29. Februar 2016 German Symposium London School of Economics: “Welfare states and freedom of movement"

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Opening Speech.

German Symposium London School of Economics: “Welfare states and freedom of movement"

Excellency,
Ms. Benz,
Ms. Karl,
Ladies and Gentlemen,

Thank you for the kind invitation. I am very pleased to be here today. The London School of Economics and Political Science (LSE) is an ideal place for me, as a citizen of Hamburg, to speak about Europe. For it allows me for a few moments to follow in the footsteps of a great European from Hamburg, whom all of you know. I am referring, of course, to Lord Ralf Dahrendorf, the Hamburg-born long-time director of the LSE. 

As a politician and a scholar, Lord Dahrendorf supported and encouraged European unification. He continually stressed that the quintessence of Europeanness, in the emphatic sense, lies not in a mechanical levelling, but rather in the judicious combination of universal solutions and national particularities. Thus he wrote, for example:

“A European Europe is also a much differentiated, colourful, multiple Europe. It is also a Europe in which those matters are dealt with and regulated in common which could perhaps only sensibly be dealt with in this way”

Lord Dahrendorf looked at Europe as both a German and a Briton. For him it was as natural to use both perspectives as to possess both passports. This is worth emphasising, as it serves as the point of departure for these remarks.

There is a long and extremely varied British-German tradition. Within it stand the centuries-long ties with the London Steelyard, which for the first time connected the kingdom to a very successful European commercial and economic community, namely the Hanseatic League. Likewise successful and culturally influential was the House of Hanover, which from 1714 till 1837 reigned in both Great Britain and Germany. However, in the early 20th century, German intransigence and hunger for status as well as the two world wars that it started wrought enormous destruction. We understand that the citizens of the United Kingdom look at Germany and think about how it was the British who freed Europe from the Nazis.

Precisely in northern Germany and especially in Hamburg we know that we have to thank the British for the establishment of our democratic institutions. Every day, the news programme Tagesschau—one of the most important sources of information in the Federal Republic—is broadcast from a studio on Hugh-Greene-Weg. Hugh Greene was a British journalist who, after the war, helped to set up the ARD, a public broadcaster that is still highly renowned today.

Many citizens, scholars and statesmen have worked to normalise British-German relations. Today, our common goal is a Europe of democracy, peace and prosperity.

Strengthening the ties between Britain and Germany is an on-going effort. We are counting on people like you, ladies and gentlemen, who know the perspectives of both countries. You live these ties and can carry them forward. You will enrich Europe. Your education at this excellent and world-famous university is your capital.

You will assume responsibilities, shape politics and make decisions, and I implore you to do so in the spirit of Europe: Bring our nations together, strengthen our democratic institutions and show everyone how enormously productive a British-German perspective is.

Ladies and gentlemen,

Among the notable events in post-war British-German cultural history was the launching of the career of the Beatles in Hamburg in 1960. Hamburgers were enthralled by the group, whose line-up then still included Stuart Sutcliffe and Pete Best. But after about 503 hours, the party was over: Over a formality, the police expelled the Beatles from the country. John Lennon worked a few jokes about this into his biography, but fortunately no one holds it against us. Hamburg gave the Beatles their start: They returned to Liverpool with a new hairstyle and international performance experience, and went on to achieve global fame.

Today, no Briton would be expelled from Hamburg, (at least not over a formality). Nor would any other EU citizen who was working here. On the contrary: The EU encourages the mobility of young people undergoing vocational training, studying and developing their talents. Indeed, the freedom of movement of European citizens is one of the cornerstones of the EU.

In the early years, freedom of movement applied exclusively to economic activity — it was, so to speak, the personal “slash” human corollary to the common market. With the introduction of European citizenship, however, the core of individual rights was emancipated from the market. Freedom of movement is now foremost among the European civil rights, being extended to 500 million EU citizens. And it is a vibrant right: Pensioners spend their golden years exploring every last corner of Europe. Young people speak the languages of their neighbouring countries, and everyone here at the LSE knows of the enormous potential for enrichment that mobility in education possesses.

However, at the heart of mobility are the economically-related fundamental liberties: The freedom to work and engage in trade within the framework of the internal market. Citizens can choose the place in Europe where they want to earn their livelihood. They can go where they see an opportunity for themselves. They work under the same conditions as native citizens, and must receive equal pay. The Beatles would no longer be thrown out. Discrimination is prohibited. Freedom of movement is the European right to equality of opportunity on the labour market.

Freedom of movement for workers is also an important economic factor. Businesses profit enormously from skilled workers from other countries; many appreciate having bilingual employees. Entire economic sectors, such as the health system, logistics and hospitality, could scarcely function without employees from other member states. In his immigration speech [of November 28, 2014] British Prime Minister David Cameron also explicitly stressed that the greatness of a nation depends on its openness to foreign professionals.

