Mark Breddy: What do you hope will happen as far as US-European relations are concerned and how did the meeting with Condoleezza Rice go?
Nicolas Schmit: It went very well. I think it showed the overall atmosphere in the European-US relationship. I also attended the NATO meeting with Miss Rice (her first time there in her new capacity). There was also a strong feeling that Europe and the US have to come together again and that differences with some European countries have now been overcome and that we have to start a new chapter.
Mark Breddy: Do the old and new Europe Donald Rumsfeld referred to still exist?
Nicolas Schmit: We were given these labels, old and new, but we are all Europeans: the new and the old ones. The new-old Bush administration has a strong feeling that it needs Europe in some way. But it is not only the Europeans who are expected to make changes. I wouldn't say that. I think there is also a feeling in the US that there is a need to work together with the Europeans.
Mark Breddy: Despite the friendly language, differences between the EU and the US still remain on certain issues, such as Iran's nuclear programme and the lifting of the arms embargo on China. What is the state of affairs concerning these issues?
Nicolas Schmit: There are some differences on both issues, although we do not diverge on the main points. To take the arms embargo issue, we all agree that lifting the embargo should not encourage China to rearm and contribute to more tension in a very difficult area, especially regarding China's relations with Taiwan. On this point we absolutely agree with America, except that Europeans think we should give China positive signals. These signals could include the lifting of the embargo, which would not automatically mean that we would increase the export of sophisticated arms systems to China. That was one of the points that we tried to explain to Miss Rice. We very clearly want to limit, by a new and stronger code of conduct on arms exports, all kinds of exports, especially sophisticated arms exports to China. So we agree with America on the aim. Some divergences on the way the lifting of the arms embargo could be performed may persist. The same thing goes for Iran. We Europeans do not want the Iranians to develop nuclear arms. That's very obvious and is as strong an opinion on the European side as it is on the US side. Again, certain attitudes may diverge.
Mark Breddy: Can you give us an idea of what Luxembourg will be involved in in the next five months of its EU Presidency?
Nicolas Schmit: A lot has already happened. We have several important meetings in March when we have to agree on relaunching the socalled Lisbon Strategy, something not many people know much about. The Lisbon Strategy aims to foster growth and employment in Europe, without neglecting the social dimension and also the environmental dimension. So we want growth, social progress, within an acceptable environmental context. That will be a big and very important meeting because it will send a strong signal to the European economy that Europe is still able to reform, but also to sustain growth. The second important meeting will be in June and will deal with Europe's finances. Europe's budget consists of a seven-year programme. We have to renew this framework in order to start a new financial perspective in 2007. And in order to be ready we have to agree on this in June, if possible. This is quite a challenge, so we have to make the European Council in March, which deals with the Lisbon Process, a success.
Mark Breddy: The Luxembourg Presidency was hoping to reach an agreement on the Growth and Stability Pact in March. Are you still on track?
Nicolas Schmit: I think we are. Our Prime Minister is working hard on this. It is very important to come to a rapid agreement and if possible in March, because the longer you deal with this kind of issue and the longer you discuss it, the more difficult it becomes to reach an agreement. I think you have to build up momentum in these kind of discussions and then find the right compromise. I think we are quite close to this compromise. What we are aiming at is to keep the Growth and Stability Pact with the different criteria as they are. We do not want to soften them, but we want to perhaps have a different approach. When we are faced with an excessive deficit in the future, we will perhaps pay more attention to the quality of the deficit. We want to link the Pact more strongly to the economic evolution, to the economic cycles. We also want to look more at the causes of deficits. If a country has high expenditures in education, (...) in research or in big infrastructure or maybe in health, as is the case in Britain, then this is a different situation to when expenditures just go into consumption. So we have to more flexible and nuanced. We are optimistic that an agreement on the Growth and Stability Pact can be reached. If we manage that, I think it would be a very strong signal for Europe and for its citizens.
Mark Breddy: European Commission President jose Manuel Barroso recently played down the goals of the Lisbon Process. Would you agree that the original goals were overambitious?
Nicolas Schmit: It was certainly a bit too ambitious. It was fired at the time by the information economy. Everybody expected that the very, very strong stock markets based on this economy would just remain strong. So it was certainly overambitious. A redefining of the goals is necessary now because of what is at stake, because of what Europe needs. Europe needs a higher growth rate. That is the basic problem. Overall growth in Europe is too weak, which means that we still have relatively high unemployment rates (not perhaps in all countries, including in the UK) and therefore we have to reform our economies. We also have to bring in some reforms for our social system. That does not mean that we must reduce social protection. We have to keep a high level of social protection, but we have to bring in higher flexibility for our economies.
