Professor Schwab, Klaus,

President Zelensky, Volodymyr,

Mr Brende,

Ladies and gentlemen,

Daron Acemoğlu is one of the three current Nobel laureates in the economic sciences. For years he has been looking at the question of why some countries are prosperous and others not. One key takeaway: in the long term, strong, trustworthy institutions are vital to achieving prosperity. So says Daron Acemoğlu.

Of course it is no coincidence that I am quoting him here today. Particularly in this extremely dynamic era, it is important that we act in a level-headed and predictable manner. Many of our countries are experiencing a similar development: predictability, honesty and reliability are having an increasingly tough time. At the same time, public debate is being taken over by a black-and-white thinking that promises, but can never deliver, simple solutions. After all, the world out there is not becoming blacker or whiter, but more complex and more complicated.

This is posing unprecedented challenges for us all. Of course we are convinced of the benefit of strong institutions and states based on the rule of law. But how can we protect them against attacks from within and without? Of course we are aware of the link between predictability, trust and prosperity. But how can we maintain this consensus and convince others of it? These are hugely important questions, and it is right that they occupy us here in Davos.

Before we start our discussion on this, I would like to express a few of my thoughts on the subject. First of all, we need to be clear and steadfast. This holds especially true in matters of peace and security. We must do everything possible to safeguard the fundamental principles of international order, and the most fundamental principle of all is the inviolability of borders. That, by the way, is always so, everywhere. Anyone who calls this principle into question is calling into question the international order as a whole, calling into question peace and prosperity, and this worldwide.

That is why President Putin must not be allowed to succeed in the war of aggression he has unleashed against Ukraine, and – and this fact is often overlooked – so far he has not succeeded. Putin wanted to drive a wedge between Ukraine and the EU. Instead, Ukraine is now an EU candidate country. He wanted NATO to be as weak and divided as possible. Instead, NATO is more united than ever before, and has grown to include two new members, Sweden and Finland. He wanted to install a pro-Russian puppet regime in Kyiv. Instead, Ukraine is stronger as a nation than ever. And he wanted to subjugate Ukraine militarily. Instead, the Ukrainian army is much larger and stronger today than before the war, and is equipped with western weapons.

This is all primarily thanks to the brave people of Ukraine, but it is also a result of our support. This support is and will remain the way to a real, just peace for Ukraine. To that end we coordinate extremely closely in Europe – with the United States and naturally with Ukraine. Because the Ukrainians themselves need to have the final say. Nothing about Ukraine without Ukraine! This clarity on principles is necessary.

Secondly, in a world permanently on the verge of a nervous breakdown in the glare of social media, cool heads are called for. Not every press conference in Washington, not every Tweet, needs to plunge us head first into agitated existential debate. This is also true after the change of administration yesterday in Washington.

To put it plainly, the United States is our closest ally outside Europe, and I will do my utmost to ensure that it remains so, because that is in both our interests, as the close cooperation between Europe and the United States is crucial for peace and security throughout the world and because our partnership is also a driver of successful economic development. My first conversations with President Trump and contacts between our advisers point in that direction.

And yet at the same time it is entirely clear that President Trump and his administration will keep the world watching with bated breath in the years ahead – on energy and climate policy, trade policy, foreign and security policy and a few other fields. President Trump has announced all this, again yesterday, too. We can and will deal with this – without unnecessary excitement and indignation, but also without false ingratiation or currying favour.

Yes, President Trump says “America First” and means it. Now, there is nothing wrong in having an eye on your own country’s interests; it’s what we all do, after all. However, the truth is that cooperating and reaching understanding with others is generally also in one’s own interest, too. For Germany, I have often said that Germany’s major national interest is the European Union.

And this leads me on to the third thought I’d like to share with you today, one that is becoming more important almost by the hour: we Europeans must be strong in ourselves. We must stand together, among ourselves and with partners across the world. We must become more competitive and more resilient. We have what it takes to do so. As a community of over 450 million Europeans, we have economic clout. With only 84 million inhabitants, Germany is the world’s third-largest economy.

First example: our defence capability. Here we need not only increased defence expenditure but also, at last, more efficiency in Europe. Not “gold rim solutions” in each individual country and dozens of different types of weapon, but a European arms industry that works together to develop large-scale projects, as we already do, for instance, with battle tanks and combat aircraft. My goal is for every European procurer to be able to easily step into existing contracts, and it must also be possible for companies to develop weapons together without restrictions.

