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  • Good morning ladies and gentlemen.

  • It gives me great pleasure to introduce the Prime Minister of the United Kingdom,

  • Mr. Cameron.

  • I think we are very privileged after having listened yesterday to Chancellor Merkel,

  • to hear now the Prime Minister talking about his vision for the future of the world,

  • and for the future of Europe and, I should add, the Euro.

  • So Prime Minister of the United Kingdom, please welcome.

  • Thank you very much.

  • Thank you Klaus for that introduction.

  • And it's great to be back the World Economic Forum in Davos.

  • But we meet today at a perilous moment for economies right across Europe.

  • Growth has stalled, unemployment is rising,

  • the prospect of Europe getting left behind is all too apparent.

  • While China grows at 8%, India at 7% and Africa at 5.5%,

  • the European Commission forecasts that the EU will grow by just naught 0.6%

  • in the whole of 2012,

  • and even that is assuming that the problems in the Eurozone get better, not worse.

  • Yesterday, in Britain,

  • we had the official figures for the final quarter of the last calendar year,

  • and they were negative.

  • Other the large economies of Europe are forecast to have a similar outcome or worse.

  • In just four years, government debt per EU citizen, has risen by ג‚¬ 4,500.

  • Foreign direct investment has fallen by around two thirds,

  • and in more than half of EU member-states, a fifth of all young people are now out of work.

  • So this is not a moment to try and pretend there is not a problem,

  • nor is it a moment to allow the fear of failure to hold us back.

  • This is a time to show the leadership that our people are quite rightly demanding.

  • Tinkering here and there and hoping we'll drift to a solution,

  • simply isn't going to cut it anymore. This is a time for boldness, not for caution.

  • Boldness in what we do nationally,

  • but boldness also in what we do together as a continent.

  • Now, in Britain, we've had to be bold.

  • We were faced, as we came into government,

  • with the biggest budget deficit in our piece- time history, more than 10% of our GDP.

  • We had the most leveraged banks, the most indebted households,

  • and the biggest housing boom. To be cautious would have been catastrophic.

  • Instead, we were bold and decisive.

  • We formed the first coalition government for 70 years.

  • We legislated for a fixed term five-year parliament,

  • which has helped to give people the confidence of stability and credibility.

  • We put forward an aggressive set of plans to get our economy back on an even keel.

  • Five and a half billion pounds saved inside the first financial year,

  • the one that was already underway.

  • Welfare bills, cut. The cost of government, cut.

  • Public sector pay, frozen. The state paid pension age increased.

  • Let me give you one example, the reform of public sector pensions.

  • This is a difficult issue for any government.

  • We want public servants to have good pensions. We've insured that that is the case,

  • but at the same time, we've actually cut the long-term cost in half.

  • By taking bold decisions to get to grips with the debt,

  • Britain has shown that it is possible to earn credibility and get ahead of the markets.

  • Our borrowing costs have fallen to the lowest for a generation,

  • and we will be equally bold in meeting our key ambition, which is to support enterprise,

  • and to make Britain the best place in the world in which to start or to grow a business.

  • So, we are pursuing an unashamedly pro- business agenda, scraping needless red tape,

  • simplifying planning, reviewing all regulation,

  • creating the most competitive business tax regime in the developed world,

  • with corporation tax coming down to 23%.

  • We're making bold investments in new infrastructure, including high-speed rail.

  • And while we may be fiscal conservatives, we are monetary radicals.

  • We are injecting cash into the banking system, and introducing credit-easing measures

  • to make it easier for small businesses to access finance.

  • So my message to you, in this special Olympic year for Britain,

  • is that we are a country that is absolutely committed to enterprise and to openness.

  • Come to Britain, invest in Britain. Be part of this special year in a truly great country.

  • So yes, in Britain,

  • we're taking the bold steps necessary to get our economy back on track.

  • But my argument today,

  • is that the need for bold action at the European level is equally great.

  • Europe's lack of competitiveness is its Achilles' heal.

  • For all the talk,

  • the Lisbon strategy has failed to deliver the structural reforms that we need.

  • The statistics are pretty staggering.

  • As measured by the World Economic Forum, more than half of EU member-states

  • are now less competitive than they were this time last year,

  • while five EU member-states

  • are now less competitive than a country that is pretty sclerotic, Iran.