Until now, the exercise of freedom of movement has not led to any disruptions, even in times of economic crisis. Citizens from Ireland, Spain, Italy and Greece have settled in other EU countries, many of them later returning to their homelands when job opportunities there improve.

With the expansion into Central and Eastern Europe, the number of job seekers on the move has increased dramatically. Europe now has a workforce of some 200 million men and women, of whom all could potentially set off with the families and try their luck in another country. It is now evident that the EU is insufficiently prepared, both legally and politically, for such a mass exercise of this right.

It is the big cities of Europe that are most directly affected: Metropolitan areas such as Greater London or Hamburg attract thousands of labour migrants. For many Europeans they are places of hope for a better life. And it is not only the best and the brightest, prized skilled workers and problem solvers—those whom the American economist Richard Florida has dubbed the “creative class”— that come. There are also the unemployed and families in need of support. Precisely for unskilled workers there are too few or only low-paid jobs.

The British Prime Minister also made clear that the United Kingdom no longer wishes to extend full benefits to EU foreigners. In Denmark, Sweden and Germany there are also fears that more people exercising freedom of movement could burden the welfare state.

The causes for this can be seen by way of a comparison with the United States. There, with a population of more than 300 million, the principle of labour migration works considerably better. Many careers are spread out over multiple states. Indeed it is common when changing jobs to switch states as well. The states are varyingly attractive, with enormous differences in prosperity. However, this also begs comparison with Europe: Massachusetts and Mississippi are as different as Sweden and Greece. However, in the US, labour migration is unproblematic, as there are fewer and less precisely defined state benefits to be had and above all: In the US there are uniform rules governing access to welfare. While differences exist among the various states, the key decisions are made centrally by the federal government in Washington.

The EU, in contrast, currently has 28 separate social welfare systems. Neither historically nor conceptually can one speak of “a” European welfare state. Every member state provides a different density of coverage, defines different requirements for receipt of benefits and sets different goals. Basic income, health insurance and jobless benefits are more generous in some countries than others. Even a superficial comparison highlights the danger that better social benefits might function as false incentives. No welfare state can afford this in the long term.

It is common sense that needy native citizens should receive support. In Europe, the principle of solidarity can only work if we define it with the whole of Europe in mind. It is important for the union’s cohesion that it be clear when and why citizens of other member states are entitled to receive social benefits. We need an adaptable concept of solidarity.

There are few who would favour an American solution to the problem. Notions of a uniform European welfare state founder not least on the rocks of the differing financing models: In Germany, for example, the healthcare system is largely funded through insurance premiums, whereas in Britain it is financed through taxes. Thus social benefits do not belong to the canon of European policies but rather follow the principle of subsidiarity. Authority lies with the nation states. But what does this mean for EU citizens who move to other member states?

Prime Minister David Cameron has taken a clear position on this and demanded a redefinition of the UK’s relationship to the EU. This includes the demand that workers from other member states may only be able to claim in-work benefits after a waiting period of four years.

Fortunately it was possible to reach a compromise. The EU heads of state and government passed a resolution in Brussels that is to come into effect in the event of a positive outcome of the UK referendum. It includes the introduction into the provision on workers’ freedom of movement of a protective mechanism: the so-called emergency brake. It expressly states that the protective mechanism “will act as a solution to the United Kingdom's concerns about the exceptional inflow of workers from elsewhere in the European Union that it has seen over the last years”.
[Conclusions 18./19. February 2016, Annex VI].

This mechanism gives Britain the power to deny social benefits to EU citizens from other member states for a period of four years. The authorisation would apply for a maximum period of seven years. The provision will only be introduced if the island votes Yes on remaining in the EU. And for the most part it will apply only to the United Kingdom. For the temporary protective mechanism can only be deployed in countries that did not make “full use of the transitional periods on free movement of workers which were provided for in recent Accession Acts”. Under those provisions, social benefits for EU foreigners could be limited for a period of up to seven years. The United Kingdom as well as Sweden and Ireland did not avail themselves of this possibility.

The emergency brake gives the government in London more room for manoeuvre. Decisions relating to the disposal of national expenditures will be made in accordance with the wishes of its citizens. It is a means of leaving measures for the domestic labour market within the sovereignty of the nation-state.

This outcome was a compromise that demanded a great deal from all member states.

But the Brussels compromise is a good one; it is a reasonable one. I very much hope that the citizens of the United Kingdom will also recognise it as a compromise in their favour and will vote on the 23rd of June to remain in the EU.

