financial crisis revealed our structural weaknesses in europe. shed light on it. and therefore, for me, this crisis is more of a wake-up call. it's a wake-up call that tells me we have to look in the face at our problem and it's not going to be easy to find a solution, but i'm fully convinced that the only solution is when we all work together and if we are successful in the mobilization we will be and that's what we want. otherwise, we will not be a successful continent. this means that what we have already achieved in europe can only be preserved if we renew

with strength. and therefore, we can say that this crisis is a chance for us, it's the chance for us to create a stability union, a stable union, worthy of the name. the question of finances very often it is summarized in cut cut cut. well, that's too simple. no, it has to to with the fact that we have to live in the sustainable way and we have to also think about the next generation. and if we were not able to have a sustainable system, well, we would be in a very difficult situation that we could never overcome in the future. and the financial markets wonder if we can come out of this crisis. and therefore, one of the

elements is to consolidate our budgets. we could say that we have started. we have started the beginning, if you want. the facts of the treaties are clear. we had the stability, it was very clear rules. the problem, the truth is that the rules were never rete therefore, the reality was different from what was on paper. so we need solid finances, solid budgets, sustainable budgets. among others for a generational justice. but not all the rules and the stability factor must be binding. that's why in this new fact it will be binding. this new treaty if you want, which was first thought for the eurozone countries now has been signed by 25 countries.

and today, today, this very date, it's the 20th anniversary of the treaty. and we have taken an important position. we have decided to go the right way in our common currency. the rules of the stability packs were neglected. now we must say in the future there will be a respect, otherwise, we won't have a free and independent economy. but solidity is one aspect. but in order to have solidity we have to be more competitive. that and lack of competitivety are linked together if we cannot sell our products we will have

less jobs and therefore our debts are going to go up. that is to say that budget consolidation and growth must go together. one is the condition for the other. if we look at europe and if you look at the youth unemployment problem, then we must say one thing. the average youth unemployment is over 20% in europe today. in some countries it's way over 40%. and if you think about the future, imagine where you want to invest your funds, where you want to place your money. thinking about life insurance, for instance. are you going to place your money in a country that has high youth unemployment? that has very profound

demographic change and huge debt or are you going to place your funds in a country that is in a better situation? therefore, i think it is important here that we be competitive. that we improve our competitivety so that more people have a job. and so that we can maintain positive standards. so we need structural reforms and of course that's a question of fairness, equity. in germany, we had the hearts for reform. it was very tough. change is always difficult. but when i became chancellor, the reform was still fresh. we had 5 million people unemployed in germany. today, we have less than 3 million people unemployed. youth unemployment has been cut in two in the last couple of years.

and i think that for people now, especially for the young people, they have a new change. the country could still talk about wages, wage levels and fairness, but at least we have undergone some profound changes for the better. and that's why i'm saying in the e.u. let's learn from countries that have made changes and i think it's not asking too much. even if there are no confidences in europe, at least we can look at the best practices. see who's done well. if we can learn something. and change the rules where countries are not doing so well. that's what we thought about in what we call the eurozone fact and i'm happy to see a year later we have reached the point that we were aiming for with more solidarity, more competitivety, but also the

question is how much do i invest in research, in innovation? in 2000, mind you, heads of state of europe said in 2010 we want to be the continent of innovation. they all promised to invest at least 3% of the gdp in research. today in europe, it goes between 0.7% and 2.3%. of course nobody -- i mean, germany we are still far from the 3%. but it is not very good image for competitivety for what we have left in europe. the president of the european council said and i quote, we are not facing a choice between community methods and the

methods of the member states. it is between coordination among member states and nothing. these are the discussions we must have today. the economies of the different member states of europe are so tightly interwoven and especially with the market that political decisions in one country always impact all the others. more today than ever. and this is true of the whole e.u. more for the eurozone. that is to say the european policy will always be domestic policy. we have to understand that. this is different from classical policy. you're talking among yourselves, but we do the same thing in our countries. we are trying to find the best

recipe in our country. but everybody is taking a different policy. that is to say we must work closer with each other. if we want to strengthen our economic and monetary union. and we must always give a piece and a part of our sovereignty to europe. we have always done it in the past. in germany, it was always difficult in terms of the immigration policy to always accept that we were giving up some of our sovereignty. it's easy for no country, even germany. and especially in other, in the european union. we have adopted the majority principle. no country has a veto right anymore. so we have given a lot of our sovereignty, but in order for the whole to function that's what we have to accept.