  • For every Euro invested in venture capital in the EU,

  • five times as much is being invested in the US.

  • Our single market, one of our greatest strengths, remains incomplete,

  • and there are still a colossal 4,700 professions across the European Union

  • to which access is regulated by government. And that is not all.

  • In spite of the economic challenge, in spite of the unemployment challenge,

  • we're still doing things through the EU to make life even harder.

  • In the name of social protection, the EU has promoted unnecessary measures

  • that impose burdens on businesses and governments and can destroy jobs.

  • The Agency Workers Directive, the Pregnant Worker's Directive,

  • the Working Time Directive, the list goes on.

  • Then, of course, there is the proposal for a financial transactions tax.

  • Now, of course, it is right that the financial sector should pay their share,

  • and in the United Kingdom we're making sure that's the case with a bank levy,

  • and with the fact that we charge stamp duty on shares.

  • And these are options that other countries can adopt.

  • But if you look at the European Commission's own original analysis,

  • that showed that a financial transactions tax could cost the GDP of the European Union,

  • and could reduce it by ג‚¬ 200 Billion. It could cost almost 500,000 jobs,

  • and force as much as 90% of some markets away from the European Union.

  • Even to be considering this at a time when we're struggling to get our economies growing,

  • is quite simply madness. It shouldn't go on like this.

  • That is why Britain has been arguing for a pro-business agenda in Europe.

  • This is not just a British agenda.

  • Over the last year, we have spearheaded work with 15 other member-states across the EU,

  • both inside and outside the Eurozone.

  • This weekend, Chancellor Merkel and I called for a package of deregulation,

  • and liberalization policies.

  • And our ideas now lie at the heart of what the European Commission is promoting too.

  • Together, we're pushing for the completion of Single Market in services and in digital.

  • Those two things could add alone, ג‚¬ 800 Billion to EU GDP,

  • and they could lead the drive to exempt micro- businesses for excessive regulation,

  • both new and existing.

  • But I believe, we need to be bolder still, so here is the checklist.

  • All proposed EU Measures should be tested for their impact on growth.

  • We need a target to reduce the overall burden of EU regulation.

  • And we need a new proportionality test to prevent needless barriers-to-trade in services

  • and to slash the number of regulated professions in Europe.

  • That together with our international partners,

  • we also need to take decisive action to get trade moving.

  • Now, I'm not going to give you the standard speech on Doha.

  • Last year, at this very forum, world leaders called for,

  • an all-out effort to conclude the Doha Round in 2011.

  • We said it was a make-or-break year, it was.

  • And we have to be frank about it, it didn't work.

  • But we must not give up on free trade.

  • Let us step forward with a new and ambitious set of ideas to take trade forwards.

  • First, rather than trying to involve everyone at once,

  • let us get some bilateral deals done.

  • Let's get the EU Trade Agreements with India, with Canada, with Singapore,

  • finalized by the end of this year.

  • Completing all the deals now on the table, can add ג‚¬ 90 Billion to Europe's GDP.

  • And let's also look at all the options on the table for agreement between the EU and the US,

  • where a deal can have a bigger impact than all of the other agreements put together.

  • Next, let's be more creative in the way we use the multi-lateral system.

  • Far form turning our back on multi-lateralism, we need the continued work of the WTO

  • to prevent any collapse back to protectionism,

  • to ensure we take a candid interest of the poorest countries in our world,

  • and to ensure that the WTO framework is fit for the 21st century.

  • And I also believe that it means, going forwards,

  • perhaps with a coalition of the willing, so countries who want to,

  • can forge ahead with more ambitious trade deals of their own,

  • consistent within the WTO framework.

  • Now, there are some proposals out there already, like the Trans-Pacific Partnership,

  • but why not also an ambitious deal between Europe and Africa,

  • or even a Pan-African Free Trade Area.

  • This is a bold agenda on trade,

  • which can deliver tangible results for the world economy this year,

  • and I'm proposing that we start work on it immediately.

  • Now, of course, the most urgent question facing all of Europe right now,

  • is how to deal with the Eurozone crisis.

  • And this is where, I believe, Europe needs to be boldest of all.

  • Vital progress has been made.

  • The European Central Bank

  • has provided extensive additional support to Europe's Banks.

