Günter Verheugen is Vice-President of the European Commission responsible for Enterprise and Industry. On January 28, 2007 he will be participating in the second series of Allianz Lectures, discussing "Europe's roadmap to global economic leadership" with Josef E. Stiglitz, winner of the Nobel Prize for Economics, and Hans Joachim Schellnhuber, Advisor to the German Government on Climate Issues. The event is organized by Allianz Cultural Foundation and Sueddeutsche Zeitung and takes place at Munich's Residenz Theater from 11 a.m.

Verheugen: It certainly is an ambitious goal, but exactly the one we must achieve. With such huge changes taking place on the global economic stage, the only way we Europeans can maintain our current standard of living is by being better than the competition.

Verheugen: I believe it certainly can. Implementing a European growth and employment policy has been extremely difficult because not all member states approach the task with the same vigor.

I hope that during its Council Presidency, Germany will be able to move the policy forward in several important areas. Uppermost on the agenda are reducing bureaucracy, improving conditions for European companies and establishing a European energy policy.

Verheugen: Our growth and employment policy is basically a reformulation of the Lisbon strategy. When the European Commission under José Manuel Barroso came into office in 2004, the Commissioners realized that this goal was unattainable. The gap between Europe and the USA had actually widened, and other world regions were catching up quickly.

So we totally revised the strategy and worked to establish a coordinated economic policy throughout the EU, at both Community and member state level. We aim to strengthen research and development, invest more in education and training, promote innovative spirit in our economy, and make Europe a more attractive place to invest.

And this strategy is effective: our economic data looks far more favorable. We know of course that this is not due to our new policy alone, but we also know that this policy has significantly increased people's confidence in the European economy.

Verheugen: I don't want to be so bold as to suggest a definite date. What is important is not whether or not we achieve our objectives in 2012, 2013 or 2015, but rather that we have a long-term policy which helps us to be the best in all areas, despite ever increasing global competition.

To my mind, a product that is "Made in Europe" should stand out because it is technologically state-of-the-art, is produced using the best possible method, is the most ecologically friendly and energy efficient, and most reliable for users.

Verheugen: A great deal. It has just launched its seventh Framework Program for Research and Technological Development, providing over 50 billion euros to fund leading research projects in Europe. Most importantly, it coordinates research efforts in specific areas that are strategically important, thus creating synergies, many of which are due to increased integration of public and private research.

Another important change is that EU research policy is now much more practice-oriented, based on the belief that anything discovered and developed by European researchers should be put to practical use. This utilization of new findings and skills for economic gain is something that the Americans are much better at than we are – for the time being.

Verheugen: Without a doubt. The political objectives of this extensive enlargement were achieved: the entirety of the former Communist region between the Baltic and Black Seas is now democratically stable and on course to economic success. We have achieved long-term stability and peace in an area of Europe that is part of the European integration policy.

From an economic point of view, the enlargement is especially positive for those countries that border the new member states, and above all for Germany and Austria. The new member states have extremely high growth rates, and Germany in particular has benefited immensely from this in the form of increased demand from these countries, which in turn has led to the creation of new jobs.

Verheugen: It already is. We are already the region that sets global standards, not just for climate protection, but for environmental protection in general. We will continue on this path for the sake of the coming generations, even if it proves costly. Because everyone must know by now that the later we start to tackle the issue seriously, the more expensive it will be.

Of course we are putting all our efforts into ensuring that we Europeans are not alone in mitigating the effects of climate change and that other regions of the world, which are far greater polluters than we are, also participate in the effort.

Verheugen: Behind the discussion is the question whether in the long term it is acceptable to continue burdening our industries with costs that make their exports more expensive – costs that our competitors elsewhere in the world do not inflict upon their industries.

If the competitiveness of our own economy suffers due to our high EU environmental standards, then we need to discuss how to achieve fair conditions. This discussion has only just begun, and some EU heads of government have called for compensation through higher import duties. Personally, I believe that we should explore this suggestion, but we should also remember that in the medium term, having high environmental standards could actually give us a competitive advantage.

Verheugen: Basically, I see three main areas where we have severe and dangerous deficits. The first is our Constitution, or the way the EU is organized, which is no longer suited to an enlarged Union or the 21st century. We need fundamental institutional reform, yet a previous attempt to do this has come to a standstill. It would be a huge achievement if the German government were able to revive this reform process during its Council presidency.

Secondly, Europe needs to actively implement its growth and employment agenda, at both community and member state level, thus enabling it to become a knowledge-based society and economy.

Thirdly and perhaps most urgently: Europe is an economic giant, yet our ability to influence global politics is still extremely limited. At the same time, demands placed on us are increasing. So we urgently need a common foreign and security policy worthy of that name.

Given the great changes in global politics that are to come, Europe must not simply be a pawn used by others to achieve their interests, but must speak out strongly and decisively for its own interests. I am not talking about Europe becoming a global power, I am talking about Europe taking on the same role in politics as Allianz plays in the insurance industry, namely the role of global player. And we need to create the right conditions for that to happen.

Verheugen: The most important task for companies is to prepare themselves as well as possible, and tackle competition head on. Above all I would advise them to invest more in research and development and in training and qualifying employees. Those seem to me to be the two key areas for investment. In my experience, companies which do this more than the others do, are successful.

Verheugen: I am expecting a highly educated and knowledgeable audience, and my intention is to convince the participants that the future of Europe is not just the responsibility of people like me, who have made it their purpose in life, but the responsibility of each individual European — and particularly in Germany.