25. 4. 201321:51

Speech by the Czech Prime Minister at the National Forum on the Future of the EU

Dear Madam Speaker,
Dear President of the European Council,
Dear Representatives of European institutions,
Dear Members of the Government and Parliament,
Dear Invited Guests,

I am genuinely pleased that we have been able at such a relatively short notice to organise today's conference in such a worthy manner. It is also both an honour and pleasure to be able to welcome in person the President of the European Council, who is charged with coordinating the debate over the future of the economic and currency union and of the EU as a whole.

This National Forum follows on from the event of the same name held ten years ago, on the occasion of the Convention on the Future of Europe.

Of course today we do not have in front of us, at least for the moment, a new Convention or Constitutional Treaty. But in spite of this the EU nevertheless stands at a fundamental crossroads. In recent months the European Council has been very active in debating the possible variants for the further development of the eurozone, and indeed the Union as a whole. Following last year's discussion on the so-called Four Presidents' Report, which was an excellent starting point for the discussion, we should be returning to this topic at Head of State and Government level this May and June. A key part will be played in this by Herman van Rompuy, European Council President, who is with us here today.

The Czech Republic is not of course a member of the eurozone, nor will it be in the next few years. In spite of this it is very much in our interests to be actively involved in the current debate. There are several reasons for this:

1. First, we are economically and politically fundamentally dependent on the eurozone and its development. As an export-oriented economy whose exports go primarily to countries using the euro, we must logically be interested in the currency union working as well as it can and being sustainable in the long term.
2. Secondly, it must be said that the Czech Republic is already a member of the economic and currency union, even if it is not yet part of its third phase, the use of the common currency. For this reason it is clear that the issue of the future of the economic and currency union is fundamentally our topic as well.
3. Thirdly, one must add that in addition we also have the direct commitment to adopt the euro. It is true that the content of this commitment, approved in a referendum in 2003, has changed a lot over the last ten years.

Membership of the currency union was linked to an obligation to join the European Stability Mechanism, the Fiscal Pact, but also to an obligation to adopt a whole series of commitments which no one in 2003 could possibly have anticipated. In short, the eurozone has changed substantially and this process has by no means reached its end. Of course this does not mean that we do not need to be aware of our commitment. But the question does arise of how in the future to decide on the date for adoption of the euro. Whether a simple majority in the government should still suffice, or whether our legislative body should decide, or the citizens directly, as in Sweden, which finds itself in a similar position in this respect.

At all events our commitment motivates us to be actively involved in the debate on the future of the eurozone. We must not look in on current developments like some kind of external observer, who has no business giving his recommendations and opinions on how the eurozone should further develop. On the contrary, from the perspective of a future member we must take account of all proposals in the knowledge that one day they clearly affect us as well.

But I do not wish to speak only of the reasons why it is important for us to take an active part in the ongoing debate. Unlike many others, I am not of the view that it is enough for us to adopt the slogan of "being at the table" or "in the mainstream of things". What is important is what we are going say at that table.

I am firmly convinced that it would be a mistake to simply adopt a passive stance, where we would take a position on the proposals coming our way from Union institutions. In the end such an approach could easily generate the impression of being only a perpetual critic. If truth be told, I am not against an intelligent critical stance. I find it suspicious when someone assesses any document based only on the opinion of others or on whether he or she is going to look like a "grumbler". But it is also true that he who is keen to criticise should also be able to offer his own view of a matter.

This is what I want to do. To this end we have also prepared concept materials on the future of the economic and currency union, which yesterday were unanimously approved by the government. This is our contribution to the European debate.

The document does not define itself by negative stances on other proposals, but on the contrary attempts to come forward with a whole series of possible next steps to strengthen the stability of the currency union. Inter alia by facilitating labour mobility through the elimination of bureaucratic obstacles, by further deregulation and through support for innovation. And not least by the efficient coordination of the economic policies of member states.

Concerning further steps which should be taken in the near future, I support in principle those measures which will lead to increased stability, convergence of EU member states' competitiveness, but also the prevention of moral hazard.

I therefore also support ex ante the coordination of Union member states' economic policies, but of course without the elements of their unification, be this via the legal route or by means of financial penalties.

Economic policy must remain the domain and primary responsibility of states, their governments and parliaments. I am of the view that unification of tax rates or welfare systems is not a solution to this. The northern economies with their strong tradition of the welfare state can be just as competitive as for example the relatively liberal model of the Netherlands. And indeed, competition between states in the use of tax and other instruments can be healthy. Moreover, it is even present within states themselves, within actual federations, beginning with the United States of America and ending with Switzerland. The path for the EU is not therefore unification of instruments and uniformity, but a healthy diversity.

