EIB President Werner Hoyer delivered a speech on the State of Europe at Konrad Adenauer Foundation’s Europa-Rede 2022 event on 9 November.
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Ambassador Oleksii Makeiev,
Professor Norbert Lammert,
friends of Europe,
There is war in Europe.
I never thought I would have to utter those words in the 21st century.
Today we look on in horror as the unthinkable happens: the Russian army has launched a devastating attack on Ukraine, a sovereign European democracy.
Ukrainian towns are being besieged. Tens of thousands of people have lost their lives, hundreds of thousands have been wounded, and millions have been forced to flee.
On the night of 24 February, the world became a different place to what it was a generation ago, when here, precisely 33 years ago, the Berlin Wall fell and people from the East and West embraced.
The world has also become a different place to what it was just a year ago, when on 9 November President of the European Council Charles Michel delivered the State of Europe speech.
He warned that Europe would only be able to tackle the challenges of the 21st century if it focused on unity, a global security and defence strategy, prosperity, its strong trading power and strategic autonomy.
Just how right he was is abundantly clear today, in the face of war and at this historical turning point.
As we woke up to the news of Russia’s attack on Ukraine on the morning of 24 February, we were shocked by the sheer brutality of the war.
Bombs falling on Kyiv.
Sirens wailing in Ukrainian towns.
Women, children and older people fleeing their homes.
Since then, we have been hearing about civilian massacres like the one carried out by the Russian army in Bucha and, as the war goes on, in all once occupied and now recaptured territories in eastern and southern Ukraine. With massacres on such a scale, it raises the question: has the line into genocide been crossed?
With each pushback of Russian troops by Ukraine’s courageous defence, Putin’s brutality only grows. Russia’s dictator is no longer even claiming that his bombs are just targeting military facilities. In Kyiv, his army recently damaged the water and electricity supply network.
Today, on the anniversary of the fall of the Berlin Wall, it is important that every EU citizen understands why Ukrainians can never accept a “peace” dictated by the aggressor, Vladimir Putin. Submitting to a conqueror’s rule would mean a reign of terror. It would mean torture. And it would bring thousands of deaths.
From the first day of the invasion, there was no doubt in my mind or in the minds of my colleagues at the European Investment Bank that we would strongly condemn Russia’s assault on Ukraine. We took immediate action together with the other EU institutions — the European Council, the European Commission and the European Parliament.
Just a few days after the invasion, we provided €668 million, backed by an EU guarantee, to meet the Ukrainian government’s urgent need for funds to pay for food, medicines and fuel.
A few weeks later, we made another €1.6 billion available to help Ukraine rebuild its damaged infrastructure.
On top of this, we provided €4 billion to support the EU countries hosting Ukrainian refugees.
As the EU bank and the European Union’s lending arm, the European Investment Bank has made a firm promise to the Ukrainian government to help rebuild the country’s damaged infrastructure. We won’t wait until the war is over. We will support reconstruction efforts in all areas away from the frontlines so that some semblance of life and business can resume in Ukraine.
We aren’t just supporting Ukraine for economic reasons, but also in the interests of our own security.
The Russian invasion of Ukraine threatens democracy and peace throughout Europe. Russia is not only waging war against Ukraine. This war affects the whole of Europe and the free democratic world. Energy and hunger are being used as weapons with the aim of bringing chaos and political instability. If Vladimir Putin can claim a success, however small, it would serve as a victory and as encouragement for all autocrats, in Russia, China or Iran. Today, Ukrainians are fighting for all of us.
In spite of all the suffering and horrors of this war, we should also recognise the opportunities that this external threat has brought:
Europe has come together.
Europe stands united against the aggressor.
Europe is actually acting as a union.
The European Union and its Member States, together with other allies and friendly nations, have imposed harsh sanctions on Russia. They are the most far-reaching economic sanctions that Europe has ever imposed on its largest energy and raw material supplier.
For the first time ever, Europe is delivering deadly weapons to an active war zone. We are not doing so lightly. Many rightly hail this as a historic moment for our union, which was created as a foundation for lasting peace in Europe to make the idea of war on our continent inconceivable.
