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Vice-President of the European Commission, responsible for Industry and Entrepreneurship
Twenty years of the internal market
Sala della Protomoteca, Campidoglio / Rome
15 October 2012
The Nobel Prize awarded to the European Union recognises its contribution to peace and prosperity over more than sixty years of political and economic integration.
The internal market – whose twentieth anniversary we are celebrating today – is surely one of the foundations of this hugely successful history, of which we can be proud. The freedom and rights granted to citizens and businesses within the EU market led between 1992 and 2008 to the creation of 2.8 million new jobs and a 2.1% growth in GDP. The 500 million European citizens/consumers and 25 million EU businesses have derived huge benefits from it. For example, travelling by air and using a mobile telephone cost 40% and 70% less respectively. Choice, quality and price competition have all increased. Economic freedom and the opportunities for finding work, moving to another country, starting a business or selling goods and services throughout the Union have all grown, with far fewer legal restrictions and bureaucratic hurdles.
Young people have more opportunities than ever before to travel, study, learn a trade or start a business, thanks to the European space for training, undergraduate and postgraduate study and programmes such as Erasmus and Erasmus for Young Entrepreneurs, which help to open horizons and encourage a spirit of adventure.
The message is loud and clear. The single market has created unprecedented freedom and opportunity and, because of this, is a real source of growth and jobs.
This anniversary occurs at a particularly sensitive moment. Every week, thousands of businesses are forced to close, jobs are lost and social tensions increase. Since the start of the economic crisis in Europe, 3 million jobs in industry have disappeared, representing trillions of euros in lost GDP. Transactions in goods and services in the internal market are at a level 10 points below that at the start of the crisis.
Europe is becoming less and less popular as a place to do business – thanks not least to bad choices and errors. Many businesses that have gone under were fundamentally sound and could perhaps have been saved with better access to credit, if they had been paid in time by the State or had not had to pay so much in taxes or for energy, or had there been better infrastructure or less red tape and fewer legal obstacles to doing business.
This means that we still have much to do to improve access to the market and the conditions in which businesses operate – starting with the actual completion of the European market, which is the basis of every policy for growth.
The social tensions in many EU countries are also linked to the perception of the austerity measures which – at least in the short term – appear to be exacerbating the problem, without there being, in parallel, a plan which could bring new hope of growth and jobs. This lack of hope is making the recession worse. This is why we must continue our efforts to publicise, without delay, the fruits of our efforts.
THE EU MARKET – THE BASIS FOR GROWTH AND JOBS
Two weeks ago – on a proposal from Commissioner Michel Barnier - the Commission adopted the Single Market Act II, with 12 initiatives to speed up the completion of the single market in certain critical sectors. The model is that of the Single Market Act I of October 2011, which provided for 12 legislative proposals to be presented to Parliament and the Council within 6 months. This strategy, which sees our market as our primary resource for freeing up our growth potential, is based on a report presented by Mario Monti at the request of President Barroso, which outlines the main obstacles to be overcome.
Standardisation is one of the most effective ways of overcoming technical barriers and facilitating the free movement of goods. For this reason I am glad that, of the activities provided for in the Single Market Act I, the first to be firmly adopted (just a few days ago) was my reform proposal for a more efficient system of standardisation pushing industry towards greater innovation and competitiveness.
This is critically important. Consider the Frabo case. This Italian company is also taking part in today's programme. The European Court of Justice issued a judgment on this case last July. It was a case in which national standardisation bodies – in this case German – imposed additional standards which impeded access to their national market. Germany claimed that the body – being private – was not obliged to comply with European law. In practice, although it derived its own powers from the German Government, the body was able to impose any technical rules it liked on those wishing to export, in violation of the right to free movement of goods. Thanks to the Court of Justice and the new standardisation policy, these barriers have now been removed.
THE SINGLE MARKET ACT II
The Single Market Act II deals with some of the most difficult obstacles to completing the internal market: transport and energy networks, citizen and business mobility, the digital economy and social entrepreneurship, cohesion and consumer confidence.
