Guide Westerwelle: Growth through competitiveness

The debt crisis has turned into the most serious crisis of confidence in the European Union's history.

Citizens and investors are asking themselves: is Europe doing enough to prevent the crisis from escalating further? Will we manage to transform the EU quickly enough into a stability union? Are we Germans in particular asking too much of our partners with the strict conditions aimed at ensuring greater budgetary discipline? Indeed, are we neglecting growth and competitiveness in Europe as a result of this?

One thing is clear: Europe is ailing as a result of a debt mentality which crept in over the last few decades. Some countries have also lost much of their competitiveness over this period. Together, these factors have weighed us down and will make it more difficult to overcome the crisis.

We are now on the right track to resolutely tackling the root causes of the crisis and thus to regaining the confidence of citizens and the markets. Our joint efforts to once more place Europe's finances and economy on a solid basis are now beginning to produce results. The fiscal compact, currently the subject of intensive negotiations, will lay down binding rules to strengthen budgetary discipline on a durable basis. The structural reforms introduced by Greece and other countries deserve respect and must be rigorously implemented.

Although budgetary consolidation is essential, it is only half the story. All efforts to establish solidity could be in vain if our economies do not get back on a sustainable growth track. It's therefore crucial that our strategy does not focus solely on austerity but also provides intelligent impetus for good and sustainable growth. The key to this is enhancing competitiveness. We have to concentrate on strengthening it rather than fuelling rapid economic expansion which will soon burn itself out.

The economic ramifications are evident: without growth there is a risk that economies will sink into recession, unemployment will rise, the debt crisis will worsen and, in the long term, Europe will marginalize itself. However, there are also political reasons why we in Europe need more growth. A healthy economy which offers every citizen real opportunities forms the basis for social cohesion and for society's acceptance of necessary reforms.

In addition to the necessary further consolidation, our task this year must therefore be to launch an ambitious agenda for more growth and competitiveness. Europe finally has to break the chains it has imposed on itself and take advantage of the huge potential it has to offer in three areas:

Internal market: Once before - back in the eighties and nineties - realizing the "four freedoms" released tremendous forces. Today the expansion of the internal market to cover new spheres offers great opportunities once more. That applies in particular to the digitized economy and trade on the Internet, the energy sector, where more competition will lead to lower prices and greater security of supply, as well as stronger small and medium-sized enterprises thanks to bureaucracy reduction and easier access to risk capital. The European Commission has put forward a number of proposals on the expansion of the internal market; every possible effort now has to be put into implementing them. In general, there should be a growth test to identify priority projects and an accelerated procedure for their passage through parliament.

Budget for the future: "More competitiveness" must be our maxim when it comes to negotiating the future EU budget. We have to invest where we can best promote sustainable growth. The EU's structural policy must therefore be examined critically. A European growth fund should be established in which unutilized resources from the Structural Funds can be used in a targeted fashion to create impetus for growth in problem countries. It is vitally important that we make education, research and innovation our budget priorities.

Free trade: In 2015, 90% of global growth will be generated outside Europe, notably in Asia as well as in North and South America. We Europeans have to try harder than ever before to increase our share. Free trade will be increasingly important. The EU therefore has to do everything it can to conclude more free trade agreements with old and new global powerhouses. That applies to the US, as well as to negotiations with Japan. We also have to bring the negotiations with India, the Gulf states and Brazil to a speedy conclusion.

However, the member states have to create the key conditions for growth themselves - through ambitious reforms on the labour market, in old-age pension systems or in terms of infrastructure. That goes not only for states which have been especially hard hit by the debt crisis. For reforms are particularly effective - and less painful - if they are implemented before and not during a crisis. No-one knows that better than the people who are currently bearing the brunt of the far-reaching reforms which became necessary in the midst of the crisis.

That also means that we all have to do our homework. Despite its favourable economic situation at present, even Germany cannot do without an ongoing reform programme to strengthen growth and competitiveness. At the same time, we Germans should work together with other partners whose economies are in relatively good shape and do everything we can to help our neighbours in trouble on the difficult path ahead.

It is occasionally claimed in the current debate that consolidation and growth are not compatible. I refute such claims. It is possible to combine the two - Germany, as well as many of our northern and eastern neighbours, have impressively demonstrated that. If we set the right course before the end of the year, we can find a sustainable way out of the crisis. We will also be laying the cornerstone for a Europe which is united politically and speaks with one voice in the face of the global challenges.

Guido Westerwelle has been Germany's Foreign Minister since October 2009.