovery. This needs to be done with vigour and intelligence.

Many references have been made to the successful handling of the Swedish banking crisis in the 1990s, and I understand why.

I believe that we need to strengthen the supervisory system for the financial markets to make sure that a similar crisis does not happen in the future. To be frank, our citizens simply won’t accept huge bonuses being handed out to corporate managers when results are negative, while they are left on their own at the end of the day when it’s time to pay the bill.

The incentive systems must not reward irresponsible behaviour. In the autumn we expect to be dealing with legislative proposals and to reach a political agreement.

I also believe that it is crucial not just to restore confidence and stability to the financial markets, but also to initiate a discussion about fiscal policies in the EU Member States.

The current downturn has put significant pressure on national budgets, creating increasing deficits and growing debts. To achieve sustainable growth we need to agree a common exit strategy to return to the rules of the EU Stability and Growth Pact.

I know that this task won’t be popular and it will certainly not be easy. But let’s be honest: if the crisis we face today was created by people borrowing too much, the solution cannot be for governments to act in the same way.

Alongside all of this, we must also remember to address the reality that people all over Europe are now witnessing. For most people the crisis is not a question of financial stability or sustainable growth. Instead the sky is painted black by a rise in unemployment and social exclusion. To put it bluntly: people are losing their jobs.

New jobs within the European Union are not created by way of communications, regulations or directives from Brussels. And I would add to that: the answer does not lie in protectionism either — or in trying to save European companies that are not competitive.

What Europe needs in the short term are proactive labour market policies in order to maintain employability, prevent long-term unemployment and, not least, prevent the re-emergence of protectionist pressures. What Europe can do in the long run is to reform, adapt and modernise by strengthening its innovation capacity and moving towards a low-carbon economy.

This brings me to our next important priority — combating climate change and reaching an international climate agreement in Copenhagen to achieve this.

We are experiencing more extreme weather conditions, with severe storms and droughts. And while this is happening, emission levels have not even started to decline.

There is no more time to lose, if we do not want our children to suffer even more dramatic consequences of climate change.

Over the last year I have often been told that, in the middle of deep economic crisis, countries cannot afford to spend money on “green dreams”. I would argue the contrary. They cannot afford to keep their current costly energy sources.

So in addition to the benefit of having cleaner air, improved health and reduced risk of natural disasters, many countries would even improve their public finances by addressing climate change and their energy mixes. I guess that is what you call a ‘win-win’ situation.

I will reiterate: the cost of inaction is far higher than the cost of action.

I say this knowing that, at the same time, many developing countries will have difficulties making the initial investments. The EU has therefore stated its readiness to take on its fair share in the framework of an agreement in Copenhagen. The Swedish Presidency — and I personally — will do our utmost to continue to work out the details of such financing arrangements as well as ways of transferring technology, to enable an agreement on global emissions reductions in Copenhagen.

We know that substantial mitigation efforts are needed in all countries if we are to keep the increase in global average temperature below two degrees compared to pre-industrial levels. Developed countries must take the lead in reducing emissions and reach a mid-term target of cutting emissions by 25 to 40 per cent.

And the EU has done its homework. We have promised to cut emissions by 30 per cent by 2020 in the framework of an international agreement. The energy and climate package agreed last December is the most ambitious mitigation policy the world has ever seen.

We now need to initiate discussions on how economic instruments can best be utilised in climate policy. I believe tools such as a carbon tax and emissions trading, if designed well, can play a key role in addressing climate problems.

But other developed countries must now follow. If they don’t we can hardly expect the developing countries to contribute according to their own responsibilities and capabilities. I’m pleased to say that we are receiving encouraging signals from President Obama and his administration, who have profoundly improved the discussions on this issue.

I believe that the EU must become more outward-looking and take on greater responsibilities in today’s world. I can assure you that I will do my utmost to strengthen the EU’s overall relations with our global partners.

This is the only way to solve the global challenges we are facing. Regional issues like Afghanistan, Pakistan, the Middle East, Iran and North Korea are issues that need concerted global action.

The summits that we are preparing with India, South Africa, Brazil, Russia, China and Ukraine will all provide important opportunities to achieve our global commitments.

As you can see, there are many challenges facing Europe and the Swedish Presidency in the six months ahead. In addition, we have to expect the unexpected. Handling the unforeseen is often what defines a presidency. By working together in an open, efficient and result-oriented way I’m convinced that Europe is ready to take on this challenge.

(Fredrik Reinfeldt is the Prime Minister of Sweden.)