Speech by Minister of Finance Sigrid Kaag. The future of the Netherlands is European – 30 years after the Maastricht Treaty

Speech by Minister of Finance Sigrid Kaag. The future of the Netherlands is European – 30 years after the Maastricht Treaty.

Thank you to Rector Pamela Habibović and host Mathieu Segers for the warm welcome.

Dear students, madam mayor, regional counselors,

‘Die eigentliche Heimat, die mein Herz sich erwählt, Europa, ist mir verloren, seit es sich zum zweitenmal selbstmörderisch zerfleischt im Bruderkriege.’ (Even the true home of my heart’s desire, Europe, is lost to me after twice tearing itself suicidally to pieces in fratricidal wars.) The Austrian writer Stefan Zweig wrote these words at the end of his life. He is someone I’ve long admired: he was on the syllabus when I took German in school. He lived at a time of great progress but also great discord and fatal destruction. Born in 1881, he took his own life in 1942.

Speaking about the two world wars, he said he’d witnessed the ‘furchtbarsten Niederlage der Vernunft und des wildesten Triumphes der Brutalität innerhalb der Chronik der Zeiten.’ (…the most terrible defeat of reason and the most savage triumph of brutality ever chronicled). He would not live to see the peace.

When I accepted the invitation to come here today to talk about European unity, we all believed that war on this continent was a thing of the past. The world wars Stefan Zweig lived through seemed like a distant nightmare. The war in the former Yugoslavia in the 1990s and the fighting in Donbas in 2014 had terrible consequences for the people involved, innocent citizens. And, for the Netherlands, both conflicts came very close. Yet still, they seemed far away.

Until the dark night of the 23rd of February when Vladimir Putin put an end to that peace we’d all taken for granted – by attacking and invading a democratic and sovereign Ukraine. A country that in the words of its courageous President Zelensky ‘wants to build [its] own history. Peacefully, calmly and truthfully.’ Eighty years after Zweig’s death, almost to the day, war has returned to the European continent. I echo the words that Prime Minister Mark Rutte recently spoke to our parliament: ‘We condemn the brutal Russian invasion of Ukraine. We condemn this unprecedented act of aggression against a democratic European country. We condemn President Putin and his clique. And our hearts are with the people of Ukraine.’

Putin’s invasion comes as a rude awakening. On the news show we have for kids, Jeugdjournaal, children were asking if this means that war would be coming here too. The threat of armed conflict hangs over other parts of the world all too frequently, but it’s become rare in this corner of the planet. And we owe this to the ever closer union between the peoples of Europe that arose from the fratricidal conflict Zweig wrote about. A partnership of peace in which this city played a historic role, when the Maastricht Treaty was signed 30 years ago: the birth certificate of our shared European citizenship and our single currency.

As a result, in recent years, it’s true for both politicians and ordinary citizens that the further that war receded into the past, the more self-evident peace seemed. And not just peace, but everything it brings with it: democracy, free speech, tolerance and inclusion. We’ve taken this state of affairs for granted and forgotten that it requires attention and maybe even love. And this heedlessness can itself pose a threat.

I mean this quite literally: in the Netherlands and beyond we can see how journalists, the judiciary, scientists, administrators and politicians are faced with threats and violence, aggression and intimidation. These people form the foundation of our civilisation; they supply our society with oxygen. It is unacceptable that they have to undertake their work in a climate of fear and insecurity.

It is a threat to the foundations of community and solidarity on which our Union rests.

While heedlessness is a clear and present danger to Europe and the values we hold dear, scepticism about the functioning of the European Union is not. I am acutely aware of the shortcomings of our unfinished project. The commitment to the euro we made here in Maastricht has brought us great benefits in this century, but it also plunged us into problems, such as the euro crisis.

When it comes to migrants or refugees, we as a Union have had trouble agreeing on a united course of action. A course that is humane, just and manageable for every country. Let us seize on the current crisis, in which hundreds of thousands of Ukrainians have had to leave their homes and seek shelter elsewhere, to show more unity, drive and purpose than we were able to manage in the past.

When it comes to our shared values and the rule of law, we are not sufficiently able to uphold our own principles.

But as we list our failures or relative shortcomings, let us also count our blessings First and foremost, the Union is unmatched as an engine of peace. It brings the people of Europe a level of security and stability they had never known in the decades before its inception. Today, as our security and stability is under threat, the Union is more important than ever as a protector.

Less tangible, but no less precious, is the value of our shared culture and the social cohesion this generates. This is what unites us in diversity – why we feel at home on this continent.

