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Speech of the President at Çukurova University in Turkey

English Pages, 16. 2. 2012

Mr. President, Ladies and Gentlemen, Students,

Thank you for the invitation to visit your university and for the possibility to address this audience. I appreciate it very much. This is not my first academic speech in Turkey. Six years ago, I spoke at the Middle East Technical University in Ankara and a year before that at Forum Istanbul. There is even my book published in Turkish by the Forum Istanbul in the year 2005 with the title “On the Road to Democracy” which discusses our experience with the transition from communism to a free society and market economy.

Currently, I am in Turkey on a formal state visit which started in Ankara two days ago, continued in Mersin and Tars yesterday and culminates here in Adana. I am pleased to be able to tell you that we had very positive, friendly and productive talks with your President, Deputy Prime minister, Speaker of the Grand National Assembly and other leading Turkish politicians. I can assure you that we are – all of us, on both sides – motivated to intensify the mutually advantageous relations which exist between our two countries.

Between my two last visits here – 2006-2012 – Turkey witnessed extremely positive developments. Your country is economically successful, the living standards have increased, Turkey has transformed itself into a stable democratic country and becomes an inspiration for countries in many other parts of the world.

In the meantime, the Czech Republic – as a European country and as a member of the European Union – found itself in a more complicated situation. We could not avoid being negatively influenced by the 2008-2009 economic crisis but because of the good health of our financial and banking sectors we succeeded in avoiding the devastating financial crisis. As one of the most open countries in the world – in economic terminology, we are a textbook case for a “small open economy” – our exports to the EU countries decreased substantially which in the year 2009 led to a GDP fall (of about 4 %). In the last two years, the economy has been growing again. As some of you may know, we are not a member of the Eurozone and still use our own currency – the Czech crown. We are happy not to fall into the Eurozone debt trap.

This motivates me to say a few words about the European Union. I know that Turkey has been – for more than half a century – a patient aspirant for the EU membership. I would like to make it very clear that the Czech Republic, and I myself, are very much in favour of it. The situation is, of course, not the same in all member countries.

I always say that we are interested in your membership not just for altruistic reasons. We believe that the accession of your large, economically strong, dynamic and culturally diverse country to the EU could change the current balance of forces (the current equilibrium) in the EU and could help to positively modify its behaviour. We, the Czechs, are not in favour of the excessive unification, centralization, homogenization and standardization of the European continent, we are not in favour of the concept of “ever-closer Europe”, we would prefer to live in a more loosely integrated continent. The membership of your country would be a help in this respect.

We are, however, not sure whether you are still interested in the EU membership. Your dynamic economic growth demonstrates that successful development is not based on a common currency, on an increasing volume of subsidies, on intensification of government regulation and on the centralization of economic policy.

In the last years, Europe has become – for many people rather rapidly and unexpectedly – a problematic region[1]. The foreign observers were not prepared for that. They started to pay closer attention to Europe as late as in the last two years during the Eurozone debt crisis because they – quite incorrectly – considered even the 2008-2009 crises a global crisis, which was not true. It was only a European and North American crisis. The previous, very problematic developments in Europe were, therefore, evidently underestimated.

The current sovereign debt crisis that keeps making everyday’s headlines in the media, is only the most visible tip of the iceberg of a much deeper and much longer existing European problem which is a long-term consequence

– of the form and the method of the undergoing European integration process and
– of the European economic and social model characterized by government overregulation and by the unproductive welfare state.

After the fall of communism, the Czech Republic had a clear and undisputed ambition to once again become a normal European country and – as a country located in the heart of Europe – it understood that it requires the EU membership. I don´t think your country is in the same position now. I guess you want to be a dynamic, prosperous, democratic and sovereign country with the best possible relations with Europe. I am not sure you want to be a “normal” European country, whatever it means.

As regards the EU membership, our experience tells us that this is not a one sided benefit. It does have its costs. Let me, briefly, outline how I see the economic benefits and costs of the EU membership.

The economic benefits of the EU membership can be structured in the following way:

1. Becoming a part of an – until recently – very prestigious club of economically developed and stable countries is supposed to improve the image of the country and to attract foreign investors. Switzerland does not need it, the post-communist countries needed it;
2. A territorially bigger market – without protectionistic barriers among countries – is an advantage (on condition it is not undermined by financial instability);
3. Certain fiscal transfers in the EU do exist (on condition the country is below the EU average in GDP per capita, which is the case of the Czech Republic) but the net fiscal gains are not large. They are – macroeconomically – practically irrelevant (they were relevant when only two countries – Spain and Portugal – needed them and were getting them two decades ago);
4. The obligatory implementation of the European legislation and of the European way of governing is a benefit on condition the country itself has a less liberal legislation and is generally less organized.

There is, as always, the other side of the coin: economic costs connected with the EU membership:

1. Every country has to participate in the co-financing of this large, expensive, highly bureaucratic organization, which is a problem more relevant for smaller and economically less developed countries;
2. There are non-negligible domestic costs connected with the membership (bureaucratic paper work and all kinds of other similar requirements, the organization of endless conferences, meetings, trips abroad, the financing of the artificially created EU jobs, etc.);
3. The implementation of a very heavy and, therefore, economic activity undermining legislation based on centralization, excessive regulation, controlling, harmonization, standardization, subsidization;
4. The more or less inevitable acceptance of an overgenerous and therefore demotivating European welfare system.

As an economist, I know it is very difficult, if not impossible, to give quantitative estimates to all these factors. My guess is that the net positive effect of the membership on a country such as the Czech Republic is very small, if not negative.

The very sluggish economic growth which is the consequence of half a century of the deepening of the integration process and of “more and more Europe” does not indicate that the opposite could be the case. The currently proposed solution – the move to a fiscal union – is another example of “more Europe”. The just prepared “fiscal pact” – which the Czech Republic together with the UK refused to sign – would imply that Brussels would monitor the budgets of all EU governments (and of all levels of government!). That would require an enormous bureaucracy with a knowledge of individual member countries which is impossible to get. The individual countries can also lose the motivation to control budgets themselves.

As a result of all this, Europe will not be a “locomotive” of the world economic recovery and growth. I expect the BRIC countries – and I would include Turkey into the group – to be the most dynamic part of the world economy in the future. The plans to organize a fiscal union in the EU will not make any difference. 

I am convinced that the European Union should be open to any country willing and ready to participate in the integration process. As I said, any country willing to participate should have a chance to do it, on condition that it fulfills the political, economic and social criteria that were agreed upon.

Václav Klaus, Speech at the Çukurova University, Adana, Turkey, 16 February, 2012