Good afternoon ladies and gentlemen, thank you. As a proud representative of another global multilateral cooperative, the World Bank Group, I thank you for inviting us to participate in this event in occasion of the 25th anniversary of the European Union.
Since this is an anniversary, I want to start with a little history. Where I’m from we say that one should “use the past to serve the present.” The past is a great teacher and can always provide us the context for our analysis and decisions in the present.
The World Bank Group and the European Union share both deep historical ties and core common values. Both institutions were born in the wake of a devastating world war.
Both institutions helped lay the foundations of the peaceful and prosperous Europe of today—a Europe which serves as a beacon of what serving the common good can accomplish.
In 1944 as the war was winding down, delegates from 44 nations gathered at Bretton Woods in New Hampshire. Their goal was to establish a stable economic system required for long-term peace. Over days of intense debate, they came to consensus and laid the foundations of the International Monetary Fund and the International Bank for Reconstruction and Development—what would become known as the World Bank.
The World Bank’s first task was to help reconstruct a devastated Europe. The very first loan the World Bank made was $250 million to France for post-war reconstruction, and it was followed by other reconstruction loans to the Netherlands, Denmark, and Luxembourg the same year.
The World Bank loans were later complemented by the Marshall Plan, which linked the reconstruction investments to removing trade barriers. The central idea: economic reforms and investment were essential to building a peaceful, prosperous and integrated Europe. Then, in 1951, the Treaty of Paris established the European Coal and Steel Community and, in 1957, the Treaties of Rome created the European Economic Community, which twenty-five years ago became the European Union.
The EU’s foundation hinged on the same central idea: economic integration would, ultimately, render war “materially impossible” as Robert Schuman said. It is a history you are familiar with. It is a history where integration leads to peace and prosperity, and peace and prosperity create a demand for more integration. This is how the Treaties of Rome had six signatories and the EU has twenty-eight members states.
Seventy years have passed and this central idea proved to be correct. The European Union became the world’s greatest “convergence machine” (a phrase coined by a World Bank report) propelling poorer and newer member states to become high-income economies and delivering to its citizens some of the highest living standards and lowest levels of income inequality in the world. While the global financial crisis took a toll on the convergence machine, economic growth is now strong in most parts of the Union, and employment growth is bringing down unemployment to pre-crisis levels.
Regional integration, political cooperation and the sharing of a single market—through unity and consensus building—have been the critical key to success in Europe’s prosperity and its leading role on the world stage. Europe accounts for about one-third of world gross domestic product with less than one-tenth of the world’s population.
European firms are among the world’s leaders in innovation, creativity and productivity, and the EU leads the way on many environmental and social issues. The strength of the European Union today is a shining example of the constructive power of multilateralism.
And with peace and prosperity, European countries have in turn generously become some of the strongest and most faithful supporters of development aid to promote peace and economic development the world over. Europe is one of the strongest allies of the World Bank, supporting its mission to lift up the poor and vulnerable throughout the world.
The World Bank, like the EU, has evolved over the years. We are now a cooperative of 189 nations. Everything we do—from our loans and technical assistance, to our global data and research, and our support of the private sector in emerging markets—is guided by our twin goals of ending poverty and boosting shared prosperity.
Last year the World Bank Group committed nearly $67 billion in assistance to the public and private sector across the world.
We have counted heavily on the role that EU member countries and the EU institutions have played as key partners. We recognize the important, positive influence they have had in shaping the development agenda over the past 70 years and concretely improving the lives of people in the poorest regions. We harbor deep gratitude for the leading example of the European Union as an exemplary beacon in the promotion of the rule of law, gender equality, the fight against climate change and much more.
While progress has been substantial, significant challenges remain. Today, 736 million people still live on less than $1.90 a day; more than half are in Sub-Saharan Africa; and if trends continue that number will grow to 87% by 2030.
This challenge is so great that we need to leverage public and private resources. Much in the way the Marshall plan leveraged public reconstruction with opening up opportunities for private investment. The combination of a capable public sector and a vibrant private sector is a powerful driver of jobs and innovation and key to sustainable economic growth and poverty reduction.
This is why a key pillar of our strategy is to use the combined strength of all the World Bank Group institutions—our public sector and private sector arms—to help countries improve their enabling environments, develop the right regulatory conditions, build capacity, reduce risks and create markets so that private finance can become an option for countries that have not been able to access it without the right institutions or markets.