Ladies and gentlemen,

We know that the question of what social benefits EU foreigners are entitled to receive is being discussed in other states, as well. The British protective mechanism will not provide a solution for them, as for most countries it does not apply. We therefore need a set of rules for what we might refer to as the “normal” course of action.

Legally speaking it is conceivable that 200 million workers might, together with their families, choose to exercise their freedom of movement. We are still far away from an event of this order of magnitude. However, even if only 5 to 10 per cent of the population should move to just a few states in search of work, with some failing to find it, it would currently cause problems.

In addition: Government authorities and courts in Germany are already having to decide whether EU citizens residing in Germany are entitled to receive basic security benefits. Does the German social security code apply to EU foreigners? This is not a trivial question. The state of the law is still unclear. Thus the largest social court in Germany, the SG Berlin, reached a different decision than the higher federal social court. Both are familiar with the comparable rulings of the European Court of Justice and yet have reached different interpretations. Such a degree of confusion is famously frowned-on in Germany.

I would like to outline a suggestion for a solution to these questions. It is my opinion that we can find a solution to the problem that is both thorough and practicable. The solution must satisfy four conditions:

(1) It should be generally seen as just and fair, (2) it should define the entitlement requirements for EU citizens for benefits, (3) it should give national lawmakers freedom to shape social policy, and (4) it should not curb freedom of movement.

I believe that such a solution could be found if we understand it as a question of individual rights. This fits in well with existing legal systems: The right to freedom of movement belongs to the canon of civil rights. Thus the regulations for social benefits should also be outlined within the framework of individual rights.

This is possible when the concept of labour is placed at the centre of our considerations.

Labour is a good approach for thinking about justice. John Locke stated that what one has produced by ‘the labour of his body and the work of his hands … are properly his’. [Two Treatises of Government, Essay Two, Ch. 5, § 26 ff]. This idea has spread all over Europe. It is embraced by conservatives and liberals alike. The principle is even found in the Marxist concept of exploitation — presumably also because Marx wrote “Das Kapital” in the British Museum.

It is part of the European canon of values to say that work creates claims. Differentiations are justified when they are based on labour and achievement.

Labour is furthermore the central term because it is about free movement for workers. Citizens can choose where they want to work in Europe. Freedom of movement is a general right: It applies to all. And it is also a negative right: It forbids discrimination against workers.

With social benefits, it is a different story: They are specific, apply in particular situations and are conditional upon different factors. In some cases they are extended only to people who have paid into the system, in others only to citizens, in still others to those in need. Entitlement to financial benefits is thus tied to individually varying circumstances. My proposition is that with regard to the issue of the free movement of workers, we must in the long term link social benefits to the question of labour.

We must focus on labour in order to prevent freedom of movement—which is an aspect of equality of opportunity—from turning into a force that decouples labour from financial benefits. In the long term it therefore strikes me as sensible to link the social benefits that EU citizens receive outside of their countries of origin with the work they have performed. Their claim to support in the country to which they have immigrated arises only when they have worked full time for a year, receiving at least the minimum wage. In Germany, that would correspond to an income of € 1470 per month.

With this solution, social welfare benefits will be linked to the ability to integrate into the labour market, without limiting freedom of movement. It sends out a clear message: You can look for work anywhere. However, you do not have the right to choose the country in which you wish to receive social benefits. Support is due to those who have contributed to the national product. This solution honours the contributions of immigrants and also serves as an incentive to earn one’s living through labour.

So much for my suggestions for further developments. I have allowed myself to look a short distance into the future. Of much greater importance are the current developments.

Ladies and gentlemen,

You know that there is a strong argument for agreeing to the Brussels compromise and it is: the United Kingdom. No one can replace the UK in the EU. This applies to foreign policy, security policy and economic policy alike. 

The UK’s strength is indispensable for an effective foreign and security policy in the EU. The EU is an amplifier. Together we can give our concerns global-political weight.

Britain is a decisive factor from an economic perspective, as well. The EU knows the importance of London as both a centre of finance and trade and as the hub of the Commonwealth states.

The European Union needs reforms. It must become more democratic and flexible and at the same time return some competencies to the regions. We want to set these reforms in motion, together with our partners in the United Kingdom.

Britain is an open society that can serve as a model for the rest of Europe. The British body politic unites citizens from a panoply of countries and of various cultural and ethnic backgrounds into a stable parliamentary democracy. Europe could stand to become a great deal more British.

Britain is the homeland of great European minds, the land of the (new) lingua franca and a model of statehood.

The European Union would be small without Britain. We do not wish and indeed cannot do without the British.

We are banking on the courage, pragmatism and willingness to compromise of the citizens of Britain.

Germany is hoping for a yes-vote on the part of the United Kingdom to remain in the European Union.

Thank you!
 

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