I am greatly honoured by this opportunity to address the Scottish parliament.

The very existence of this Parliament, whose doors have been closed for three centuries and are now re-open, reminds us that the old states of Europe are being pulled in two different directions: towards integration into a greater whole — the European Union — and towards devolution and decentralisation at home.

These two — apparently contradictory — trends have one element in common. European states feel an increasing need to share powers previously concentrated at the national level. Abroad, power must be shared with other states to secure peace, increase prosperity and enhance our ability to deal with external pressures. At home, the exercise of power must be decentralised to satisfy the demands of the citizenry for greater closeness and transparency in the decision making process.

Determining at which level — local, regional, national, European, and global — should power be exercised, according to the issues at stake, is one of the central questions of political debate today.

The ability of national states to delegate some of their powers, while maintaining their cohesion, indicates that their political systems are mature and their democracies solid and vital.

I am confident, therefore, that this process of devolution will successfully serve Scotland, a nation we admire for its brave and noble people, its remarkable culture, and the spectacular beauty of its landscape.

Ladies and Gentleman

I come before you at a time of great changes, set out by the appalling terrorist strikes in New York and Washington last September. We stand together with the United States and with Great Britain, our oldest ally, in the common fight against the scourge of international terrorism.

This crisis has, once again, reminded us of the relevance of security and political aspects in our common European endeavours and challenged Europe to examine anew its strengths and vulnerabilities.

We have certainly come a long way. Following David Hume and his teachings on the balance of power, Europeans have tried in the past to make sure that "general tranquillity" could be imposed in what Voltaire called the great Republic of Europe, shared by many different states but united by common traditions in religion, law and manners. Edmund Burke described the European community of his times by saying that "no citizen of Europe could altogether be an exile in any part of it".

It took a terrible succession of wars and revolutions, namely the total wars and the totalitarian revolutions of the last century, to bring back a European ideal to European politics. I share the interpretation of many historians and politicians who think, in the tradition of David Hume, that we owe European integration to the devastation of Europe, destroyed by successive wars and morally ruined by the obscenity of totalitarian rule.

The driving force behind this binding process was a deep determination that such devastation would never happen again in Europe. To ensure this, the upmost priority was to build up and consolidate democratic pluralist regimes and, at the same time, organise and institutionalise the many forms of economic interdependence among former enemies. Both were essential conditions for peace - and lasting peace among Europeans states was, and remains, the ultimate purpose of European integration.

The formula for European peace was, and still is, be to build up a free and close binding of its sovereign states, diverse as they are in their culture, national identity and character. This diversity is a core European value and one of its great assets.

This general program for re-building Europe after the Second World War has attained the most remarkable results. European integration, the building of the European Communities and then of the European Union, were central to this historic outcome which brought about a liberal democratic order in Europe with an unprecedented degree of political homogeneity and strong common institutions.

At the end of the cold war, we were challenged by massive changes in the political map of Europe. For those who thought that Germany’s unification and the opening of European borders meant the end of the on-going integration process, the answer was given firstly by the Federal Republic as it chose to remain within the framework of its western and European alliances; then by the Maastricht treaty, which created the European Union and set the calendar for economic and monetary union, now completed; and last, but not least, by the democratic outcome of the political transitions in most Eastern and Central European countries.

I never doubted that the fall of the Berlin wall was a historic opportunity to unite all European democracies into a new European Union. More than a decade later, we are called upon to complete the task. The cold war may be dead but it will not be buried until we accept into our common institutions the new democracies of Central Europe. Our main priority now is to fulfil, by 2004 as planned, the commitment of enlargement to those who are ready to undertake the responsibilities of EU membership.

Enlargement tests our political imagination and skill. It will represent the greatest transformation of the European project in its history. Some support it in the hope that it will lead to a loosening up of the Union. Others resist it precisely for the same reason. We reject both perspectives. We support enlargement not only as a moral and political obligation, but also because we think it will be a great contribution to stability, prosperity and peace in Europe as a whole. At the same time, we believe that enlargement requires us to undertake a renewed, concentrated effort to strengthen the economic and political cohesion of the Union.

