Ladies and gentlemen,

It gives me great pleasure to be with you today to share some thoughts about the current trends in the global economy and how the Nordic countries can face together the challenges of our globalised world.

Globalisation is transforming our economies, our social fabrics, our culture. We are becoming much more inter-dependent. Greater economic integration has allowed millions to be lifted out of poverty. It has also empowered millions who now have access to information and education. But globalisation has also shown a darker side. Whether we speak of the H1N1 flu last year or of the financial explosion that led to the current economic crisis, whether it is about CO2 emissions or over-fishing, we have also realised that disruptions in one corner of the world can no longer be ignored since their impact is likely to be felt at home.

We can choose to be the bystanders of globalisation. And our citizens will feel disempowered. They will no longer accept the constraints imposed on them by an ever changing world. Nationalism, populism and foreigner scapegoating will spread.

Or we can choose to harness globalisation. To embrace it to maximise its benefits while minimising its costs. For that, we need to work together. We are globally responsible, even if locally accountable. We are also accountable to future generations.

This is precisely what the Nordic countries have chosen. You have decided to join hands, to pool part of your sovereignty to face together these challenges. You did not start this from scratch. In fact you share a common culture and history. There is a sense of cohesion and common destiny that unites you, a “Nordic dimension”.

You all have open economies, with relatively low barriers to trade and investment, with robust property rights and pro-business environments. But you have also chosen a strong social model by investing heavily in education, health care, social security and innovation.

Education has contributed to social mobility and empowers citizens to better themselves. Education is also at the heart of an essential component in our economies today: innovation.

Social security and health care ensures a decent living standard for all citizens, regardless of their economic situation. It reduces the anxieties provoked by the changes brought about by globalisation.

This is a model which meets the consensus of both left and right forces in your countries. And despite the many criticisms of the system as too complex, too cumbersome and too costly to survive, you have proven that it can work. In fact it is now a model which many in Europe and around the world want to emulate.

Today this model of economic opening and social safety net faces a triple challenge.

On the one hand the cost of the social model is increasing. It is very good but very expensive and therefore questions about its sustainability do arise. And this at a time when public finances are overstreched as a result of the crisis will, in my view, lead to an inevitable questioning of parts of the social model. My sense is that it will need to be adjusted, but I believe the adjustments should be made bearing in mind two considerations: a continued focus must be placed on the weakest and most vulnerable; and that reduction of spending on education, research and development, and innovation should be avoided — these elements empower people.

The second is the demographic challenge. Europe is the only continent where population will decline by 2050. Nordic societies are ageing. This has an impact on the social dynamism, on innovation and growth and takes a severe toll on public spending. Immigration is the solution, but as we know raises its own challenges.

The third challenge is that of growth. Without robust growth we will not be able to maintain the social model. We will falter under the weight of our public debt. We must therefore invest in growth policies which means structural reforms. They will be painful in the short term but will increase the growth potential in the long term. This today is a must.

Many of these challenges require domestic responses. But they need to be underpinned by international action to address their global dimension. More and better global governance is therefore a necessity.

In recent years we have seen a rebalancing in world power. There has certainly been a rebalancing in the world economy. The share of developing countries in global GDP is increasing. Their share of world trade has increased. Many of these emerging economies are now huge investors in other developing countries, but also in developed economies. The world is changing and the structures of global governance need to adjust.

The global economic crisis has accelerated the move towards a new architecture of global governance, in what I have called a “triangle of coherence”.

On one side of the triangle lies the G20, replacing the former G8, providing political leadership and policy direction. Its representativity has improved even if more can be done. Many small and medium sized countries which have been and are key bridge builders, middle grounders which can help construct compromises, feel they should have a seat at the table, whether individually or through a system of constituencies.

On another side lie member-driven international organizations providing expertise and specialized inputs, be they rules, policies or programmes. The challenge they face is one of coherence in the actions of their members in the different organisations. The heads of the respective organisations can contribute to this coherence, but as the good old English saying goes “coherence starts at home”.

The third side of the triangle is the G-192, the United Nations, providing a forum for accountability.

In the longer term, we should have both the G20 and the international agencies reporting to the “parliament” of the United Nations. In this respect, a revamping of the UN Economic and Social Council could lend support to the recent resolution adopted by the UN General Assembly on UN-system wide coherence.

This triangle would constitute a potent mix of leadership, inclusiveness and action to ensure coherent and effective global governance. With time, the G20 could even be a response to the reform of the UN Security Council.

But a structure of global governance of this type needs to be underpinned by a set of core principles and values, some sort of “global economic contract”, to anchor economic globalization on a bedrock of ethical principles and values which would renew the trust that citizens need to have that globalization can indeed work for them.

I believe Nordics have a role to play in this emerging, new global architecture. The values of solidarity, of justice, of inclusive growth, of sustainable development which you represent must be ingredients of this global economic contract.

You have demonstrated this in your efforts to build a global deal to tackle climate change. I know that many of you were disappointed that the summit which took place precisely in this city did not result in a Global Climate Change Agreement. And yet, I do not believe it was as bad as many have described it. Global governance is often made of crab walking, of apparent defeats and procedural messes but which produce steps forward.

To judge the Copenhagen Accord, one cannot stop at what happened last year, since far more important is what has happened this year with respect to this Accord. By the 31 January deadline set in the Copenhagen Accord, all of the world's major emitters had notified either their emissions caps, or actions to reduce emissions, that they would undertake. In fact about 100 countries have responded to the deadline, amounting to 80 per cent of world emissions. This result is not enough, but it is a step forward and certainly the result of your efforts.

You also demonstrate this in your solidarity with developing countries through your development cooperation. Here again your contribution has helped lift many boats in poor countries. We will have an opportunity to discuss this together at the UN Millennium Development Goals Summit in September. I believe it will be important that the international community, and you as leaders in this field, send a signal that, despite the severe crisis, you will maintain your commitment to helping the poorest raise their own capacity to develop. That you will continue to empower them to fight against poverty with their own weapons. Not because of a charitable sentiment, but because this is a question of justice, as well as efficiency.

Let me conclude by saying that I see a strong need to have a “Nordic flag” in the architecture of global governance.

Thank you very much for your attention.