The late 1980s and early 1990s have been a time of momentous change in Europe. They have seen the collapse of the Soviet Empire, the reunification of Germany, and the current splintering of Yugoslavia and of the Soviet Union itself. Despite the problems and dangers caused by these events, overall they are positive for the development of parliamentary democracy and free market economy.

These historic developments come at a time when the European Community itself has being undergoing a fundamental change.

First, the Community was gripped by a form of sclerosis in the early part of the 1980s. It has restored its dynamism through a series of bold steps: the Single European Act and the principle of qualified majority voting, mutual recognition, and the entire, massive, 1992 strategy.

The role of Competition Policy

In my areas of responsibility, competition policy and financial services, we have achieved a very substantial part of our 1992 tasks and we are still pushing ahead. Our determination to open markets by the application of competition principles has been boosted by the new tools we have acquired in the form of the Merger Regulation and the European Court of Justice's clear ruling that Article 90 can be used as a legal basis for directives addressed to states which force undertakings to act anticompetitively, or which hide behind apparently independent undertakings.

The creation of a single barrier-free market is the single biggest help the Community can give to its industry and to its consumers. However, as we get closer to an integrated market, the pressures of competition will increase as will the temptation for governments to give a little help to "their" companies or to the temptation among companies to engage in restrictive practices so as to try and steal a march on their competitors. The Community will have to be increasingly vigilant in order to ensure that competition in the single market is fair and takes place on the basis of comparative advantage rather than access to public funds or ability to squeeze out competition.

The priciple of cohesion

Another key aspect of the European Community's great leap forward is its concentration on the principle of cohesion. The European Community will only be deemed a success if it can bring better living and working conditions to all its people, wherever they live. The Community can help the regions by, first, providing funds for development on a scale which the smaller Member States cannot attain. Secondly, the Community should concentrate stuctural spending both geografically and in volume terms on the areas of greatest need. I believe that we must concentrate structural aid above all on Objective 1 areas. Thirdly, there must be very strict control of state aids in the richer regions of the Community so that the incentives available in the poorer regions are not eclipsed.

Coupled with regional policy, the Community must develop training programmes, support research and development and encourage the creation of small and medium sized companies. The Community must adopt an across the board approach to this assistance. Whilst I accept the advantages of targeted aid in terms of funding to key technologies in a way which involves many companies in a broad range of industries and sectors, I am opposed to targeted aid in terms of the selected funding of specific large European companies, even for R&D.

The logic of openness

The logic of openness applies externally, as well. The European Community must lend all the assistance it can to the completion of the Uruguay Round of the GATT with a workable agreement, even if this requires fundamental changes to the Common Agriculture Policy. In terms of competition policy, there are massive advances to be made in the development of international policy. In my view, the best way forward is to embark on a series of bilateral arrangements, the efficacy of which can be tested over time. In the next GATT round we should propose, as well, multilateral discussions on international competition policy. It is through the development of this type of co-operation, rather than through protectionism at home, that Japanese trading policies should be tackled.

The next steps in the European Community's development were taken at the Maastricht intergovernmental conferences. The Member States have agreed on the timetable for monetary union, and have reached an agreement on political union which includes a common foreign and security policy, increased cooperation in a number of areas, and extentions to the range of the Treaty, to qualified majority voting and to the powers of the European Parliament.

Making the enlargement possible

The European Community is responding to the changing situation in Europe. The prospects of enlargement is to be welcomed but a successful application is only in the applicant's and the Community's, interest if the applicant is economically able to contribute to the Community by, and benefit from, its membership. It is also inevitable that the growth of the Community will within a few years necessitate changes in the institutions if the Community is to retain its dynamism. It is already clear that there will have to be further intergovernmental conferences to achieve this.

The Community has also negotiated with the EFTA countries for the creation of a European Economic Area. Together, the EC and EFTA account for almost half of the world's trade. In the 1990 they were responsible for 47.2% of total exports and 46.6% of imports. Most of this trade is carried out with each other: in 1990, 68% of the EEA trade was internal. If an agreement is finally concluded, as I am confident it will be, then from the date on which it comes into force, the EEA will have a market of some 380 million consumers stretching from the Arctic to the Mediterranean, in which the Community's fundamental freedoms of movement will be implemented to the largest extent possible and in which EFTA will be closely involved in any new Community initiatives.

For some EFTA countries, membership of the EEA is a step on the way to full membership of the EC. For others, it may at present be an alternative, but an alternative which keeps options open.

The Community is deepening its links with Eastern, as well as Western, Europe. The Community encouraged the re-unification of Germany. The Community offers aid, technical assistance and economic and legal advice to the former Soviet-bloc countries, some of whom are already well on the way to establishing viable free market economies.

The EC: a unique construction

The European Community is a unique construction. It is a model of how the disadvantages of a system of national states can be overcome without losing the advantages. It is a construction which can be, and is, used by national governments as a convenient scapegoat for unpopular but necessary decisions. That is inevitable, and often desiderable, so long as it is always remebered how crucial the Community is to the prosperity of its members. More than ever today, it is the existence of the Community which enables European nations to play a world role, not least in economic terms, along with the United States and Japan. The Community is also a force for stability along its borders, even if it is not always instantly successful in resolving deep-seated conflicts. The Community may also in due course be used as a model for the economic relations between the former Soviet Republics, now members of the Commonwealth of Independent States - distant though that prospect may currently seem.

Within the Community there are bound to be many unresolved issues. There are forces tending towards regionalism and federalism which run counter to the more traditional view of a "Europe des patries". There is conflict over whether industrial policy should involve the fostering of large Euro-champions which are chosen by governments and are given large amounts of specific aid, or whether industrial policy should rather allow markets to select the most successful companies, with aid being provided across the board. It is not surprising that the debates continue.

But these debates should not affected the enormous progress we have made and are making. The changes in the structure of Europe which I have outlined reflect its future as a continent whose central pole is a Community coming closer together and with the enormous benefit of a vast and prosperous barrier-free market economy.

Sir Leon Brittan

Vice-president of the Commission of the EC.