 Many years later, Austria and Ireland are still neutral, but we have other things to worry about, such as the Euro crisis, which is part of the topic of my statement today here. Now before I actually go into the substance of that, I would say something about the rather peculiar nature of European foreign policy. You know, every single one of you knows that of course security concerns the very origins of the integration process, but later on the whole dynamics came from the economic side, and the foreign policy made its reappearance only in the early 70s and remained for a long time a sideshow, and to you could say it still remains a sideshow of the European integration process as a whole. The member states share a common market, many of them share a common currency, many of them share the Schengen space, many of all of them share a very rich and very heavy legislativearchy. Many of these aspects have their own external implications, such as trade policy, visa policy, international environmental policies. And on top of this elaborate construction of deep integration, you have something that resembles very much traditional intergovernmental organizations, such as the Council of Europe or the OSCE, you have CFSB. It's sort of superimposed on something that goes way beyond a traditional intergovernmental organization. And that I think explains sort of the schizophrenic aspect of CFSB, that on the one hand it benefits from the identity-building effect of the much stronger integration in other areas, which means that external partners of the EU and also many European citizens would expect something at the level of the overall relevance of the European Union. But at the same time CFSB is in a way the weakest link in the chain of EU activities. And for that reason, many of these expectations are frequently disappointed. Now, the reason why I briefly describe this sort of outlook on CFSB in general is that I really believe it's quite fundamental to keep in mind always that it is the economic integration, the integration of Europe that drives the foreign policy dimension. I read recently a paper by a very good colleague of mine whose work I admire very much, but basically he said now with the Euro crisis and all this mess and all these difficulties, why don't we shift our efforts really to foreign and security policy, really to try to improve things in this area and so and re-energize the European project by this means. I think this is absolutely not an option. This is simply not possible. If the eurozone is in crisis, so is European foreign policy. If the crisis is eventually resolved and I very much hope it will be, European foreign policy will once again become more relevant. But basically the driver is always the integration process as such and foreign policy is one of the elements that are moved by the dynamism in this economic and other areas. Now I come to the ways in which the euro crisis affects European foreign policy. And I must say, I must warn you what you are going to hear now is fairly depressing. But I'll keep it short and really highlight only the most important parts of it. The one, maybe even the biggest effect that is frequently not overlooked but underestimated is distraction. If you look for instance at the year 2011, at year 2011 was as rich and as loaded with big international developments as the year 1989. You know, it's unique. Everything changed in the Arab world. These are very, very far reaching and profound transformations. Normal times you would have expected the European Council to meet many times on these issues that you would have expected the president of the European Council to take, make missions here and there to engage in diplomacy to sort things out. In 2011, as you know, the European Council met every few weeks, but it only had one really substantive discussion, operational discussion on these issues that was on Libya, I think, in March 2011. Otherwise, this was simply not happening because the EU in a way was at war with the bond markets. And at times of war, most other things get neglected. Now, you might say, okay, there are also foreign ministers and it's a fact, of course, that the Foreign Affairs Council discussed all these matters at great lengths. But unfortunately, the dynamics of European foreign policy has changed. Foreign ministries in the last 15, 20 years lost a lot of their role. They lost it to the line ministries, but in particular, they lost it to the heads of states and government in most of these countries. And this is one of the paradoxes of the present situation that now that the bosses really have all the authority and power for foreign policy, they have no time to use that. So this explains to some extent why the European Council was, it continues to be fairly, fairly inactive on a very rich external agenda. The second point is the loss of ambition. And this is, I mean, this is a simple psychological mechanism. If you have a big internal crisis, the willpower and the confidence that you can influence outside event reduces, is rapidly reduced. This has happened before in European integration. To some extent, this is just a reordering of priorities. You put your own house in order first before you deal with other matters. But I think in this case, it goes beyond that. It is really sort of a question of self-doubt and the fundamental crisis of confidence that many people, irresponsibly, experience in Europe these days. The third point is loss of prestige and soft power. That's the flip side of the loss of confidence. And it's undoubtedly true that the Euro crisis has resided in a huge loss of soft power. The Europe is no longer perceived in many places as part of the solution of problems, but it's seen as a big problem in its own right. I've been told by a colleague who participated in the EU ambassadors conference in Brussels a few weeks ago, who reported that many of his colleagues said that basically most of their conversations in the countries where they serve are completely dominated by concern about the Europe crisis. And they keep having to explain the various efforts to manage the crisis. And this is completely dominating their role at the same time, at the present time. Now, I've been to Belgrade two weeks ago. And my impression from talking to people with whom I've worked for many years is that, of course, the Euro crisis has also reduced our leverage and our influence on the countries of the Balkans. They look at Greece, and suddenly the perspective of EU membership looks rather different from what it used to. I've read something quite hilarious, an interview with the Croatian after the Croatian referendum, which was very strongly positive, of course. But he said that for Croatia joining the European Union now is a bit like arriving very late at the party, when half the people are drunk and half are from the wake. So it's clearly that it's the case, unfortunately, that both the reality of the promise to join has lost credibility. And also the attractiveness of this perspective is also suffering. I think these