This feeling is upheld by voices and creative works from the past that continue to put their stamp on our present-day thinking and dreams. From Stefan Zweig to Simone de Beauvoir, from Béla Bartók to Salvador Dalí – the source is inexhaustible. Contemporary thinkers and artists build on that foundation and sometimes set off on radical new paths. Consider our European cities, which are hotbeds of creativity. Or the companies – whether start-ups or established businesses – that contribute to the new economy in innovative ways.

In this they benefit from being part of the world’s largest single market. And from European Union citizenship, and which gives us the freedom to travel and live anywhere we choose in the EU. Cutting red tape, standardising rules and promoting international trade have all given our economies a tremendous boost. The Netherlands’ GDP is structurally 3.1% higher thanks to the trade advantages of the European Union – and that’s a conservative estimate. This means that we’re one of the countries that benefits most from increased trade. It’s a percentage, a number, but it says something about our lives. It means more money for good healthcare, for education, for our living environment, for the future. It means a small business owner from Maastricht can easily do business across the border in Hasselt or in Aachen.

After the financial crisis of 2008 there was a growing realisation that greater integration was also needed in our banking sector. With joint oversight and the same rules for everyone. This enabled us to create financially strong banks, where people could deposit their money with confidence. Even during the pandemic, which caused historic economic stagnation, the banks stayed afloat. This is something to be proud of, to cherish and to build on in stability.

The Union is a story of small failures and great successes. Of joint efforts that don’t always achieve what we want them to. But we now find ourselves at a historic crosspoint, a turning point. The war has been a brutal wake-up call. In the past few weeks we in Europe have shown unprecedented unity and decisiveness. Will the Union continue to simply muddle along, making compromises, as the writer Caroline de Gruyter described in her latest book, or have we finally turned a page? This unprecedented crisis demands another type of Union. A Union which does not muddle along but looks ahead. It looks into the future.

Let us seize on this crisis, in which our dependency on Russian gas and oil should not be a break to defend our values, to become energy independent as quickly as we possibly can. Let us seize on this crisis to invest in our own armed forces and intensify defence cooperation between Member States. If our peace, security and shared values are at stake, we need to have the capacity to deliver and we need to stand as one. I hope we can follow through with this, also in better times, so that we can prevent and prevail.

Because times like these demonstrate once more: the notion of the European Union as a partnership isn’t a question but a fact. It is the institution which we in the Netherlands must commit to fully, because this is also in our national interest. In my opinion the idea spread by Eurosceptic politicians that the Union undermines our sovereignty is a misconception, or even cynical posturing: the Union doesn’t undermine our sovereignty; on the contrary, it strengthens it. It gives us wings.

So where does that bring us today? Where does our European Union stand at the start of 2022? What kind of a world do we live in?

These are tense and scary times. On the eve of Brexit, our host today, Mathieu Segers, wrote that Europe’s vacation from history and politics was over. And since then things have not got any calmer – on the contrary.

The most recent and frightening example of this is the war on our continent, which threatens the security of our citizens – particularly in Ukraine obviously, but also beyond – and to which the EU is responding with unprecedented unity.

Then there’s the COVID-19 pandemic – you could be forgiven for forgetting about it during these last few weeks. It finally seems to be over its peak, but if it has taught us anything in these past two years, it is that nothing is certain…

And then of course there’s the climate crisis, which is undeniable and inescapable…

All these challenges raise the question ever more emphatically of what binds us together as member states.

What issues we want to work together on and what issues we don’t,

What our values are,

And how far we’re prepared to go in defence and protection of those values.

When the chips are down and the pressure is on, we always manage to recognise the value of partnership.

In an increasingly unstable world, EU member states are our neighbours and friends, and we should cherish that.

So a weighty responsibility rests on the shoulders of this generation of politicians – my generation – to keep the EU stable and safe. Maybe more than on any previous generation.

The present moment calls for a forceful pro-European stance. Don’t misunderstand me: being ‘pro-European’ doesn’t mean an attitude of uncritical acceptance. We don’t do the European project any favours by treating it as if it’s perfect.

The present government wants to play a leading role in shaping a strong and effective Union. A role the Netherlands feels at home in. Especially now, because there’s so much at stake.

Dear students,

Lysander Gipp, a German student doing a course in European public affairs here in Maastricht, asked me in a video message prior to this speech what the Netherlands’ priorities are for the EU – particularly in the financial sphere.

As I see it, there are three. First of all, our geopolitical role and, in relation to that, the EU as a community of values. Second, financial cooperation. And third, climate change – as the key transnational task of the present time.