If we continue resolutely down this path, I am convinced that Putin’s aggressive actions will ultimately unite and strengthen Europe.
But the European Union should not only be uniting in the face of authoritarian aggression.
Europe was already facing many significant challenges before the war — from economic and financial crises to climate change and the consequences of the coronavirus pandemic. As a continent of small and medium-sized countries in a world where giants wrestle for power, unity is our greatest strength.
Jean Monnet, one of the architects of the European Union, was already well aware of this back in 1954 when he said that “our countries have become too small for today’s world.”
And that was in 1954, at a time when Europe still generated 37% of the world’s gross domestic product and accounted for 13% of the world’s population.
That is why the European single market is a fundamental pillar of today’s European Union.
The rise of Asia and population growth in the Global South mean that Europe’s share of the global economy has fallen to 15%, with just under 7% of the world’s population. We need the European Union now more than ever. Together is the only way we will be in a position to take decisive action and help shape global developments.
Let’s not labour under any illusions: Western liberal democracy came under threat long before Putin’s war. Partly also because we acted recklessly: we outsourced energy policy to Russia, economic policy to China and security policy to the United States.
Under its ruler Xi Jinping, who consolidated his power at the recent party congress, China sees itself as the more efficient model of wealth creation precisely because of its authoritarian leadership. Since the mid-2010s, the country has been moving to create dependencies worldwide through the construction, operation and control of critical infrastructure. Under Germany’s leadership, Europe allowed the strategic port of Piraeus to be sold to China during the euro crisis. Since then, Xi has repeatedly declared that he wants to overtake the United States as the world power and gain economic control not only over Africa and Asia, but also over Europe.
We cannot be naive in thinking that we will retain sufficient control over our critical infrastructure if it is in the hands of autocratic rulers. The sale of the largest German gas storage facility Rehden to Gazprom should serve as a lesson to us all. We sold it in 2015 — and that was already after the Russian annexation of Crimea — and have only managed to fill it for this winter using legal enforcement measures.
I would like to highlight, however, that the European Investment Bank cut all business ties with Russia in 2014.
Our critical infrastructure — power grids, gas storage facilities and distribution networks, communication networks, ports, railways and roads — are all of strategic importance. They should never fall into the hands of Russia or China.
For far too long in Europe, and especially in Germany, we have been under the illusion that after the fall of the Berlin Wall, Western liberal democracy would forever triumph, and would become the model of society for the whole world.
The rest of the world would transition naturally as a result of global trade, creating mutual dependencies that would benefit everyone.
It was a beautiful utopia, but we overlooked the fact that we ourselves were becoming increasingly dependent, especially on Russia and its fossil fuels. This dependence has plunged our economy into a severe crisis and will lead to medium and long-term structural fractures that will cost jobs and curb economic growth. Because energy is the lifeblood of the economy. And while this may not be news to us, the war has brought it back into the public consciousness.
But are we finally learning the right lessons from this serious crisis?
Europe’s political priority is to promptly replace the shortfalls in Russian gas supplies in order to quickly achieve energy security.
However, the short-term focus on this winter and next winter seems to be distracting from the most pressing problem facing all of humanity: global warming.
Because even though war, the energy crisis and record inflation are commanding all of our attention right now, the threat of climate change has not diminished. Quite the contrary, in fact: every day that we continue to release greenhouse gases into the atmosphere, the threat to humanity grows.
Climate models unanimously show that the heatwaves, droughts and heavy rains seen in the summer of 2022 were only a glimpse of what is to come if we continue to neglect climate change. The time to act is now. We have very few years left to transform the economy in such a way that will avoid throwing the climate completely out of balance.
The transition to a zero-emissions economy is one of the biggest challenges of the climate crisis.
But it is also a great opportunity for us to completely end our dependence on oil and gas — and thus also on autocratic rulers.
The faster we manage to do so, the faster we will become independent from Russia, our largest gas supplier.
