Excellencies,
Ladies and Gentlemen,

A very cordial welcome to you all here in Munich!

Munich, in fact, is not just a very beautiful and attractive city with many sightseeing attractions that provide an excellent setting for international conferences, but it's also one of the most successful economic regions in Europe.

And this fact is reconfirmed to us by international studies and the ranking of top-cities.

But of course, Munich has also felt the weak economic development.

Unemployment is up, many companies are planning a further cut-back in jobs and, for the first time in many, many years, there are vacancies in office buildings.

I insist on mentioning these alarm signals which should not be swept under the carpet.

Nevertheless, Munich's economic situation is quite good, in comparison with other German or European cities. Even last year. Munich's average annual unemployment figures were the lowest of all German cities: 6 per cent. At times we were beaten by the City of Stuttgart, it is true. But no other region is rated for better growth potential in the years ahead.

And there are a number of reasons for this:

• Munich has a sound mix, the so-called Munich mix, involving various branches of industry. Its not just the IT sector which is particularly strong here, it's also the media, economy, financial services and lately bio-technology.
• Munich also shows a sound mix of different sizes of firms and companies. The global groups of Siemens and BMW are headquartered here, and we still have a backlog of producing industries, but we are also strong in tourism and the manufacturing trade.
  As far as international visitors are concerned, Munich is even ahead of Berlin. Every seventh workplace and even every fifth training place falls to the manufacturing trade. In contrast to certain global players, the manufacturing trade tends to stick to the location, which is an important stability factor for the job market. Thanks to its universities, colleges, municipal vocational schools and public research institutions, Munich has an enormous potential of excellent and highly qualified labour.
  This is playing a big role when it comes to locational decisions taken by high-tech enterprises.
• Finally, I would like to mention the factor of social stability, and the high quality of living as a locational asset. The positive social climate has a lot to do with the social activities of our city. And the high quality of living is partly due to the proximity of mountains, lakes and forests, and in part even to the enormous variety of cultural and recreational attractions.
• Over the last decade, Munich's position was greatly strengthened again as a result of enormous capital investments by the city and state in the construction of a large-scale airport at the doorstep of the city, as well as a new trade-fair centre which ranks among the most advanced facilities in the world.

However, inspite of these assets, Munich is also facing big challenges:

• As a result of the globalization of the economy we are getting a tighter competition between the cities. On the one hand, Munich is benefiting from concentration processes, especially in future-oriented sectors which are all represented well here. On the other hand, Munich is also under threat by completely new competitors in the finance and IT sector, by locations with highly qualified staff also, but with lower costs, ranging from wages to taxation. This means that we have to take great efforts, inspite of our leading position in Germany, to attract and keep businesses and by no means to discourage them.
• The further development of the information society is connected with higher demands being made on the cities and even their residents. To promote a knowledge-based municipal economy is considered to be a key element in this respect. Life-long learning is of outstanding importance here, just as a higher degree of interdisciplinary cooperation, new forms of knowledge dissemination and the promotion of networks.
• The European process of unification is also connected with a liberalization of formerly sovereign monopoly markets. This means a threat to the institutions providing municipal services. Liberalization has already occured in the field of electricity generation. Our city works have done extremely well in keeping up with big private competitors, not without undergoing painful reforms, however. At present there are negotiations about public transport. And we are seeing new steps being taken towards the privatization of municipal water supply. Munich fights, like other cities in Europe do, to retain the right to organize its public transport in the city. This model has worked well over a century and is also expected by the citizenry. Looking at the privatization of British railways, it seems to be a disaster so far. In addition, we find that new monopolies are often created after privatization, namely regional monopolies which are in private hand and without public control. In such a case, the city hall would be reduced to an office handling complaints for the mistakes and failures committed by private contractors, without having control over the quality of its public services. Let me be very clear about it: This is what we don't want to happen.
  
  Well, we are quite serious, when incomes to water supply in Bavaria, and that beyond all differences between political parties. We have the highest quality of water, at reasonable prices, and we want to keep water management in the hands of the city.
  
  It should not be allowed to become a trading commodity for big industrial players. The same applies to municipal hospitals and other services we are trying to stay in control of. The cities must be able to guarantee the supply of the population and maintain the quality of living for which we need suitable instruments. However, if a city wants to open up to privatization it it free to do so. But, if a city wants to stay in control of its services, this should also be possible in a liberally-minded Europe.
• Munich, too is facing severe financial difficulties, of course. The financial plight of the cities presents also a problem to the economy because two third of public investments are made by the municipalities. If the cities are to provide sufficient infrastructure for the economy, and if the economy expects to get contracts from the cities, it should also stand in to create a basis for sufficient financial supply of the cities. A prospering Europe depends on the cities as engines of economic and social development.
  
  In my capacity as Mayor of Munich, and being the only municipal representiative at your conference, I wanted to point out this aspect in all clarity.

For your convention I wish you every success and would kindly ask you not to forget the cities when dealing with European future issues, as more than 80 per cent of the people of the European Union are living in cities. And the cities are the future workshops for social, cultural, economic and social development.

Thank you.