countries still are where they are. They have no strategic alternative. They maintain on the course, but the confidence and energy in which they pursue the agenda is not what it used to be. But this effect does not only affect the European neighborhood. A friend from the EAS told me that he recently went to Pacific Islands very, very far away, and he was shocked by the amount of commissuration he had to listen to and concern about the future of the European Union. That was of course also mixed with concerns about the continuation of assistance. Now there is of course one collateral benefit from all this misery is that because of the crisis the interest in Europe has increased again. It's interesting that GMF, a German Marshall Fund, does polling every year on the transatlantic trends. And the 2012 polling had 55 percent of Americans believing that Europe was more important to the U.S. than Asia. In 2011 it was still the other way around. So you can be relevant and significant also when you have problems, not just when something that is particularly useful. The fourth point is fairly trivial but very important, is the lack of resources. Foreign policy costs money. Less money means less foreign policy. The resource constraints in Brussels and in the member states explain why the CSDP operations over the last years have been diminishing radically. The new ones, many of the old ones continuing some of them with very severe resources and many constraints and many problems. Because simply there is in many countries not the money there to mobilize the resources for missions that are seen as less important than having these people, policemen serving in your own country. Also of course financial constraints are part of the reasons why the external action service was not implemented in a way which really exploited the full potential that was foreseen in the Lisbon Treaty. If you look at the number of people that the protecting presidency used to use foreign policy. If you take this into account then the overall number of people that work on foreign policy now in Brussels and in the delegations is about the same as the number working on this issue during the Solana's time. Even though of course the new treaty has involved considerable additional tasks and what you hear at the moment is I think the council has frozen the years budget. It now depends on the process whether the parliament helps reopening it again. But the situation is quite serious and the years might be in the unfortunate situation of having to look at cutting the network and actually reducing the overall manpower simply because of financial constraints. I do hope it will not get that far but it is clearly a very difficult moment. The fifth point and I'm approaching the end of the list then it will be more uplifting again I hope is the loss of coherence. I think as a result of the crisis you have centrifugal forces at work in the EU. If you there's this publication annual publication the ESC CFR scorecard and they speak about the renationalization trend creeping renationalization of European foreign policy. It is I think obvious that the Euro crisis also produces a lot of new divisions between north and south between ins and outs. It also affects the confidence and the solidarity among member states and I think it can be shown that it's sort of anecdotal evidence rather than sort of something that is really statistically research. But I think the overall coherence of the EU has gone down in recent years. There's a greater readiness of individual countries to take their own national positions without coordination. There is a lack of less investment in the common project in European foreign policy and there is also I think a greater readiness to use national interest to block EU positions within the institutions. All this is not you know dramatic and it's what we used to have was not so terribly strong and efficient but it is the trend is clearly in the wrong direction. Now all these consequences are serious and they are problematic but they are not tragic at this point. I think the amount to the relative weakening of foreign policy instrument that was never very strong and they can easily be reversed if the Euro crisis can be overcome and this brings me to the I think more interesting but also highly speculative part of my presentation the scenarios for the future. Now the first scenario would assume that the Euro crisis cannot be resolved. Either the Eurozone breaks up or this kind of dancing on the brink of disaster continues for a number of additional years. Under these circumstances I think all these negative trends will continue and will result in a much more fragmented Europe. The bigger countries will continue to play a significant role but it's particularly smaller countries that will lose part of their voice in international affairs. Cooperation among the big countries if it takes place might take place outside the EU institutions in many cases and it could well be that sort of coalitions of the willing will be the normal way of dealing with European foreign policy challenges. The kind of attractive force of the EU that has a very important stabilizing influence in the Balkans in Eastern Europe and even beyond will diminish which would mean that this would benefit the nationalist parties and forces in these countries that could threaten the stability in the region as a whole and of course the chances and the possibilities to affect changes in the Arab world and beyond to participate in global decisions on global future orientations will of course also diminish greatly. If the EU manages to to overcome the Euro crisis I see basically two scenarios. One would almost certainly I think the consultation of the Euro would require a significant deepening of integration within the Eurozone. Banking union, fiscal union, much closer economic coordination. Not all countries are likely to join the Euro but it is imaginable that these countries reach some kind of a durable accommodation with the countries in the Eurozone. This would not result then in a sort of federal Europe but it would result in something much looser construction of based on policy communities and variable geometry. There would be several policy communities which share the internal markets but otherwise have different rules and different participants and different degrees of of integration. To some extent this is just the continuation what you already have at the moment when you have the Eurozone you have Schengen you have defense policy etc but this would probably be much further developed. If this happens then foreign policy will certainly be or will likely be one of the broadest policy communities where practically everybody would participate even though defense policy might be organized on a more narrow basis to accommodate neutral countries among others. It could be based for instance on the permanent structured cooperation foreseeing in the Lisbon Treaty. Following the Euro crisis I would expect external challenges to rise up on the agenda again. I