Just this morning, I returned from the UN Climate Change Conference currently taking place in Sharm el-Sheikh. Although the current measures to combat climate change still do not go far enough, many new political initiatives in Europe, the United States, China and Japan give reason for hope.
In the fight against climate change, as in the fight against the pandemic, we in Europe are already showing what can be achieved through unity and strength. And also on the money side of things.
But EU governments need to take more decisive, vigorous and unified action, and if not now, when?
At the onset of the coronavirus pandemic, President of the European Central Bank Christine Lagarde — on behalf, too, of the then head of the European Stability Mechanism Klaus Regling and myself — called for a joint response from all EU countries. A “fat, fast, flexible and European” response. And Europe delivered. With €720 billion available for investment, the EU Recovery and Resilience Facility certainly packs a mighty punch.
But are we really doing enough to stick to Lagarde’s words as we tackle the twin crises of war and climate change? I fear not. Since Putin switched off the gas supply, I have seen European leaders travel around the world to find replacement gas supplies wherever possible, often finding themselves in fierce bidding wars, when the joint purchase of oil and gas could have been organised long ago. After all, this is still working very well for the procurement of vaccines.
What I’m saying is that the green transformation is an historic opportunity to simultaneously address climate change and autocratic threats — not someday, but right now.
But let’s be honest:
Our ability to respond to autocratic aggression and actions, and to make large-scale investments in green technologies is closely linked to our economic power. This power grew during industrialisation in the mid-19th century, based on innovations such as the railways, electricity and later the car. And we are still benefiting from the bold investments made by forward-looking companies.
In the age of climate change and digitalisation, Europe urgently needs to call on this innovative power. Digitalisation is accelerating all areas of life and the economy. It is opening up previously unimaginable possibilities.
But all too often we emphasise the dangers and focus less on the opportunities for new innovation.
To secure Europe’s place in the future, we need to actively shape technological developments. And that means we need to make targeted and bold investments in digitalisation and in advanced sectors such as artificial intelligence, space, quantum computing and biotechnology.
These areas are key to future economic prosperity.
Unfortunately, they are also where Europe has fallen behind.
In quantum computing, 50% of the top investors come from the United States, 40% from China and none from Europe. In artificial intelligence, our share of global investment in recent years was just 12%, while in advanced mobile technology it was just 11%. This will not be without consequences in the long run.
However, there is also some good news: Europe remains a global leader in all sectors combining innovation and climate change. For example, double the number of patents for green technologies have been filed in Europe than in the United States. We need to develop and play to this strength now.
Unfortunately, green and digital innovations in Europe also face dependencies that we cannot lose sight of, for example when it comes to critical raw materials and primary products. Cobalt comes from the Democratic Republic of the Congo, and we source a large portion of our lithium from China, although some deposits can also be found in Europe, for example in the Rhine rift valley.
We should not ignore the debate about more raw materials extraction in Europe as an alternative to imports, and should strive for increased and smarter recycling.
The war in Ukraine, like the coronavirus pandemic, has made it abundantly clear that our geopolitical ignorance and our dependencies could quickly become problematic, with the example of microchips, or even basic items such as FFP2 masks.
Europe must therefore become more independent from other regions of the world. This does not mean that we should cut ourselves off from the rest of the world. It means we need to end unhealthy dependencies while expanding trade in key areas with like-minded partner countries.
If we want to achieve our goal of becoming climate neutral by 2050 at the latest, we will also need Africa. For decades, we have neglected our neighbouring continent.
30 years ago, we may still have gotten away with thinking of development finance as charity. Those days are over, and for a long time now the focus has been on building strategic partnerships with countries in our neighbouring continent that are as much in Europe’s interest as in Africa’s.
In energy-intensive industries, coal and gas can only be replaced by green hydrogen. In the future, much of this would need to be produced in Africa, where sun and wind are abundant, and then exported to the European Union — from a continent that would hopefully also use renewable energies for its own electricity needs. Unfortunately, this has not been the case so far, and Europe will need to do a great deal of persuading. We will not succeed in doing so if our leaders continue to open new gas fields off Africa’s coasts. The only way we can gain some credibility now is if the European energy sector quickly switches to wind and solar power and we end the fossil fuel era.
