Joaquín Almunia Vice President of the European Commission responsible for Competition Policy Priming Europe for Growth European Competition Forum Brussels, 2 February 2012
European Commission - SPEECH/12/59 02/02/2012
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Vice President of the European Commission responsible for Competition Policy
Priming Europe for Growth
European Competition Forum
Brussels, 2 February 2012
Ladies and Gentlemen:
It is a great pleasure for me to welcome you to the first European Competition Forum.
First of all, I wish to thank all the moderators and speakers for accepting our invitation to share with us their knowledge and expertise.
My special thanks go to the services of DG Competition that worked on the organisation of the conference with great enthusiasm.
I would also like to greet the people who have joined us in Brussels and those who are participating through the internet. I have the feeling that you are just as much a part of the audience today as the people sitting in this room.
We decided to launch this annual Forum to open a new space to debate the main policy issues for European and global competition and I hope that – in time – it will become a regular date in the calendar of competition circles and beyond.
This Forum is designed to broaden the horizons of the debate. This is the reason why we decided that it would welcome not only competition specialists but also a wider audience.
For the same reason, we have invited our speakers to adopt a broad approach for their contributions beyond the discussion of individual cases.
Everyone knows that competition enforcement is a delicate and complex task which demands a great deal of care, reflection and expertise. However, attention to detail should not make us miss the big picture.
In this respect, the day could not have had a better start; President Barroso and the opening panel have not shied away from the big issues.
President Barroso affirmed once again the centrality of competition policy in the strategy and action of the European Commission in these challenging times.
These are important and timely words, as this year we celebrate the 20th anniversary of the Single Market, which has brought us prosperity and has become a magnet of Europe’s integration.
Together with the single currency, the internal market remains our most important asset – one that gives us an edge over our global competitors.
The Commission wants to build on these achievements; last year we launched the Single Market Act, which was considered again as a priority by the Heads of State and Government last Monday.
Competition works like a catalyst in this environment; it promotes and speeds up economic activity and helps the internal market deploy its full potential.
In addition, the public policies that promote competition and the completion of the internal market are perfect examples of what we can do in Europe to boost growth and create jobs at no cost for the taxpayer.
Ladies and Gentlemen:
The themes that we are debating today are linked by a basic principle; competition is one of the most powerful engines of growth in the EU.
I don’t need to tell you how, in these dire times, the benefits of competition are extremely valuable – and not only for our companies.
Many people in Europe are bearing the brunt of the crisis and of the fiscal consolidation strategies introduced to rein in public deficits.
Together with this framework of fiscal discipline, the EU needs to modernise and strengthen its economy; and competition drives firms to look for a competitive edge and towards innovation.
Therefore, if competition means growth, what we need today to reverse the decline in the standards of living of our citizens is more, well-regulated competition in the internal market.
Releasing the creative and productive forces of our economy will bring lasting results.
However, the latest stage of the crisis is revealing worrying cracks in the structure that holds our common currency together; so, a two-pronged approach is needed:
Three days ago, national leaders have taken important decisions on both levels. It was especially important for me to see a renewed reliance on the Single Market and the launch of initiatives to promote youth employment and support Europe’s SMEs.
Competition policy will accompany and support this reform process in every possible way; in particular, we will remain as vigilant as ever in our enforcement work.
We decided to block the deal because it would have established a near monopoly in the market for listed derivatives based on European interest rates or equity. Because derivatives are vital for Europe’s economy, we could not let this happen.
Today, the two companies control over 90% of this market globally and compete head-to-head. The merger would have eliminated this competition and – as a result – firms and investors would have had to turn to a quasi-monopolist with little or no incentive to fight for their business.
In addition, if trading fees had risen after the merger, investors could not have switched to alternative products, such as derivatives traded over the counter. They are not substitutes, but alternative products.
Our analysis found that customers use the two types of contract for different purposes and do not regard them as substitutes. We tried to find a solution with the two companies; but unfortunately the remedies they proposed were too limited.
I rarely have to propose the prohibition of a merger; since I took office, this is the second time. This means that I do not do so lightly; but I have done and will continue to do so whenever necessary.
Ladies and Gentlemen:
I will now move to the second topic I want to touch upon today. I want to take the opportunity of addressing such a distinguished audience to launch the debate on the modernisation of the European Commission’s policy for State aid control.
The strategic objectives I want to achieve are:
The reform will have a broad scope; many aspects of our existing regime are amenable to change.
I am keen to start as of today an open dialogue with the Member States, the European Parliament, and all our stakeholders to review across the board the rules that we use in State aid control.
Why do we need to modernise State aid policy?
The first reason is that we have to use all available means to foster growth and competition. Public funds that are used to favour certain companies in particular harm their competitors across the EU; and even more so in times when a few governments can spend a lot more than many others.
A number of priorities in the Europe 2020 strategy for growth require a thorough review of the way we establish the guidelines for the enforcement of our exclusive competence of control of State aid.
And of course, as President Barroso said, we need to deepen the internal market – which is a foundation of sustainable growth in Europe – and we all know that aid granted to protect inefficient companies eventually erects barriers within the internal market and hinders growth.
Moreover, we need to reform because most EU governments are faced with a dilemma. On the one hand, many of them are strapped for cash; on the other, the demand for public services and public support is increasing.
To find a way out of this dilemma, local and central governments across Europe must make better use of increasingly scarce resources; this means selecting their priorities better and improving the quality of spending. Our State aid control must help to meet these needs.
These objectives are consistent with the new rules of economic and fiscal surveillance that Member States will use to organise the control of their budgets.