Mark Breddy: Do you think that the strength of the dollar will continue to affect European exports?
Nicolas Schmit: No, I do not expect the dollar to go up more than it has. The problem is how long the euro-dollar exchange will remain at this level. They are aware in the US that they have to do something about their own budget deficit and about their very low savings rates. So I think the dollar will come down to more reasonable levels in the midterm.
Mark Breddy: You already said that not many people know about the Lisbon Process. The situation regarding the European Constitution is much the same. How will Luxembourg go about informing the population about these and other European policies? How would you sell the Constitution to the electorate, ahead of the referendum which will be held on 10 July?
Nicolas Schmit: You're right. We certainly have to inform people about the European Constitution, because many people still say that they are not aware of what it is about. But we have to inform them more globally about what is going on in the European Union and what the European Union is doing for each citizen. We are all affected by European policies now. We will soon start a campaign which will establish a dialogue with citizens. We should not limit ourselves to providing information. We have to get a dialogue going, because people do not trust you when you say: 'I'm convinced, so you have to accept it. We have to explain things and talk to people and then I am sure it will all go in the right direction. Unfortunately, non-Luxembourgish European citizens will not be able to vote in the referendum on the European Constitution because of Constitutional problems. Our Constitution is drafted in way which makes it difficult to overcome this issue. How to sell it? I think it is an important historical step in the whole European Constitution process. Europe gets a Constitution, it gets strong rules which respect everything that has been done on the European economy. It is what Europe stands for. It is all included in this Constitution. I think we are all linked to it. We should say yes to it because it is for our future.
Mark Breddy: How is the EU dealing with Russia while Putin is in power and with Eastern European countries like Ukraine and Belarus?
Nicolas Schmit: Well, we dealt with Russia when Breznev was in power, when some other people were in power. We have to deal with Russia, because Russia is a big country. It is still the biggest country in the world. In a way it is our neighbour, the neighbour of the European Union. We have to deal openly with this country. We have to tell Russia that we want it as a partner, but that we also have some criticism about Russian policies. So I think we have to deal openly and frankly with the Russians. I would not put Belarus and Ukraine in the same basket. The European Union has sanctions against the Belarusian regime. Ukraine is a different story now. They have had a very important democratic election. There is a lot of hope in Ukraine. They want to change the system, go for a more open society, for a more democratic political regime. They want to turn to the European Union. The European Union has to respond to this very strong will. We have to help them economically, but also politically.
Mark Breddy: How can Europe impose sanctions on Belarus and at the same time want to lift the arms embargo on China's totalitarian regime? Isn't this a case of double standards?
Nicolas Schmit: I would not say it is a case of double standards. The situation in Belarus is a very, very special one. The President of Belarus has abolished all democratic rights and has turned the whole system into a personal dictatorship. Sanctions are a result of this evolution. We all agree that China is not a democracy. We have ongoing talks with China on human rights, where we discuss all the shortcomings in their system, all the people who are still in prison, all those who have been punished because of Tiananmen. We cannot ignore China, as we do not ignore Belarus. What Miss Rice said (during her visit) is that we have to bring China into the international system before it becomes a real big, big superpower. We have to help them and teach them that the system has rules, rules in relation to political circumstances, democracy, human rights, but also economic circumstances.
Mark Breddy: Why do you think the US given security assurances to the nuclear power of North Korea, while it threatens Iran with military intervention? Is this not saying: 'get yourself a nuclear bomb and we'll leave you alone'?
Nicolas Schmit: I'm not sure that the US is more worried about Iran than North Korea. I would say both are worrying. But Iran is potentially an important power, when you compare the resources, when you compare the population of Iran and the strategic position of Iran in an area where there are important interests not only for the United States, but also for Europe. We do not disagree with the Americans on the importance of controlling Iran and its ambitions to get these sort of weapons. Iran is on our border or potentially on our border, at least if one day Turkey joins (the EU). What we are really very worried about is the balance of power in the area. And certainly, if a country like Iran got a nuclear weapon, this would completely change the balance of power. We do not know what will happen to Iraq. Maybe it will have to endure several more years of trouble.
So, at the moment, Iran is still a very strong power in the area. (The European Union and the US) share these concerns. North Korea is a dangerous regime because it is not accountable for anything. Military action in this case is not the first and the best solution. We have to try to bring North Korea back to some discussion. This regime is very unpredictable. It is a very big danger that we must acknowledge.