Second example: economic and trade policy. Isolation comes at the cost of prosperity. Together with other partners, we will defend free trade as the basis of our prosperity. We are discussing this with EU partners and with the European Commission, and I will be talking about it with Emmanuel Macron in Paris as early as tomorrow.

Europe is committed to free and fair global trade, and we are not alone in that. This point is underscored by the fact that the negotiations between the EU and the MERCOSUR states on a free trade agreement have finally been concluded after 25 years, and by the conclusion of political negotiations on the modernised agreement with Mexico last Friday – a success for Europe and for Mexico. Because reduced tariffs mean more trade, more competition and lower prices.

Talking of competition, Europe and Germany must roll up their sleeves to improve their competitiveness, not just as a response to developments in China or the presidential elections in the United States, but because the world and globalisation as a whole have undergone radical change. Serious competitors have emerged in all parts of the world – in Asia, Africa and South America.

That does not mean that we should get into an undercutting war, along the lines of who pays the lowest wages and who has the lowest environmental or social standards. But if we Europeans want to preserve our prosperity under these new circumstances, then we must above all keep up our technological lead and in some areas build one.

Quantum technology, semi-conductors, pharmaceuticals, biotech and green technologies – these are key technologies and sectors that an industrial country like Germany needs and that a sovereign Europe needs. The European Union must and will orient its policies even more to this in the years ahead – from competition law and state-aid rules to industrial and financial policy to a modern immigration law. All of these must be seen as an ensemble if we want to kickstart new growth in Europe.

And it is possible. On that I am in agreement with Emmanuel Macron and many others, also with Commission President Ursula von der Leyen. Our companies need better financing possibilities and capital for investment. Many banks and international financial investors stand ready, but often their efforts founder in the face of nationally organised capital markets in Europe. So what’s important now is substantive progress on deepening the Capital Markets Union. This is not some marginal issue for the experts; it is crucially important for the future of our competitiveness, indeed for the future of Europe. 

Improving competitiveness also involves the EU dismantling excessive red-tape and regulation. The European Commission has promised to do this, and we will call on the new Commission to view this as a central task. 

Let me give you just one example: electric mobility is the future. There is no doubt about that. Anyone who suggests otherwise is harming our industry. But it is also harmful if European car manufacturers have to pay penalties to Brussels, instead of investing the money in clean mobility. That helps no-one, least of all the climate. 

What we need is pragmatic solutions, not ideological ones. And that is why I am pleased that the Commission President has meanwhile taken up my proposal for harmonised Europe-wide purchasing bonuses for electric vehicles. Our goal in Europe must be to make ourselves better.

To this end, it is imperative that Germany, too, the largest economy in the European Union, continues to invest massively in the future. I am thinking here in the first instance of private-sector companies, large and small. I want to support them with an unbureaucratic “Made in Germany” bonus for investment – rapid, simple and pragmatic. The state is to contribute ten percent to every equipment investment in Germany, in the form of a tax credit – with no need for complicated applications, and without bureaucrats giving the thumbs-up or thumbs-down to new business ideas which, let’s face it, they understand far less than the very companies that are bearing the entirety of the risk. 

Investment in new technologies, equipment and machinery is one thing. Investment in infrastructure – roads, railways, bridges – is another. For investment in electricity grids and heat networks, new houses and flats, I have, among other things, proposed a Germany Fund for which both public and private capital is to be mobilised. 

If there’s one industrial country in the world that can invest heavily in the future, then it’s Germany. The government debt of all other G7 states is over 100 percent of gross domestic product, in some cases well over. Germany’s government debt is falling towards 60 percent. That’s why I am in favour of a wise, targeted amendment of the debt rule in the German constitution. And this is not just my idea: many experts, including many here in this room, have been calling for such a change for years. The IMF and the Nobel laureate I quoted at the outset, business associations, trade unions – they are all urgently advising us Germans to invest more in defence, in infrastructure, in transport infrastructure and in education, in safe, affordable, clean energy. Such investment creates growth, not merely for a few months, but for years. It ensures prosperity for decades ahead. 

Ladies and gentlemen, I know that many of you, too, feel that we must stand up more resolutely than before for our beliefs, our values and our prosperity. I would like to encourage you and all of us here today to do so. Steadfast in our principles, relaxed in the all-too-impassioned debates, pragmatic in our actions, closely allied with old and new partners – that is how we will get through this difficult time. 

Thank you.