we have to go step by step. we have to understand that little by little giving up our sovereignty to europe is going to be better and better for all of us. it's a question of trust. we have to trust each other. trusting means that of course if somebody is in a crisis, is in a difficult position, we have to help them. the future, european stability mechanism is going to see to that. and also, we have to trust each other and trust that the other is going to make a big effort for better competitivety, so there's going to be national responsibility and european responsibility that goes together hand in hand. if we do that, we will go in the right direction.

and i will quote also courage in adversity. that's what shiller said and of course, as you know, the words of the european anthem, courage in the middle of adversity. and europe has had worse problems in the past than the ones we are going through today. so all this for freedom and solidarity. in the old days, we had economic crisis. economic crisis led to lack of trust, to distrust, to isolation and unfortunately very often to war. today fortunately, it's no longer like this. we europeans are much closer together than we ever were. and now the basis of all that is trust again. germany knows the importance of

such a trust. the western allies up to world war ii fought with germany -- thought that germany would be a democratic country. we owe their trust to what we have become. it's allowed us to start again and to be friends with the rest of europe again. and without that, we would not have had the reunification of europe nor the trans-atlantic treaty. so german reunification and unity are the same sides of the same coin, since i spent a lot of years in the nonfree part of germany, i know what happened. for the generations after world

war ii, it was almost a miracle that we were able to overcome this mountain of hatred and misunderstanding. the european union has made borders less and less important. we have the single market and for people your age it's normal. you have always been in that situation. you have always seen it's not always been like that. trust has also made the euro possible. and of course we had to trust each other when we widened europe. we had the german reunification. we accepted new countries. and now we are all the same members of the same history. we are now 28 member states.

we know that the rest of the balkans want to join us. therefore, it's all the more important that we all trust each other. that everybody makes an effort, so that that trust remains. the berlin statement of 2000 that i mentioned earlier is still important. we want to transmit to the next generation this happiness, this luck of being together and of the europeans. the european union has always been a very peculiar structure. it's not always understood on the other side of the atlantic. but it is not a classic image. but now we are in a world that is constantly changing. we are part and parcel, also the population of this planet keeps

growing. if we want to bring our values, we need to have more europe, rather than less europe if we want to do that. so we have to give shape to the political union. the euro didn't make it yet. but of course, not everybody agrees on the shape that europe should have in the future. but we have a commission that functions as a government of europe. we have a strong european parliament. which is becoming stronger and stronger throughout history of europe. with a council, heads of state, which is the second chamber. we have european court of justice, which is our supreme court. many of you will have to keep on

building this house of europe for us. house of europe for us. and i can promise you, your generation has a lot to do. we have a lot of work to do. and for me it's goingtereing to discussion that we're going to have. what do you think of europe, what are your concerns, what are your expectations, what is your vision, what do you want to add, or do you think that everything that funct and, well, therefore it is good that not only i was able to talk to you, but i also have the possibility to have a discussion with you. thank you for listening. >> translator: mrs. chancellor,

thank you very much for this very interesting expose. and now it is my job here to be the moderator of the discussion. for me, i think my job is more like to provoke the discussion. i want to widen and sometimes what you said, and we have many, many questions also that are coming from our students. and i hope that in the 30 minutes that we have -- >> no, we can talk for half an hour. >> thank you very much. i hope that we're going to have some answers because i know that the young people here have already discussed in groups to prepare the questions, they

prepared the themes. and i think there is a fear among them. they wonder if this europe that we've already built, is it going to last for the rest of their life or not. that's a big question for them. i apologize for my poor german grammer. but i hope that you will see that my very unbritish passion for europe is better than my german grammar. i have a question myself, and then immediately after that, i'm going to defer to the students' questions. recently you have said often, mrs. merkel, that if the euro fails, europe will fail. but at the same time you have said that the solution of this crisis is to go towards more

europe rather than less europe. more integration. you mentioned that today. and i would ask you. you mentioned fiscal union. what do you mean exactly when you say "fiscal union"? isn't it what a lot of germans mean when they say a transfer union? and are you going to be able to convince your own citizens to accept a transfer union? >> translator: the fiscal union is not a transfer union. what we mean when we talk about the beginning of a fiscal union is what we have already decided. that is to say stability and growth, a pact which now is going to be binding. so we talked a lot about