More integrated networks: in order to get the economy moving again and enhance industrial competitiveness we must, throughout the EU, speed up the full liberalisation of certain key markets (such as national rail transport, as has already happened in Italy). Activities to enhance market effectiveness are also planned for maritime transport, aviation and energy. Completing the energy market is particularly urgent, given that energy costs in Europe are amongst the highest in the world, not least because of lack of competition and infrastructure to provide interconnectivity; this is a handicap to our industry in relation to its global competitors.
More mobility: in addition to developing Erasmus for Young Entrepreneurs, we should also develop the Eures web portal, to facilitate the search for work outside people's State of residence.
Promoting the digital economy: digital networks and the digital economy are another essential component of competitiveness. The Single Market Act II aims to cut the cost of broadband networks and make electronic billing and payments easier.
Citizen and consumer confidence: the main beneficiary of the European market should be the citizen. We want to propose a package of measures to increase consumer confidence. A stepped-up, more European market-monitoring system is therefore a priority, not just for the benefit of free movement but to shore up trust in goods sold in the EU. It is an area on which I am working together with John Dalli, the Commissioner for Health and Consumer Policy.
I also plan to step up the EU's campaign against counterfeit goods and to promote product safety; this includes compliance with the new directive laying down the highest standards in the world for toy safety.
STILL TOO MANY OBSTACLES FOR SMEs
This Monday sees the start of SME Week which, together with Michel Barnier, I wanted to combine with Internal Market Week. A study presented today by the Commission confirms that the burden of red tape and legal obstacles is one of the main hindrances preventing SMEs from exploiting the potential of the internal market.
In the context of implementing the Small Business Act (as also recognised in the Stoiber report on simplification), the EU – in cooperation with the national SME advocates – has agreed to reduce the burden on SMEs by tens of billions of euros. Yet much remains to be done to make life easier for businesses.
Two weeks ago, I launched a consultation to identify the ten EU rules considered most anti-business by businesses themselves. This will be followed by a public consultation on all the remaining obstacles to the free movement of industrial goods in Europe. On this basis I will present by the end of the year an initiative to eliminate residual obstacles to access to the internal market.
RE-INDUSTRIALISATION OF EUROPE
On 10 October, the Commission approved the new industrial policy strategy which considers improving market access to be one of the key conditions for strengthening competitiveness and reversing the process of de-industrialisation.
The reverse we want to achieve is reflected in the objective of moving from 15.6% of GDP linked to manufacturing industry today to a figure of 20% by 2020. This is possible if we pursue the following goals:
(I) Investment in productive activity to return to pre-crisis levels by 2015, reaching 23% of GDP by 2020;
(II) Investment in machinery and equipment to return to pre-crisis levels by 2015 and to attain 9% by 2020;
(III) Increasing the percentage of GDP representing exchanges of goods in the internal market from the current 21% to 25% of GDP by 2020.
(IV) At least 33% of SMEs using e-commerce by 2015;
(V) At least 26% of SMEs exporting outside the EU.
Innovation and the deepening of the EU market will determine whether or not these goals can be reached.
The illusion that the economy can be based solely on finance and services must be laid to rest. Without industry there can be no services, employment, exports or innovation capacity: 80% of EU innovation and 75% of exports come from industry, and for every job created in manufacturing, two are created in services.
To ensure that all of Europe becomes, once again, a location for industry, this strategy, which complements the Single Market Act I and II, is based on four pillars: (i) access to credit, (ii) access to markets, (iii) training, (iv) industrial innovation.
(i) Access to credit: Despite the ECB's thousands of billions, one business in three does not manage to obtain the credit it needs. In many Member States, the banks have requested the repayment of loans and are now reluctant to lend. Moreover, the Member States have 180 billion in unpaid debt – Italy alone has 90 billion – owed to businesses, which is the cause of around one-third of bankruptcies.
The Communication calls for the implementation of last December's access-to-finance strategy, in line with the Single Market Act II. The measures proposed include an EU market for venture capital, more European loan guarantee funds, a greater role for the EIB, the implementation of the Late Payments Directive and an application of Basel III which does not penalise SMEs.