In normal times my priority as Finance minister would be financial stability. But these are not normal times. Europe’s main concerns and tasks lie in the geopolitical arena. The images from Kyiv, Mariupol and Kharkiv show a reality that is unfolding just 1,800 kilometres away.

The war in Ukraine is testing Europe, and it leaves us no room for hesitation. We cannot and will not allow Putin’s illegal act of aggression go unanswered.

First of all, cooperation is crucial to remaining united. This means effective political, military and financial action. For the first time ever, we as the European Union have supplied a state with defence equipment. An unprecedented development which, until recently, we wouldn’t have thought possible. The decisiveness we’ve shown in these first few weeks must be maintained. As a Union we must be more capable of resolving conflicts on our own. It will mean that defence expenditure in the various member states will be a subject of discussion. And this is necessary too. The Netherlands wants to do its part for a stronger European defensive partnership: a stronger Europe within NATO.

Second, we should use our strength, which lies in the EU’s size as a major economy. Economic sanctions entail costs, but we should not be afraid of their impact on us. Anything we feel will be felt much harder by Putin and his clique. Instruments rooted in our prosperity and economic strength can be deployed now. We are striking at Putin’s war chest by freezing Russia’s foreign currency reserves and blocking major banks’ access to the Swift payment network. I call on the European Commission to provide EU-wide regulation against corporate service providers for Russian investors. EU-wide regulation is the most effective to prevent these companies helping wealthy Russians hiding their money through complex structures.

Let the unity we’re displaying here and now be an example for the future. We are a major economic power, but we need to dare to be a political power as well. We cannot hide behind or lean against the United States. We cannot be dependent on China for crucial medical supplies. We cannot allow ourselves to be a plaything in the hands of Russia, which has turned its back on the international legal order, the existing European security architecture and the universality of human rights, international law and the rule of law.

We are therefore pushing to abolish the veto in cases of sanctions, human rights violations and civilian missions.

Finally, if we wish to remain an economic power, which is necessary in order to exert influence in other areas, and if we don’t want to be overly dependent on other countries, we need to embrace global competition with open arms. Without renouncing our values, we can maintain our unique and autonomous position in the world through smart industrial policy and our own digital and technological innovations.

In order to display unity to the outside world, we need to be united internally. We can talk about and compromise on the Stability and Growth Pact, or the question of what constitutes a sustainable investment. That’s never the case for our shared values. They are non-negotiable. This is our most important common denominator, the foundations on which our Union was built. If we undermine those foundations, we undermine our community.

This is why we collectively agreed on this point, enshrining it in the Charter of Fundamental Rights. If countries fail to respect it, they will be called to account, if necessary with financial corrections. If the judiciary is not independent, if legislation infringes on the equality of citizens, or if there is widespread corruption.

Last month the European Court of Justice handed down a clear judgment on this matter. With this judgment the Court recognised that shared values lie at the very foundation of our community. And that there can be no mutual trust without this foundation. In my view a Europe without this foundation is not a Europe we want. The Union can only work if everyone takes part.

This brings me to my second priority: our financial stability. It may make us feel uncomfortable to talk about money, prosperity and wellbeing in the midst of the current political and military crisis. Yet these are the very things people worry about. How will this affect me, how will it affect us? What’s more, if the EU wants to assert itself in the world, a strong economic and financial basis is a prerequisite. The political response to destabilisation is to continue enhancing your existing strengths.

A Dutch MP once drew my attention to an insightful observation made by Aristotle, centuries before the common era: In principle money is a means to pursue the good life, but in practice it soon becomes an end in itself.’ We need to ensure this doesn’t happen.

Money is a means to ensure a good life and a bright future for the Europeans of today and tomorrow. To make Europe a safe and clean continent, which takes care of its people and protects them from war and aggression. People who enjoy equal rights and opportunities.

The euro and the single market have unquestionably brought us a great deal. To me the European Union is about shared values, which are more important than the market. But having the world’s biggest single market does help ensure that we can live in prosperity and comfort. This is especially important for the Netherlands, with its open economy based on fair and sustainable trade.

There are still people who question the use of the euro. They underestimate how much the euro benefits us. The euro makes it cheaper, easier and safer to trade within the eurozone and with the rest of the world. Withdrawing from the euro would mean giving up a lot, in terms of our wellbeing and prosperity. What’s more, in international terms, the euro is a much stronger and more influential currency than the guilder ever could be.

