This validates the tough decisions we have taken to consolidate our public finances and reform our economies. And since the crisis, both countries have introduced measures to ensure the financial sector never again jeopardises our public finances.

But we must also acknowledge the risks. Some countries, such as the UK, still have to undertake substantial fiscal adjustments to ensure the future sustainability of public finances. Others must keep up the pace of structural reforms to boost growth and provide for ageing populations. Germany has undertaken significant reform, but there is no room for complacency.

There are external risks, too. We have seen the difficulties that some emerging markets are facing. And we must confront the problems –political and economic – in Ukraine.

Russian aggression in Crimea is clearly unacceptable. We cannot allow the sovereign territory of a European country to be compromised. And we have both been clear that taking a stand will not come without a cost – for Russia, but also for the EU and our partners. EU and Group of Seven finance ministers are preparing and implementing measures that demonstrate real economic consequences to Russia, while doing so in a balanced and proportionate manner. We hope that Russia, in its own interest, will return to the course of dialogue, de-escalation and co-operation. We are open to pursuing that channel.

Recovery in Europe is vital. But our continent is falling behind. Over the past six years the European economy has stalled. In the same period the Indian economy has grown by more than a third, and the Chinese economy by almost 70 per cent. Europe’s share of world patent applications almost halved in the past decade. A quarter of young people looking for work cannot find any. Europe accounts for just over 7 per cent of the world’s population but 50 per cent of global social welfare spending. Reform is the key.

Each country in Europe needs to make reforms at the national level. For many countries that means consolidating public finances; supporting business and investing in infrastructure; and freeing up labour markets to create jobs. But we also need action at the European level. We must complete the EU’s single market, especially in services, open up to international markets and conclude reforms to the euro area.

The eurozone has achieved major changes: the European Stability Mechanism has been created to support countries in difficulty; a Single Supervisory Mechanism is now overseeing major banks; and the proposed Single Resolution Mechanism will clarify how banks in trouble will be resolved, at minimum cost to the taxpayer.

A stable euro is good for the global economy, and especially for Europe. The crisis has shown that the eurozone needs a common fiscal and economic policy with corresponding improved governance. The UK fully recognises the progress made so far in responding to the crisis, and it supports the case for further steps forward. But as the euro area continues to integrate, it is important that countries outside the euro area are not at a systematic disadvantage in the EU. So future EU reform and treaty change must include reform of the governance framework to put euro area integration on a sound legal basis, and guarantee fairness for those EU countries inside the single market but outside the single currency.

Some suggest that reforming the EU is impossible. We have already proved them wrong. Last year saw the first ever real-terms cut to the EU budget. Together, we are proposing a programme for cutting red tape in Europe that already has the support of 12 other member states and the European parliament.

Moreover, the EU has recently agreed trade deals with Canada, Singapore and South Korea. After we signed the South Korea deal, EU service exports there jumped 9 per cent. We have now set ourselves the urgent task of completing the transatlantic trade and investment partnership with the US. This would be the world’s biggest ever trade deal, a huge economic prize.

We consequently approach European reform with optimism. Reform supports recovery. Looking ahead, we can create a flexible and outward-looking EU. One where EU action fully respects the principles of subsidiarity and proportionality, avoiding unnecessary interference. One that builds on its existing values of democracy and the rule of law. And one that serves as an example to its neighbours.

No one should assume that European decline is inevitable. It is in our hands to build our future success. And the UK and Germany are committed to making that happen.