We cannot abandon our efforts to promote economic convergence across the European Union. There can be no Union worthy of its name if it is not founded on solidarity among its different parts. Enlargement will increase disparities in levels of development across the Union. The Union must have adequate instruments to gradually redress these inequalities, even if this means an increase in the level of its own resources.

Nor can we relax our efforts to complete the program of economic reforms laid out in the Lisbon Strategy. We must exploit to the full the opportunities offered by the Single Market; promote a knowledge-based economy; foster scientific and technological innovation, create more and better jobs. At the same time we must move resolutely to eradicate poverty in our countries, thus achieving greater social inclusion and more equal opportunities. The European social model is fully compatible with and a more dynamic and competitive economy.

Greater economic cohesion must be underpinned by stronger political cohesion. The on going debates about the institutional make-up of an enlarged Union have revealed that some are tempted to retreat into a core of central states, self-proclaimed as an avant-garde of regional integration, thus undermining decades of political convergence towards European unification. This is something that Portugal cannot and will not accept.

It is certainly not easy to find an institutional framework, which assures an adequate balance between the general interest of the Union and the particular interests of its constituent parts. However, just as, in our democracies, we do not call into question the principles of the separation of powers or due process in the name of efficiency, we cannot, in the European Union, undermine the basic principle of the equality of States in order to make decision making quicker and easier. One way to safeguard this principle would be to create a second chamber of the European parliament, where Member-States could be represented on an equal basis.

Given the magnitude and the complexity of the tasks before us, there is a strong need for renewed reflection and a thorough debate on what European integration is all about and where it should be heading. We have to engage in this debate as it shows European democracy is in the making.

We must ensure that the peoples of Europe understand the benefits to them of a successful European Union and continue to regard integration with neighbours as creating much greater benefits than costs.

European integration can only move forward within a frame of balanced state representation, marked by rules of transparency, of democracy and of wider acceptance by all the citizens. Since they are the main source of political legitimacy in our political systems, national parliaments should be more closely associated to the integration process.

We must seize the opportunity afforded us by the Convention and the next Intergovernmental Conference to reconsider the essential mechanisms of political accountability and control within the Union. This time, we must get it right. The reforms to be decided then should endow the Union with constitutional texts capable of withstanding the test of time.

As if enlargement and institutional reform were not enough, the brutal shock of the terrorist aggression against our allies in the United States, has confronted Europe with yet new challenges:

Time and again, the European Union has shown itself to be an economic giant but a military pigmy, as one of your own, no less an authority than Lord Robertson, recently put it. Let us recall for a moment the wars brought about by aggressive nationalisms and weak states in the Balkans, which the European Union was unable to contain in time. Only after the tragedy and with the support of the Atlantic Alliance were European democracies finally able to step in. Until the St. Malo initiative, there was almost no movement towards addressing the question of a specific European military capability to respond to regional crises. Even then, progress has been slow, although the urgent need for a European Rapid Reaction Force has become clear to all.

If Europe wants to assume international responsibilities commensurate with its economic weight, it must strengthen its military capabilities. Our goal is not, nor should it be, to replace the Atlantic Alliance, but rather to be able to function, within it, as an equal partner to the United States. This will require much political effort and financial investment, but it is a necessity if we are to assume, as we must, greater responsibilities for regional and global security.

Ladies and gentlemen

The program I have sketched before you is an ambitious one. It will require great persistence, imagination and vision to carry it forward. I deeply believe, however, that we have no other choice.

We are faced with challenges which put our political will to the test. In the past, adversity has made us stronger. I hope it will also make us stronger as Europeans and deepen our commitment to a common European ideal of peace, democracy and the rule of law.