(ii) Access to markets: still in line with the actions and objectives of the Single Market Act I and II, the Communication promotes a clear, predictable and stable framework of rules and standards to promote competitiveness and innovation without undue obstacles and costs for industry. The need to launch without delay a grand infrastructure plan with a European dimension, with "smart" networks based on the application of new digital technologies and satellite navigation, should be emphasised. Three days ago, another two Galileo satellites were launched into orbit. Galileo is the first 100% European infrastructure in this area which, with 24 satellites, will be providing the first services as of 2014.
By 2020, 70% of new growth will be in the emerging economies. We need a trade “diplomatic corps” to facilitate access to markets and raw materials under fair conditions. We should present a united front and exploit the value of technology and industrial know-how – one of the EU's real strengths in its dealings with third countries. The Communication underlines the importance of 'growth missions', with industry and SME representatives established in various South American countries, Mexico and the USA, to be joined in November by Egypt, Morocco and Tunisia.
(iii) Education and training systems: these must be much closer to businesses, with universities and research centres being less introverted and more integrated in cluster networks. With youth unemployment in many parts of the EU in excess of 30%, it is no longer sustainable to have businesses that cannot find people with the right professional profile. The Communication aims to dovetail labour supply and demand by means of training and better link-ups with the world of business.
(iv) More resources for industrial innovation:
The EU's proposed budget for 2014-2020 provides for more funding for innovation, in both the funding intended for research (increased from 54 to 80 billion) and the structural funds. The Communication emphasises that, in addition to more funding, it is vital to have an impact on industry, with a greater share of the funding going to applied research, demonstration projects, clusters with universities and research centres.
Like pieces of a mosaic, all sectors of industry are essential, and the Commission wants to support them all. But to be technological leaders in the ongoing revolution, we have to concentrate our strengths and resources on certain priorities. To this end, six areas with high growth and technological development potential and an impact on all the other sectors (including traditional ones) have been identified: (i) advanced manufacturing; (ii) key enabling technologies; (iii) biotechnology; (iv) green vehicles; (v) sustainable buildings and raw materials; (vi) smart networks and space.
Europe should use the crisis as a way of turning the page on the period of fatalism in which it seemed to accept the loss of its industrial basis, without realising that this was inexorably eroding our ability to grow and support the European social model.
Over the past few years the EU has made unprecedented progress towards integration, establishing new solidarity mechanisms unimaginable until recently. But this action is not yet seen as being an adequate response to the current growth crisis.
The June Summit took the first steps towards real European economic governance and political union with a four-stage approach: financial integration, budget integration, economic policy integration and strengthening of democratic legitimacy.
In September the Commission proposed a system of joint surveillance by the ECB as a first step towards banking union – another vital step towards completing the European market, contributing to trust between the banks and promoting a more open credit market, with benefits first and foremost for SMEs. Joint surveillance will also put an end to certain disparities in treatment, which see, for example, certain banks – such as those in Italy – being excessively monitored whilst the risky behaviour of other banks (which have undermined financial stability and have had to be bailed out by the State) is tolerated, thus creating distortions of competition.
This move towards a more federal Europe should also include a proper foreign, security and defence policy. Only if we speak with one authoritative voice can we protect vital interests such as access to energy and raw materials under competitive conditions. And a proper internal market for the security and defence industry – with open contracts and standards that ensure interoperability – will lead to hundreds of billions in savings, make our industry more competitive internationally and our system of defence more effective.
Another aim, in the context of this work in progress, is proper economic governance, not just to ensure fiscal discipline but also to create levels of industrial competitiveness which allow growth and the stability of the euro in all the Member States. To this end, our new strategy promotes a partnership between Member States, the Commission and industry, the task of which will be to take essential measures so that the whole of Europe can return to being a place to do business.
I welcome the support received from the Industry Ministers at the Council meeting of 11 October and the letter from the Ministers of France, Germany, Italy, Luxembourg, Romania, Spain and Portugal, as well as the appreciation shown by representatives of European industry. This support is precious for the future of our work.
The Nobel Prize awarded to the European Union – to all 500 million of us – should be seen as a confidence boost in our journey towards ever-closer political union, with the prospect, one day of a United States of Europe.