The unrest in the world is also affecting the economy. Already after a long period of low inflation and low interest rates, these indicators were on the rise. This affects people’s purchasing power, it makes people anxious and concerned, and countries are seeing their national debt increase. The war in Ukraine will only make this worse – we have to be honest about that. We live in very uncertain times. Higher energy prices are hitting people in their pockets and eating into corporate profits. And the impact of sanctions – and possible retaliatory measures – will be felt by our own citizens and businesses. There is a lot of uncertainty. We do not know how long the war in Ukraine will last and how it will affect our economies. So we do not yet know how we will deal with the possible economic fallout. But there can be no doubt that our security is worth it. I see it as my job, as minister of Finance, with my colleagues to cushion the negative effects and compensate the most vulnerable among us.

These challenges come on top of the existing task of strengthening our economies after they were weakened by the pandemic – in some countries more than others. The COVID-19 recovery fund, Next Generation EU, is one of the building blocks underlying these efforts. Joint recovery is the way forward. This helps to boost member states’ resilience and adaptability. This way, we can reduce the social and economic impact of the pandemic. And we support the green and digital transitions. Not only through investment, but also through structural reform.

It’s in everyone’s interest for public finances in the euro countries to be in a healthy state. I repeat: in times of instability we need those foundations more than ever. So it remains important to agree on rules collectively, in order to create equality between countries and provide a framework to manage our interdependence. This is why we made agreements in the Stability and Growth Pact on national debt levels and budget deficits.

In the coming months I will be talking with my European counterparts about the modernisation of the Stability and Growth Pact. Now I’m well aware that we have other concerns at this time. But we do need to adopt a perspective for the decade ahead. We are duty bound to continue looking ahead, in the knowledge that the uncertainty will only grow. And we all agree: we must do things differently in order to move forward together, stronger than before. The major transnational challenges of this time – climate change, security and digitalisation – demand determination and vision. They also demand political will.

I have an open mind and a constructive attitude towards this discussion, but with three guiding principles or ‘anchors’.

First of all, heavily indebted countries need to reduce their debt levels. This makes them more resilient at times of crisis. Many member states exceed the debt limit of 60% of GDP, so the pace of debt reduction is crucial. At the same time we have to recognise that, for some member states, a rapid reduction in debt is not very realistic. Even before the war in Ukraine. This has undermined both the credibility of and public support for the pact.

We cannot go on like this: I propose we modify this criterion. Member states with high levels of debt need to cut back to a prudent level at a responsible pace. But this cannot be done through budgetary measures alone. These efforts must be supported by reform and investment. At the same time we can reduce the number of rules for member states with a low level of debt, in order to increase public support.

A second ‘anchor’ for us is the importance of growing stronger together. That requires more rapid growth in poorer member states, thereby reducing the difference with the most prosperous states. This is the only way cohesion within Europe can be maintained. Member states will also need buffers, so a future economic crisis doesn’t erode public investment. In addition, substantial public investment is needed in all member states in order to sustain growth.

The war in Ukraine has forced us to face some difficult facts. In the past few years the European fiscal rules have proved their flexibility in exceptional circumstances, for example during the COVID-19 pandemic. Given the terrible developments we are now witnessing, it is possible we may again need to be flexible in applying the rules.  

This does not mean that we should throw all caution to the wind when it comes to public investment. That would not be wise. It doesn’t help us to get ready for the future. We would then weaken our most important geopolitical asset on the long-term. Member states need above all to make smarter choices in their budgets, thereby creating scope for green and pro-growth investments. Member states can increase the quality and effectiveness of public expenditures.

Thirdly and finally: the European Commission and the Council have proved to be insufficiently capable of applying the Stability and Growth Pact in a consistent, transparent and predictable manner. This is why its modernisation must be accompanied by better protection of the rules. This involves review procedures and transparency, and giving member states more control over and responsibility for their own policy.

One option, in my view, is to allow countries to draw up their own plans to reduce debt, make investments and implement reforms. These plans must be reviewed in an effective and transparent way, possibly with the inclusion of more automatic steps in the Stability and Growth Pact if norms are exceeded. The review can also be decoupled from the political process within the Commission and the Council and carried out by an independent body. This would contribute to equal treatment of the member states.

In this way the Stability and Growth Pact can again function as it was intended – and contribute to a healthy European economy. Member states that continue to grow stronger through structural reforms, that invest adequately in sustainability, digitalisation and security, and work on healthy public finances – these member states form the basis for an EU that can face up to challenges. In this way we are not only looking at today’s world, but also tomorrow’s. A world for people in the Netherlands, Europe and beyond.

That brings me to my final priority. As I said earlier, money is a means to an end, not an end in itself. And the time we have before us will involve large-scale investment to fight climate change: to keep our planet liveable. For ourselves and for our children and grandchildren. For you here in the auditorium. For the Europeans of tomorrow.

