Today's Date:

First of all, I want to thank the University of Pennsylvania for giving me the opportunity to speak to you today about the status of the European Union and its prospects for the future.

There couldn't be a better time. The French Presidency ended three weeks ago, on December 31. Sweden has just taken the helm, and it seems like an opportune moment to make an initial objective assessment. Beyond that, I'd like to invite you to consider the future of the European integration process launched more than 40 years ago.

As is often the case, one gets the feeling that Europe is at a crossroads, and that the many challenges it is facing simultaneously are causing it to lose its sense of direction to a certain degree, its sense of the project's "finality," as Jean Monnet, one of the founding fathers of European integration, used to say. Every time you pick up a newspaper or turn on the television, there's some naysayer announcing that the European Union is running up against a brick wall and that the end is near.

Certainly, the challenges facing the EU are significant and no doubt unprecedented. Not the least of them is integrating within the next few years a dozen candidates who until recently belonged to the former Soviet Union's sphere of influence. Yet I think it's important to put these challenges into perspective. After all, since 1957, Europe has been steadily moving ahead on the road to integration, and the progress made during that period--albeit a short one in the eyes of European history--is extremely impressive.

Before opening our discussions, I would like to consider two subjects.

1. The first is the current situation, as we stand in January 2001. Has the EU gotten stuck, as a number of people are saying? Has the impetus of the early days been lost? Is America dealing with a partner lacking in backbone or spirit?

Well, you won't be surprised to hear that I plan to do away with such clichés. Obviously, the EU's situation isn't entirely rosy, but objectively, it is much better than generally said. There is, however, a certain complacency; even in Europe there is a kind of euro-pessimism, which I believe is due to a natural tendency to blame on Brussels and a disembodied Europe all the problems encountered by our citizens, our voters, our businesses, our communities....

There's no need to tell you that for 40 years, the European integration process has been moving ahead like a train whose two crucial and parallel rails are enlargement and increased depth. That's where the heart of our effort lies, and most certainly will continue to do so.

a) Although media coverage was quite harsh, the recent European Council in Nice will enable the EU to successfully enlarge its membership in the future.

It may be a cliché, but I'll say it anyway: The European Union is a "club" in which membership is very desirable. The six-member Community of 1957 has gradually expanded to include all of Western Europe, with the exception of Switzerland, Iceland and Norway. Since the collapse of the Iron Curtain, all the former satellites of the former Soviet Union have become candidates, and there are others as well (Turkey, Cyprus and Malta).

The 15-member EU, which is already having trouble functioning smoothly with its original institutions and procedures, will no longer function at all with the addition of another 13 members (the current number of candidates). Institutional reform had been postponed, or failed, for years. It was understood that reform had to take place before the next enlargement. It was even a prerequisite.

The Nice Summit's chances of failure were not negligible: the interests at stake--nothing less than the power of each and every member of the Union--were creating a clear opposition between larger and smaller member states. The bigger we get, the harder it becomes to reform, and any compromise has to stem from a consensus. Even the smallest partner can block everything.

The Treaty of Nice will no doubt disappoint the most ambitious among us, and it certainly will come under criticism from those who support a Europe based on simplified procedures. But it has the huge merit of having been agreed to by all 15 members after six months of preparatory diplomatic work and three nights and four days of intense and sometimes bitter negotiations.

The objectives have been met. Without going into detail, it should be noted that as soon as the national parliaments have ratified the treaty, the size of the Commission will progressively be limited, the votes of Member states will be re-weighted, and the implementation of an enhanced cooperation clause will give the EU the flexibility to develop new policies decided on by just a few Member States. A charter of fundamental rights was also adopted, the first Bill of Rights of the European Citizen.

Nice has averted the risk of a breakdown in the enlargement process. Our institutions and procedures are ready. Other difficulties will no doubt arise, relating to the degree of preparedness of the incoming members. But the groundwork has been laid, and we can reasonably hope to see the first wave of enlargement around 2004-2005. The candidate countries made no mistake--they and their media outlets were the first to hail the successes of Nice while the European media was sneering at them, finding the compromise disappointing and complex.

b) While it continues to grow larger, the EU is also continuing its integration, its "deepening."