One thing is clear: we will not be able to accomplish any of our major goals on our own at a national level. I am deeply convinced that when it comes to global competition in times of war and climate change, we can only prevail as a united Europe. Europe is not a choice; it is a necessity. Without a functioning European Union, we will also fail as nation states.
Another thing is also clear: the transformation of our economy will cost a lot of money. Strengthening our competitiveness through new technology and better infrastructure, and transforming into a sustainable and digital economy and society will require huge amounts of investment.
According to the European Commission’s calculations, the European Union must invest an extra €350 billion a year by 2030 on top of what has already been budgeted, just to achieve its climate goals.
In the field of artificial intelligence, we need four times the current level of investment to achieve a leading position in the global market.
Yet every structural change and every transformation has shown that profound change can only happen if people have the confidence to be forward-looking. The green transformation of our economy is a monumental task that, in terms of scope, can be compared to the transformation of the once-socialist economies of the Eastern Bloc into social market economies following the fall of the Berlin Wall and the Iron Curtain 33 years ago.
We Germans from the West should be reproached for not having taken enough care at the time to bring everyone with us on the rocky road to transition. The lesson from the 1990s is that we cannot leave anyone behind. The transition will only be successful if it provides opportunities for everyone.
Now you’re probably wondering, where will all this money come from?
It’s a fair question, and not an easy one to answer, because the EU Member States don’t have unlimited resources.
We can no longer rely solely on low interest rates and higher debt. It would also be detrimental to finance significantly higher government spending through significantly higher taxes.
The amount of investment needed will require the involvement of the private sector. New forms of public-private partnerships in which governments take on limited financing risk could also be very helpful in mobilising private capital.
The EU Member States already have an established institution to organise this process and coordinate and pool investments so that the private sector invests more and the money is channelled to where it has the greatest impact. I am of course talking about the European Investment Bank, which was established in 1958 and which I have had the great pleasure of leading for the past 11 years.
But the European Investment Bank is not just a promotional bank. It is also an example of the European Union’s positive contribution to the great challenges of our time. We make Europe tangible through concrete projects for our future.
We have supported innovative technologies such as floating wind farms that have the potential to increase global electricity production by 11 times the current consumption. Private investors alone would never have managed to build them. Our support for wind energy has helped to create an industry so large that the construction of wind turbines — especially offshore — has become more cost-efficient than even the cheapest fossil fuel projects.
Years ago, we co-financed BioNTech’s cancer research and later its COVID-19 vaccine development and production, contributing to the fight against the coronavirus pandemic.
We are financing quantum computer research in Finland, wind turbines in Denmark, the production of climate-friendly steel in Sweden, green fertiliser in Spain and nanosatellites in Bulgaria, and the expansion of TenneT’s electricity grids in Germany. We are supporting the development of a green hydrogen economy and European battery production in order to become less dependent on other countries.
Through our subsidiary, the European Investment Fund, we have backed startups such as Spotify, UiPath, N26 and Klarna in their early stages with venture capital.
These are just some examples demonstrating how the European Union and its institutions work, and how it is helping to tackle the major challenges of the future.
When it comes to investing in our future, Europe delivers. After the financial and euro crisis, for example, we mobilised more than €500 billion in investment through the Juncker Plan. Now, as the EU climate bank, we hope to mobilise €1 trillion for the green transformation during the current decade.
I urge you to follow the European Investment Bank’s example in seeing a practical and forward-looking Europe.
A Europe that addresses the challenges of the future.
A Europe that is conscious of its role in the world.
A Europe that is willing to take the necessary risks.
A Europe that is tangible and expresses itself through concrete actions.
And, above all, a Europe that delivers when it matters.
On this day 33 years ago, the Brandenburg Gate in Berlin stood for freedom — and the will of the people to fight for it.
Thank you for listening, I look forward to your questions.