Generating investment opportunities for the private sector and creating jobs in the most difficult conditions does not happen overnight. It requires clarity of vision, commitment to advance reforms to allow the private sector to prosper and resources to de-risk private sector investments. The European External Investment Plan (EIP) is a powerful example of how Europe is determined to promote a virtuous cycle of growth and prosperity where years of conflict, violence and instability have left millions of people to the margins. As a global development institution, we would be glad to contribute to this effort by sharing with Europe and its partners our decades-long experience and global expertise in the poorest and most difficult environments, and by leveraging our resources with those of the EIP in a genuine spirit of partnership.
Finally, and perhaps most importantly, we know that investing in people—in health, education and other programs that build human capital—is the single most important investment that countries can make.
Our recently released Human Capital Index links, for the first time, a country’s outcomes in health and education to its economic productivity. It measures how early healthcare and education prepare children to succeed and prosper as adults. Twelve EU countries feature among the Human Capital Index’s global top 20, and practically all EU member states have a higher score than what would be predicted for their income level – albeit with variations across the Union.
Interestingly enough, our Human Capital Index is highly correlated with our Doing Business indicators. This means that stronger, healthier, and more educated individuals go hand in hand with and an enabling environment for business.
The fact that, after controlling for development levels, late joining Eastern European countries are among the top performer in both indices says a lot about what economic integration may bring about.
Coming back to the EU process, the “convergence machine” should not slow down but rather focus on tackling the divergence of opportunities for people and firms across the Union. More economic integration, including through services deregulation and fostering a digital market, can help deal with disruptive technological change. There should also be an increased emphasis on building skills and supporting those who fall behind. Lagging regions need to converge faster. In short, the convergence machine needs to keep humming, but it needs an update, as the World Bank’s Doing Business indicators and a recent report—Growing United—point out.
Divisions between and within countries created by geography, poor infrastructure and inefficient policies are an impediment to economic growth. Regional integration allows countries to overcome these costly divisions by facilitating the flow of trade, capital, energy, people and ideas. Moreover, it allows countries to share the costs of public goods or large infrastructure projects.
The World Bank Group has a long tradition in supporting such projects. In 2017, we supported 130 projects dedicated to regional integration across the globe, amounting to over $10 billion, across a range of sectors. For example, we are supporting the Great Lakes Initiative in the Sahel to help the countries in the region tackle, political, food, climatic and security vulnerabilities. This means working in a regionally coordinated approach to finance infrastructure, remove barriers to trade and economic integration, support employment generation and raise agricultural productivity.
In South and Central Asia, we are supporting sustainable electricity trade between Tajikistan, Kyrgyz Republic, Afghanistan and Pakistan. And in the Western Balkans and in the Eastern Partnership countries, we are working on the development of key transport corridors to improve connectivity in the European neighborhood and the wider European economy.
Yes, we take heart in what is being accomplished and in our common approaches. But we are also realists. We are pragmatic. We know that global challenges threaten to stall or reverse the development gains made across the world over the past decades. Climate change could push an additional 100 million people into poverty by 2030, and the share of extreme poor living in fragile and conflict-affected situations could reach 60% by then.
The challenges surrounding forced displacement and fragile contexts in general require an ever-stronger collaboration between humanitarian, development, peace and security partners. Fragility risks transcend national borders, impacting the world’s poorest countries as well as middle-income countries and beyond. Violent extremism, pandemics and food insecurity are also on the rise. From seemingly intractable conflicts to ever increasing natural disasters, the EU, the World Bank and the overall international community have their work cut out.
Like the EU, we know that the path to facing these challenges lies in cooperation, building consensus and finding the common ground.
Like the EU, we believe investments in infrastructure, free enterprise, trade, and integration, combined with universal education and health, are the engines of sustainable and inclusive growth.
And like the EU, we recognize this formula is the key to lasting security and peace.
Yes, we share common history and values. “Make men work together, show them that beyond their differences and geographical boundaries there lies a common interest” was Jean Monnet’s goal in life, and is what the European experience has brought to the world. This is why we have always looked to European Union and its member countries as strong partners in meeting the challenges that face the world—and we will continue to do so. We must remain steadfast together.