I won't saddle you with a list of all our advances; I just want to briefly remind you that 8 years ago, on January 1, 1993, we established a single, open market; we launched a single currency, the euro, which was an unprecedented and historic development; and that especially since 1998, we have been working toward establishing a real European security and defense policy.

These are what I would call the "major advances" that are changing the nature and substance of the European project. Whether they relate to currency or defense, you can see they touch at the very sovereignty of the nations comprising the EU. Not that this is happening without debate or hesitation. But the path lies open, and the support of the majority of Europe's citizens is allowing us to move forward.

Monetary union is already a success. Its final phase will come only in the first half of 2002, with the introduction of banknotes and coins in euros, and the gradual withdrawal of 12 national currencies. The euro zone is benefiting in terms of external stability and internal functionality, resulting in increased growth and accelerated job creation. The relative depreciation of the euro since its launch may affect the European ego, but that's being compensated for by increased exports.

In the field of security and defense policy, we have accomplished more in the past two years, since the Anglo-French Summit of Saint-Malo in December 1998, than in the past two decades. I'll spare you the details of our institutional progress, but you should know that the political and military bodies necessary for launching and conducting an operation have been set up within the EU, and those in the Western European Union have been disbanded. More importantly, under our presidency, a critical step was made in the area of military capabilities, with a Capabilities Commitment Conference that recorded the pledges of EU countries, the gaps still remaining, and ways to fill them.

Beyond these major projects, deepening the level of European unity is always on the EU agenda. Week after week, major decisions are made affecting the lives of our citizens and our businesses. Under the French presidency, I will mention only the creation of a unified European corporate status, the definition of a European social agenda, an agreement on a fiscal harmonization package, the agreement in principle to establish a High Authority for Food Safety (sort of a European FDA), and decisions made in December on maritime safety following various oil slicks that have damaged our coastline.

Thus, European integration is inexorably moving ahead, even if its progress is viewed somewhat discreetly from this side of the Atlantic. It now affects every area, which of course raises all kinds of discussions, a point to which I will return. In any case, for both our citizens and our businesses, decisions issued at the European level are clearly becoming benchmarks and are tending to surpass those issued at the national level.

c) In the EU, the United States has a major partner.

Institutional relationships between the two entities were constructed rather late in the game, in the '90s, though the EU had defined the framework of its relations with other regions and other countries well before that. Two of the main reasons were the primacy of bilateral ties between the US and the various European countries, and the existence of the Atlantic Alliance, which--beyond its strict defense mission--long seemed to be the quasi-exclusive forum for transatlantic meetings.

The partnership between the EU and the US, which no doubt isn't talked about enough or tends to be eclipsed by trade disputes, is in fact the densest and most lively such partnership in the world. In the economic domain (trade and investment) and in the areas of politics and culture, the EU is by far the US's leading partner.

People are slowly becoming aware of this reality. The difficulties and even crises experienced in other parts of the world serve to highlight the common values and stability that you Americans can find in Europe. There's still Kissinger's old criticism of the lack of leadership (his "what phone number" remark), which has lost much of its relevance (the creation of High Representative for the CFSP), but perhaps we too easily forget that calling the Administration can also be a case of knocking at the wrong door, with a Congress that thinks differently.

To take just a few political examples, such as developments in the former Yugoslavia (the FRY, rapprochement with the EU following the Zagreb summit), it is clear that on major international policy issues, the Euro-Atlantic partnership is essential and often it alone can "make the difference."

2. The second subject I would like to focus on is the future. What sort of Europe are we moving toward? Based on what model and with what consequences for the United States?

a) What sort of Europe?