It is not the unity of the instruments which is important, but that of the results. Here, competitiveness must remain our common principle. It is this that should be the aim of the coordination of policies.

However, in my opinion, financial incentives used to "reward" governments for implementing reforms are not the way forward. Nor are sanctions, which would penalise those competitive economies which for various reasons do not wish to accept the recommendations given to them by the European Commission.

Mechanisms for enforcing stricter coordination of economic policies should apply to a greater extent to those countries which on the basis of objective criteria are demonstrating problems with their competitiveness. The same should apply to the newly conceived competition and convergence instrument, if it is ever established.

We must prevent governments from relying on the fact that structural reforms can wait until someone gives them money for implementing them. Moral hazard is currently one of the greatest dangers before us.

We must also face this danger in respect of the so-called banking union. Here it is a question of ensuring that responsibility for any problems in banks is borne primarily by their owners, and not by the taxpayer. In the future, banks themselves, not the state or some other external saviour, must share in the rescue of banks. I therefore support harmonisation at EU level of the so-called bail-in system, that is, rescues of banks from their own resources. The Czech Republic will also be involved in this part of the so-called banking union, like all other Union countries.

Nevertheless this harmonisation is just one part of the banking union. Another part is unification of banking supervision. We were able to support this step after succeeding in negotiating certain important changes in the proposal under discussion. Among other things, these changes guarantee that joint supervision will not be used to generate pressure for a change in the legal structure of banking institutions.

But the actual question of any involvement of the Czech Republic in a banking union is not yet relevant. There are several reasons for this. First, one cannot formally apply before the whole proposal has been approved (which has not yet occurred) and before any non-member of the eurozone has implemented basic legislative changes at national level. Secondly, it is necessary to wait to see what the remaining parts of the banking union will look like.

In particular, I have in mind the system for joint resolution of banking crises including the options for joint financing from a single package or from national funds. And of course here also there are concerns over moral hazard. No one should ever rely in advance on taxpayers' money. Especially when this is the money of taxpayers of other member states.

But for the moment there are no specific proposals on the table. What is important is that everything should be discussed at the EU-27 level. Again it holds true that one must first wait, then in a pragmatic manner analyse all the costs and possible benefits, and only then make decisions on possible support or even involvement. Responsible decision-making in the area of economic collaboration is led only by analysis of the facts, and not by emotions or superficial judgements.

The same approach should also be applied to the recently ever-increasing form of cooperation in which narrower groups of countries work together in various combinations on a given topic. Flexible integration based on so-called variable geometry is in my opinion unavoidable. It should not hold true that all are dependent on the opinion of a country which is less willing in the matter of further integration. But in the same spirit, no one must be forced into involvement under the banner of "everyone else agrees". The institution of strengthened cooperation is not therefore one we should be afraid of. On the contrary a flexible integration model offers a number of benefits. However openness, the unity of the internal market and respect for the Union's joint legal and institutional framework, all of these must be secured.

The Czech government will definitely not avoid any discussion on deeper changes in the EU as a whole and in the eurozone. We wish to be constructive and pro-active.

At the same time we wish in a pragmatic manner to defend the interests of Czech citizens and our economy. We must also have a care for transparency and democratic legitimacy. Key decisions must not be taken hastily, without due care and detailed analysis.

For that matter it is for this reason that I want to conduct a deeper debate at national level on our European Union policy. Not under a banner of political clichés and simplistic division into "pro-European" and "anti-European" views, but under a banner of open discussion and respect for the views of others.

I do not subscribe to the view that there is only one possible view of everything, and only one solution. And that applies in the case of the EU also. We should get used to the fact that the European Union is a natural part of our everyday life.

Proposals coming "from Brussels" are not a priori right, nor are they a priori wrong, just because of where they come from. They need to be assessed in a pragmatic manner and we need to have our own clear, consistent position.

I believe that the whole of today's conference will be conducted in the spirit of constructive and non-ideological discussion by representatives of various institutions and political views. At the same time I can assure you that this will not be the last event of its kind.

In the weeks and months to come my office will be organising smaller expert round tables as well as larger events with the express aim of developing debate and deepening awareness of the current development and possible options for the future development of Czech European policy. I believe that we will be able to conduct this discussion objectively and with respect for the views of others.

I thank you for your attention.