State aid control can have a positive impact on budgetary discipline and on the quality of public finance as it can help redirect spending on targeted growth-enhancing policies.
A new framework to improve the coordination of budgetary and economic surveillance is being put in place and it is worth exploring how national arrangements for State aid may fit in the broader picture.
This reform of State aid should support the efforts made by public authorities to reallocate their spending; redirect it towards growth-enhancing policies and activities; and – as a result – make better use of taxpayers’ money.
Among other things, we can:
At the same time, we need to give a more systematic look at how the benefits that the aid can bring measure against its possible distortions of competition in the internal market.
If a public expenditure does not address a genuine market failure, it will be ineffective; which means that taxpayers’ money is wasted and markets are distorted.
Instead, government support should go where it can make a difference for EU competitiveness and where it can stimulate innovation, growth and employment.
We will not start from scratch. In 2010, about €52 billion – or 0.42% of EU GDP – was granted by Member States in the form of aid earmarked under horizontal objectives such as regional development, environmental protection and R&D&I.
Together, these sectors received roughly two thirds of total aid to industry and services. In some of our countries, this kind of aid has helped – for example – to increase the share of renewable sources in energy consumption well above the 20% target set by the Commission for 2020.
It is this kind of aid that will help efficient companies grow stronger, inefficient ones be replaced, and innovative businesses come to life. I want to encourage our Member States to proceed along road.
We must also make sure that the aid can actually change behaviour; without a ‘real incentive’ effect, companies would be subsidised for what they would do anyway.
We can see this in the car industry, for instance, where the public purse should support research and innovation, rather than finance business as usual.
We have to look ahead at the ultimate impact of the aid. Most importantly, taxpayers’ money should not be spent to keep non-viable companies alive. For instance, we are working on new guidelines for Rescue and Restructuring of non-financial companies.
Another indication I can give you is that the reform will have to streamline our control. What I have in mind is a simpler treatment of cases that have little or no effect on trade in the Single Market.
At the same time, I want to shift the focus of our control on the cases that have a real impact on competition in the internal market and I want to investigate them thoroughly.
The examples that first come to mind are subsidised network industries, publicly supported incumbents in liberalised markets, and selective tax advantages.
Last week, for instance, we adopted four decisions involving some of the biggest postal operators in Europe.
Our ‘package approach’ has helped us understand better the functioning of the internal market in this sector across Member States and has resulted in a consistent treatment of the public support to the incumbents.
Cases in these domains clearly have the potential to distort competition in the internal market; damage the growth prospects of unaided competitors; and possibly shift economic activity from one EU country to another with no value added for the EU as a whole.
I believe that the Commission should have better tools to investigate these cases in depth and on its own initiative.
We will also need to set our priorities better. Under the present system of notifications and complaints, we have too little room to start an investigation on our own initiative.
A quicker process to deal with notifications and complaints of limited impact will allow us to free the resources that we will need to carry out more EU-wide ex-officio investigations of the cases with a clearer impact.
I also believe that we can have fewer, simpler and more targeted rules; and this is the third and final objective of our planned reform of State aid that I will give you today.
Over the years, many pieces have been added one by one to the system, which has now become very complex. Our rules can be explained and arranged better.
As we have recently done for SGEI, I believe we should shed more light on a number of key concepts that are relevant to the notion of aid.
We will also have to rationalise our guidance on how we assess the compatibility of subsidies, which is now dispersed into as many as 37 different guidelines.
Our guidance will be rooted in a core set of common principles, which would address a consistency issue we have today; given that older and newer guidelines treat similar situations in slightly different ways.
All this will help public authorities, providers and beneficiaries to better understand and follow the rules.
Finally, simpler rules will also mean faster decisions, provided we can maintain our excellent level of cooperation with the public authorities in the Member States.
We can draw on our experience with banks since 2008. In general, public authorities and banks have actively collaborated and the market information we needed has been easy to obtain.
I want to replicate this process across the board so that effective public interventions can proceed quickly and redundant ones can be ended just as quickly.
These are some ideas for the changes that we will introduce to modernise our State aid policy; today we have started a process that will involve authorities in the Member States, our sister institutions in the EU and our stakeholders for quite some time.
As a first step, in the next few weeks I will discuss the problems that I see with the current system and the scope of the reform with my colleagues in the Commission, and then with the other European institutions and the Member States.
Before the summer, I will set out in a Communication the challenges in detail and I will outline a package of specific measures.
The main elements of the package could be in place before the end of next year.
Ladies and Gentlemen:
I have spoken about the benefits of a robust and fair competition control and our efforts to keep our instruments abreast of the change in our economies and societies.
Effectiveness and the ability to evolve with the times are traditional features of our policies and of our enforcement work; they are the pillars of our European competition model and from them our system draws its force.
The plan to reform our State aid policy that I have unveiled today falls in this tradition. The new regime will help Member States spend taxpayers’ money more wisely; strengthen Europe’s economy; and meet the growing needs of our people.
This is important. As the EU competition authority, we are at the forefront of market realities. We know how serious the situation is in many countries and sectors. We can touch first-hand the hopes and concerns of companies, industry associations, and of ordinary people.
This gives us a unique appreciation of the implications of our work. We know that competition control touches directly the lives of a great number of people; whether they be consumers or producers, workers or employers.
This is a huge responsibility, especially in these difficult times. We must redouble our efforts to spare our fellow Europeans the economic inefficiencies, the higher prices, and the poorer growth prospects that always result from weak competition.
This is the ultimate purpose of our action. I hope that this Forum – and all the Forums that will follow in the years to come – will help us fulfil our responsibility.