The question of Europe's borders has never been officially raised as such, and on the political level is conspicuous only by its omission. On this sensitive, delicate subject, we prefer to move ahead pragmatically so that we don't get tied down by concepts.

In the beginning, the Community consisted of six contiguous European countries. In 1973, the notion of a Continental Europe disappeared with the adhesion of Great Britain and Ireland. In 1981, the notion of geographical contiguousness also disappeared with the adhesion of Greece. Several Western European nations, such as Iceland, Switzerland and Norway, continue to remain outside of the Union. At the same time, the EU has received requests for candidacy from the most varied nations, as far afield as Morocco.

While recalling that geographical considerations do remain the number one criterion, I believe it is important to draw a distinction between what seems obvious or self-evident and what seems fairly or very unlikely.

- The first category would include all 13 candidate countries, including Turkey. Institutional relations with that country exist since 1963. Its strategic interest for Europe, and the need to keep it in the Western European camp, led the EU to accept the Turkish candidacy in December 1999, ignoring the fact that only 10 percent of its territory lies in Europe, with the rest being in Asia. Europe can be pragmatic when it has to be.

- A second category includes the countries that would have a natural vocation to join Europe. Apart from those who already could have done so and have chosen to remain outside (Switzerland, Norway), I am thinking in particular of the Balkan countries (the former Yugoslavia, Albania). One of these, Slovenia, is already a candidate and is even the front runner in the adhesion process. The others could catch up more quickly than you might think. The EU/Balkan Summit held in Zagreb last November, under the French presidency, clearly laid the groundwork. The prospect of joining the EU seems to be a powerful motivating factor in bringing peace, stability and development to the region.

- Finally, there are those countries whose membership remains unlikely. These are mainly those of the former Soviet Union who now belong to the CIS, as well as those who have no geographic connection with Europe. Enlargement is a historical necessity, one that is hard to manage. The European project has been a success up to now because it has allowed its Member States to move toward an ever-growing integration. Enlarging too much would risk diluting the project and causing it to lose its whole meaning.

b) What model?

The debate on the political and institutional forms our Union should take is as old as the Union itself. We've seen no shortage of quasi-theological quarrels and struggles often arising from domestic policy issues.

The debates preceding the European Council in Nice--Mr. Fischer's speech last May, Mr. Chirac's last June--provided an opportunity to once again reflect on long-term objectives. The summit itself set a meeting for 2004, at the Germans' request, to begin discussing these questions, particularly those relating to the division of jurisdiction between the Union, Member States and regions.

In fact, there are two levels of analysis in this debate that often overlap:

- the first one, rather theoretical in nature, seeks to qualify the current integration process but also to give it a more or less ambitious and more or less costly direction in terms of relinquishing national sovereignty. For the most part, it is the federalism/confederation dilemma. All of the types of systems that could arise from these concepts are examined along with the consequences they could have for the nation states comprising the Union. Former Commission President Jacques Delors suggested the interesting idea of a "federation of Nation States," whose principal merit--apart from not making anyone mad--is taking into account the Europeans' desire to combine greater European integration with the preservation of their national identities and characteristics.

- the second level, while linked to the first, is more practical: how to concretely organize the division of jurisdictions between the European level and national, regional and local levels, given that the "principle of subsidiarity" is agreed to by all and demanded by the citizens? How to reorganize the role of national parliaments, now that legislation is increasingly emanating from the European level? How to instill popular legitimacy in EU entities, whether executive or legislative? How to enable Europe to continue its integration, the key to its survival, while the prospects for enlargement and the accompanying risks of diluting the project are looming? Questions are proliferating, and the stakes are enormous.

German Foreign Minister Fischer has proposed that the EU adopt a real constitution including among other things the direct election of a president. President Chirac has not ruled out the constitutional approach, but stressed the possibility of establishing "pioneer groups" of member states that go farther faster, allowing European integration to continue. Such groups would in the end be at the heart of a constitutional process.