And now we are not only investing for the sake of our planet. Reducing dependency on fossil fuels also affects the interests of Europeans in another way. Putin has demonstrated his willingness and ability to use gas deliveries as a geopolitical instrument. At this time, the EU relies on Russia for no less than 40% of its gas imports. We must aim to reduce these imports as soon as possible. Besides helping to bring about a cleaner world, investing in renewable energy also contributes to a world where energy is a source of progress, rather than tensions.

There will be costs for us, but the benefits will be far greater. And I think that here in Limburg you understand that better than people living in the Randstad conurbation.

Last summer’s terrible floods in this region showed that the climate crisis is a problem that takes no notice of national borders. In neighbouring countries over 200 people died in natural disasters of a sort we’ve become unaccustomed to in recent decades, in our part of the world. Sadly, in other parts of the world the destructive power of nature is already a much more regular part of people’s lives.

In the early 1990s our predecessors concluded the Maastricht Treaty, laying a key foundation for our lives today. Roughly between then and now, scientists tell us that around 28 billion tons of ice have melted. To put this in perspective, this is approximately 28 times the size of Mount Everest. A silent disaster has been taking place all around us, and we’ve been ignoring it for too long.

Reading the latest report released by the Intergovernmental Panel on Climate Change makes for a sobering experience: climate change is irrevocably harming the natural world. Species are going extinct, and corals will die off and not return. Food security is on the decline; the number of deaths due to high temperatures is on the rise; people are being forced to flee their homes.

So it is time to take serious action at scale. Because the source of all this is us. We must change our behaviour. And by ‘we’ I certainly don’t just mean individual members of society, but also – and especially – governments and polluting industries.

I am glad the European Commission recognises this and has demonstrated a high level of ambition. A 55% reduction in CO2 emissions by 2030 compared with 1990. In the period ahead, 30% of the European budget will be devoted to climate-related expenses, around 550 billion euros. And we’re putting a price on CO2 emissions within Europe, and on products imported from countries outside of Europe that have lower climate standards .

The Netherlands fully supports the ambition shown by the Commission. And to underscore this, we would like to be the leader of the pack in Europe. We are going beyond the ambitions of the Commission by aiming for a 60% reduction by 2030, an 80% reduction by 2040 and full climate neutrality by 2050.

The financial sector has a key role to play in this. Financial flows drive the economy: choosing to finance sustainable initiatives over polluting initiatives has a major impact. In my view the financial sector’s current commitment is only the starting point for the necessary progress towards sustainability. I therefore call on the sector to take a step further and act as a role model for others.

A decisive factor in making a successful transition to sustainability is agreement on what does, and does not, count as a green investment. This is done through the ‘sustainable taxonomy’, which aims to prevent ‘green-washing’ of investments. If we want to meet the Paris climate goals – and obviously we do – natural gas can’t be part of the equation, in the Netherlands’ view.

Dear students,

Let me be clear: the Netherlands’ future is European.

Stefan Zweig is a voice from our past. ‘Zwischen unserem Heute, unserem Gestern und Vorgestern sind alle Brücken abgebrochen,’ he wrote. (…all the bridges are broken between today, yesterday and the day before yesterday). Bridges demolished by the period in which he lived.

His European voice still resonates 80 years after his death. And cruelly enough, at a time in which war is closer than ever. A time when not far from here, bridges are literally being demolished and bombed, houses destroyed, lives ruined. The Dutch writer Lisa Weeda has Ukrainian roots. She wrote a wonderful book about her grandmother Aleksandra, about her family in Donbas that tried, against the odds, to build a life for themselves on their native soil. Against the odds, because those in power were fighting over – and I quote – ‘their land, in which their dead were buried and where their children grew up. Now Lisa lies awake at night, fearful for her family.

For us this war is closer than ever – for Lisa Weeda, it’s even entered her family. It is not only borders and democracy that are at stake but also people like her family, who simply – quote – ‘want to stay in their own house and live their own life.’

These are the aspirations, commonplace aspirations, that bind us as human beings. Not only in Europa, everywhere in this world. And it is our desire and duty, as political leaders, to contribute to these aspirations. We have a great task ahead of us. It won’t be easy, but it may be more important than ever before. Europe’s vacation from history has been over for some time. The war in Ukraine showed us that we have to quicker cooperate in more fields.  Together we are looking forward, towards a future of community and cooperation. This government stands for a European future, with an outstretched hand to our brothers and sisters inside and outside the Union.

Thank you.