  • Many Eurozone countries are taking painful and difficult steps to address their deficits,

  • and to give up a degree of sovereignty

  • over the governance of their economies in the future.

  • And, of course, there was the agreement to set up the firewall.

  • Now, all of these are welcome and necessary steps,

  • and I don't underestimate for one moment,

  • the leadership and the courage that has got us this far.

  • But we need to be honest about the overall situation.

  • The crisis is still weighing down on business confidence and weighing down on investment.

  • A year ago, bond rates where 5% in Spain, nearly 5% in Italy,

  • and more than 7% in Portugal.

  • Today, they are still 5% in Spain, up to 6% in Italy, and 14% in Portugal.

  • So, we still need those urgent short-term measures to be properly put into effect.

  • The October agreement needs to be fully implemented.

  • The uncertainty in Greece has to be brought to an end.

  • Europe's banks must be properly recapitalized.

  • And, as the IMF has said, the European Firewall

  • needs to be big enough to deal with the full scale of the crisis,

  • and the potential contagion.

  • And Chancellor Merkel is absolutely right to insist that Eurozone countries

  • must do everything possible to get to grips with their own debts.

  • But we also need to be honest about the long- term consequences of a single currency.

  • Now, I'm not one of those people who think that single currencies can never work.

  • Look at America. Look at the United Kingdom.

  • But there are a number of features that are common to all successful currency units.

  • A central bank that can comprehensively stand behind the currency,

  • and the financial system.

  • The deepest possible economic integration with the flexibility to deal with economic shocks,

  • and a system of fiscal transfers,

  • and collective debts issuants that can deal with tensions,

  • and the imbalances between different countries and regions within the Union.

  • Currently, it's not that the Eurozone doesn't have all of these,

  • it's that it doesnג€™t really have any of these.

  • Now, clearly, if countries are close enough in their economic structure,

  • then tensions are less likely to arise.

  • But when imbalances are sustained,

  • and some countries do better than others year after year, you can face real problems.

  • That is what the current crisis is demonstrating.

  • Now, of course, private capital flows can hide these problems for a while.

  • In the Eurozone, that is what happened.

  • But once markets lose confidence and dry up, you are left in an unsustainable position.

  • Yes, tough fiscal discipline is essential, but this is a problem of trade deficits,

  • not just budget deficits.

  • And it means countries with those deficits making painful decisions to raise productivity,

  • to drive down costs year after year to regain their competitiveness.

  • But that doesn't happen over night, and it can have painful economic,

  • and even political consequences.

  • Nor, in fact, is it sufficient. You still need the support of single-currency partners,

  • and as Christine Legarde has set out, a system of fiscal integration and risk sharing,

  • perhaps through the creation of Europe-Area bonds, to make that support work.

  • As Marion Monty has suggested, the flip- side of austerity in the deficit countries,

  • must be actioned to put the weight of the surplus countries behind the Euro.

  • Now, I'm not pretending that any of this is easy.

  • These are radical, difficult steps for any country to take.

  • Knowing how necessary, but also hard they are, is why Britain didn't join the Eurozone.

  • But they are what is needed if the single currency, as currently constituted, is to work.

  • Now, of course, some people would say, it's all very well Britain making these points

  • but you're not in the Euro and, in fact, last month you even vetoed adding a new treaty

  • to the European Union. Let me answer that very directly.

  • I understand why the Eurozone members want a treaty inside the European Union.

  • But if they do, there have to be safeguards for those countries

  • that are in the European Union but who have no intention of joining the single currency.

  • I didn't get those safeguards, so the treaty isn't going ahead inside the European Union.

  • But let me be clear, to those who think that not signing the treaty

  • means, somehow, Britain is walking away from Europe, let me tell you,

  • nothing could be further from the truth.

  • Britain is part of the European Union, not by default, but by choice.

  • It fundamentally reflects our national interest to be part of the single market

  • which is on our doorstep, and we have no intention of walking away from it.

  • So let me be clear, we want Europe to be a success

  • and all the measures that we'll be proposing for next week's European council,

  • can help achieve that success.

  • But we want Europe to succeed not just as an economic force but also as a political force,

  • as an association of countries with the political will, the values,

  • and the voice to make a difference in the world.

  • When that political will is there, we can make a decisive difference.

  • Together with President Sarkozy,