The discussions are again open. With Nice--whose objectives were necessarily more practical--behind us, we can once again give our imaginations free rein. Such an exercise will likely provide useful fodder for the work of the next intergovernmental conference slated for 2004.

As I emphasized before, European governments will be guided less by theoretical debates than by the rather common observation that most European citizens want both greater European integration, because they see its many advantages (growth, jobs, public safety, environmental protection) but at the same time are devoted to Europe's diversity and national identities. Moreover, they want to be able to make decisions on things that touch them close to home, per the principle of subsidiarity.

c) What kind of partner for the United States?

Beyond these debates on the EU's geographical limits and political and institutional organization, the question of Europe's "finality" remains.

Our former president Valéry Giscard d'Estaing put this in terms of a debate between a "European space," favoring a rapid, ambitious enlargement at the cost of weakening solidarity, and a "European power," no doubt smaller and aiming to become a real political entity, a new unified "pole" on the international scene. The first approach is supported by those who see Europe as an open, deregulated market, while the second is favored by those who want the Union to assume greater responsibility on the international scene and to strengthen its internal integration on the domestic scene.

The choices made, or rather the developments observed, will not be without effect on relations with the United States. At first glance, it would be tempting, on this side of the Atlantic, to support a "European space" containing and stabilizing the entire continent and confining Europe in the role of a large open market. That would no doubt be a strategic error. The advantages that could be expected from a more integrated, more politically unified partner should not be perceived in terms of a rivalry with the US, but rather in terms of complementarity (think of the recurrent debates on "burden-sharing.") The emergence of a more cohesive European pole would be in the US interest, giving it a solid ally in a still uncertain world. Such a pole would obviously remain open on the economic and commercial level. The old myth of a "fortress Europe" never corresponded to the reality, which is that the EU is the most open market in the world and plans to remain so.

Before I conclude, I would like to say a few words on our intentions regarding a European defense. Even though no one is talking, technically, about setting up an integrated European Army, and while forces will be committed to the rapid reaction force on an ad hoc national basis, the project we have embarked upon is politically about Europe and the concept we have of the future and nature of the EU. Perhaps even more so than with past key steps in European integration (the single market, the euro), the development of a common security and defense policy goes to the core of what the European project is, or isn't, about: in terms of power, of sovereignty, of commitments, of symbols. It is therefore only natural that it be the subject of debate among Europeans. It is therefore all the more remarkable that despite different national concepts of these issues, we have found so much common ground and have been able to more ahead so far and so quickly.

1) As I've tried to show, the state of the European Union seems to be good, as are its prospects for the future. From a certain point of view, the quasi permanent pessimism of pundits and press, who are often all too ready to take potshots, plays a useful role by rallying peoples' energies and forcing them to succeed. We too often forget the huge advances that have been made in Europe over the past 40 years, and the major achievement of the process, which is a state of perpetual peace, resulting from the franco-german reconciliation among other factors.

2) As far as building Europe is concerned, it's a good idea to avoid following existing schemes (such as the idea of a "United States of Europe"), while pursuing an endeavor that is facing unprecedented challenges and leading to solutions that are sui generis.

3) Like all considerations of the future, I am unfortunately leaving you with more questions than answers or certainties. But two persisting sets of factors and questions will remain, I believe, at the heart of the European endeavor and its chances for success or stagnation:

- what will Europe's citizens want, for it is they above all who will decide the direction of the project. They are questioned regularly, consulted on specific issues (the French referendum on Maastricht, the Danish referenda) and at national elections.

- What will the international situation look like in the medium and long-term, both politically and economically? Europe's position, and its role in a multipolar world, are largely dependent on this.

4) My last recommendation (for the new administration and the new Congress?) would be that the united states abandon its attitude of ambivalence towards européan integration: showing support on one hand, but then trying to torpedo it as soon as some solid or coherent project emerges on the other side of the Atlantic. As I said earlier, but this is again the main message I want to leave you with, a strong Europe is in the best interest of the United States. That is my deep conviction.

Thank you for your attention./.