reducing the debt. people want to put that in their constitution sometimes. but for the first time, the european commission has the right to come and check whether the member states have really translated the stability pact in their legislation. and if they have not done it, the european court of justice can sue them. it's a paradox, if you want. we have a stability and growth pact, which is like european legislation, if you want. for all the other european legislation, for all the directives, the supreme court, the european court of justice can sue a country that would not have applied the directives and the country must apply them. ls said okay, we're going to do the same with the stability pact. all the heads have said oh, no,

no, no. we're not going to do that. it's so important because it's hitting our budgets. so we don't want the european court of justice to meddle with that. and we saw that it doesn't work, especially when you have a common currency. then it should be even more binding. so it's not a question of a transfer, it's a question of finding a way to apply what we had already committed ourselves to. and if we don't, we'll be sued. but within every country there are transfers. in germany there is a transfer. you asked me if the pact was a fiscal union. i said no. so now you are asking me are there transfers within countries? of course. in every country there are transfers. in germany we have a history of that is 60 years old where we

compensate the finances from one land to the other. there is a huge discussion right now in germany, because a small amount of lender in germany are paying for the vast majority of the lender. but as i said we have a european community which is not a lender. they are national competencies. and they are competencies that have been given to the community. so in 2005 until 2013, the project is to transfer 350 billion euros within the eu. so some countries are paying -- germany, britain, and a lot of others, and then there are countries that receive in order to bring up their structure to the level of the rest of europe.

and of course we are giving these funds to eastern europe and to spain, greece, portugal. so the question that we have is what happened. the euro is ten years old. we have given a lot of the 350 billion euros. and what happened? the difference competitive is different. did we use well these 350 billion euros? and these funds of the structural fund are not all spent there is some left. so what, should we keep on spending it to build more roads and tunnels? if you go instance, you would be completely convinced that it is great because you see lots of nice tunnels on the island, and? are they more competitive? no. it's not the case. so i think we have

all this. have we given this compensation fund the right way? >> translator: all right. thank you very much. going to d students. and there are many students from different european countries, from the south, from the east. first question comes from germany. it comes from anna. >> translator: you talked a lot about sustainable policy, coordination, coordination of the economic policies, but in the last ten years, the unbalance got worse between member states. don't you think that maybe we should tell the germans to work a little bit less, to export less and through the coordination to be a little bit more like the south europeans?

>> translator: so pushing southwards. so do you think that we should go more towards the north or more towards the south? no. first, in the stability pact we talked about the unbalance between member states. the question is when we have the same currency, should we see each country individually? when we all have a single currency. the answer is no. in germany, we have never said ah, well, the bavarians have more money, in bremen they have less, so let's all do like the people in bremen to rebalance the whole thing. no. in germany, people who give the funds don't have to be more like

the people who receive the funds. i mean, that would be a really strange thesis. no. what we have to do, and it's true for the european union, we should not aim for an average so that everybody is the same, towards the middle. so perhaps that would please the financial markets, because then we could all have euro bonds and common responsibility, and the countries would be more like each other. but your living standards would be jeopardized because we would no longer be c the fact that we have the living standards that we have is because we're very competitive worldwide. so we have to pull the others towards us, and not try to bring ourselves down towards the average. that's why i talked about best practices, and not about convergence. we have discussed a lot about that.

should we be more competitive or should be more like each other. i think we have to look at the best in europe. the average will not be enough to maintain our living standards in the world. if you compare us with the rest of the world. >> translator: second question, from poland, jan jacob. >> translator: i've gathered all the questions. if you have a question in the back over there, you have to really wave your hands, because we don't see you very well. you can make a little airplane and send to it peele.

>> translator: i have the impression that the narrative of the founding fathers after world war ii no longer applies. people don't understand in europe, especially young people in europe and people who are not members of the elite. >> who? >> the people who are not part of the elite, the average citizens. my question is the following. don't you think that we should have a much stronger social dimension in the european union? that is to say we could have european unemployment insurance. that would be a new narrative that would be much more understood by the population of europe. >> well, you know, today and in the future even less, we can no longer base ourselves only on

the roots of europe and mention the foundation, because we are in a totally different situation. that's why today i insisted on the fact that for me, the justification of europe, besides the historical justification, remains true that if we want to maintain our living standards and our way of life, our way of life in europe, we have to be more competitive. and because we are together, we are worth more together than individually. and of course we have to defend our interests. especially freedom. so europe must defend itself and be itself in the world of 7 bill