would not believe that the structures of foreign policy making would radically change. I think what could well happen and I certainly would hope it to happen is that the Lisbon arrangements would be implemented in a in a more ambitious way. This would mean for instance strengthening of the political mandate of the EU higher representative and the reinforcement of the European action service in terms of more resources, more engagement, more buy-in, more commitment from the Commission and from the member states. Following this trajectory the member states would remain international players. They would preserve their right to be produce foreign policy but probably over the years more and more foreign policy would actually be made in the framework of European institutions. Now how plausible is such a scenario? There are a number of interesting variables. One is the degree of deepening in the Europe so if this is really serious for instance leads to a common European Treasury or a separate budget then I would think it's almost inevitable that there would be a core periphery relationship between the Eurozone and the rest. And if there is such a core periphery relationship then this wonderful notion of variable geometry and various communities of policy will no longer work because there would be sort of a hierarchy among member states and this construction would be more difficult to sustain. Another big variable, important variable is the number of participants in the Eurozone deepening. If this follows the model of the fiscal pact which means that almost all member states actually participate in deepening even those who do not yet participate in the Eurozone, the effect on European foreign policy would be much less than if the Eurozone remains a much more exclusive club and quite a number of countries that are sort of left beside, behind in an auto-circuit. Now imagine for instance that the heads of state of governments of the Eurozone have a meeting in parcels to discuss budgetary issues and we would have a big international crisis breaking out. Now the question is are they going to wait until the people fly in from the capitals of the non-Eurozone countries to participate in discussing this crisis management or would they discuss these issues and make statements? It's an open question one doesn't know yet but I think the more you have sort of business at the center the more meetings you have the more likely it is that this eventually develops also foreign policy dimension. The third key variable maybe the most important one is of course the UK. The British attitude to the EU is absolutely crucial. I visited London in July in preparing this paper and I was impressed and actually quite shocked by the number of well-informed interlocutors who told me that referendum on EU membership in the next parliament through around 2014 is close to inevitable because they clearly the political dynamics in the various parties move in this direction. I think UK departure would have a huge impact on the US as a whole and on EU foreign policy in particular. The UK is certainly one of the strongest foreign policy players in Europe and in terms of the substance of foreign policy making the loss of the UK contribution would be a huge loss, huge loss. I think in the daily work but the British diplomats bring to the table in terms of their expertise in terms of their sort of networking resources in terms of creativity is enormous. I think it's possibly one of the strongest countries in the EU foreign policy at the moment. At the same time of course the UK is also a big constraints when it comes to developing the structures of European foreign policy particularly in the area of security but also on foreign policy in general and also it's true that the UK already now is not 100% in. I was struck I think it was two weeks ago when the foreign secretary William Hague gave a statement announcing a big program of having joint embassies in in third countries and on the face of it this looks really good and interesting sort of pooling and sharing in diplomacy. It's a very nice idea but the interesting fact is of course that the UK is about to do this with Canada which I think shows this kind of same detached nature already now of the UK role in European foreign policy. Now this brings me to the second scenario which assumes that the euro crisis can only be resolved through a really massive deepening of integration in the euro zone. The transfer of fiscal and economic policy competencies could be so far reaching that eventually this leads to a genuine hard core based on the euro zone based essentially on federal principles. The countries that are unwilling or for the longer term unable to participate in the euro zone would be relegated to a second auto-circle. Now if the integration in the in the core is sufficiently dynamic this could have as a consequence that the auto-circle finds itself increasingly marginalised. Eventually I think this certainly would happen a few years later this core could develop foreign and security dimension. If the whole construction of the core by that time is almost federal in character one would assume that also on foreign and security policy you could have much more efficient decision making procedures you could have a stronger strategic vision and you can seriously have seriously upgraded instruments. However this gain in punch is comes at a high price because presumably quite a number of countries that now participate in European foreign policy will not be part of this construction. So I think this would necessitate to have very good mechanisms to associate these countries effectively to the European foreign policy making otherwise you would create new divisions in Europe which obviously nobody would want. Now I've come to the end all this is of course pure speculation it's not hard to come up with three other scenarios for instance a friend pointed out to me that he believed that even if there is very serious deepening based on the euro zone member states would strive to maintain the rule of maneuver and foreign policy basically this might be the only area left where they want to reassert the sovereignty and they will keep it out of the hands of Brussels bureaucrats and keep things basically as they are. Personally I don't think so because of the thought that I explained at the very beginning of this statement I do believe that the driver of foreign policy making in the EU is economic integration. If this moves forward rapidly and successfully it will also give a very strong impetus to do more on the military and security side. I think what is very clear is if the euro zone crisis cannot be resolved European foreign policy will be part of the collateral damage. If it can be resolved it is likely to be strengthened again to be revived but shape and form of this revival and the participants and the geometry of this revival is impossible to predict at the moment but what seems very clear it's likely to look very different from what we have at the moment. Thank you very much.