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European Commission

Siim Kallas

Vice-President and Commissioner for transport

Does Transport Matter?

Transport Business Summit/Brussels

27 November 2012

Ladies and gentlemen

I am delighted to see so many of you here in Brussels today. Thank you for accepting my invitation to attend what I expect to be a very useful and productive forum for debate and cooperation.

These are not the easiest of times for Europe's economy. That will be already clear to all of you here today since you operate at the ‘sharp end’ of business.

It is also clear to everyone that Europe’s main task at the moment is to revitalise its economy, create employment and attract revenues as well as investments.

One of the founding principles of the European Union was to create a space for free and fair economic activity, without barriers or bureaucracy. But this enduring vision has not yet become a full reality. That is holding us back in our efforts to revive economic growth. We need to ask why.

To build a truly sustainable economy, we need to do two things simultaneously.

We need to free the creative force of our market economy, and strengthen economic discipline. That means budgetary discipline and responsible public spending, as well as people paying taxes honestly, implementing contracts and respecting agreements.

These are the two main elements which should form the basis of pan-European economic policy, to facilitate growth and secure employment.

Europe’s economic model has been called a social market economy, a term used in the Lisbon Treaty. But in reality, the "market" part of this has disappeared.

There is a tendency to confuse it with a sort of uncontrolled liberalisation.

What it actually means is a system based on competition between companies, subject to certain rules to ensure fairness, for the benefit of consumers. In Europe today, I see too many views that see the market economy as a problem - not a solution.

This is dangerous, because it is the cause of increasing unemployment and decreasing competitiveness compared with other parts of the world.

The best way to stimulate economic growth in Europe is to remove more barriers – technical, administrative and regulatory - and open new possibilities for the market economy to work properly.

Neither the European Union, nor any government, can solve economic problems without an efficient and a properly functioning market economy.

I do, however, feel that the voice of the market economy has weakened in Europe, while the workings of the market have been trusted to governments. From my own experience and life in the former Soviet Union, I know that state-planned economies are not - and cannot be - either successful or competitive.

Innovation and a creative economy can only be created by a market economy, by private entrepreneurship – not by governments working from the top down.

There will always be different views on the exact nature of the state’s role in a market, how far it should guide the economy and cushion price inequalities.

I prefer less state intervention and red tape, and more independence of economic operators. That, along with a stable long-term legal environment so that investors and business know where they will stand in the years ahead.

As it finds its way out of the economic downturn, Europe’s best asset is its vast single market of 500 million consumers. This represents the most promising source of growth and future prosperity. But the tremendous potential this market offers for reviving and bolstering economic growth is not being fully tapped.

There is much more work to do to make Europe's business environment fair, open and competitive, to improve trade flows via technological progress and innovation. And there are many unexploited opportunities for coordinated European action.

Since this fits in extremely well with the problem at hand, let me now turn to an area that I know very well – transport.

Ladies and gentlemen: does transport matter? I would say “yes, of course”.

But do EU citizens and their Member States really want to change anything? To me, it has been clear for a long time that transport is key for driving growth, creating employment and completing the European single market.

With smooth joined-up networks and proper connections, we can give our economy a good chance to grow. Transport is the engine of the supply chain, it generates trade and therefore prosperity - I keep saying so in all my speeches!

But transport is also one of Europe’s few sectors which still has legal obstacles to market entry: in domestic rail markets, port services and road transport. There are also administrative and regulatory barriers, particularly in rail.

At the European Commission, we have plans for creating single transport areas for aviation, rail and maritime, among other areas. We want to add competition into closed and protected markets, to raise efficiency and performance.

But Europe doesn’t seem to be doing much to change things – why?

We often encounter huge opposition to some of these ideas. Unfortunately, that means there is always more to be done to let the market work openly and fairly.

Time and time again, Member States and vested industry interests together adopt a purely national, short-term perspective. This weakens what we are trying to do to build a genuinely efficient and smooth transport network in Europe.

At a time of economic crisis, why keep having lowest common denominator compromises that can lead to a situation often worse than the status quo?

Why should we always be diluting and compromising?

Let me give you just one recent example: our proposal on ground handling. This is a major element in our package of proposals to address the capacity shortage at Europe’s airports and improve the quality of services for air passengers. On present trends, if nothing is done, 19 key EU airports will be full to bursting by 2030 – meaning massive delays and congestion for everyone.

After intense industry lobbying, our proposal was rejected earlier this month by the European Parliament’s transport committee. As a result, we may now have to consider withdrawing the entire airports package. That is not in Europe’s long-term interests. It does not help anyone.

Ladies and gentlemen

We find it useful that industry pinpoints bottlenecks and complications. We always listen and try to do something about the problems it identifies.

That should be clear from our efforts to complete the Trans-European Transport Network, and our proposal to establish the Connecting Europe Facility to finance building the core transport network.

Not only is this money badly needed in the transport, energy and ICT sectors, it is also designed to generate a great deal more funding from private investors.

When industry believes that its own interests are threatened, it can be quick to lobby against change and modernisation. There are huge barriers within business, which lead to a risk of protectionism.

These need to be dismantled to let market-based measures do their work and allow us to tackle the significant challenges that face the transport sector.

The result is that today, the “business voice” that promotes fair and free market competition has become very weak. Business attitudes risk being short-sighted and not seeing the longer-term consequences.

Strong vested interests often promote policies that focus on tomorrow’s profits and not on today’s urgent need to build a sustainable transport system for Europe. They also prevent us from taking and implementing the tough decisions that are needed to complete the single market.

Take railways, one of the last bastions of vested interests in transport. This sector has very strong politico-national structures of railway companies which have strong and obscure links to political decision-makers and different lobbies.

Rail is a good example of where Member States often protect what they consider as their national champions. We need to put an end to such protectionism by breaking up the national monopolies and their cosy relationships with the state.

The situation in Europe’s port sector is not dissimilar, especially in the provision of services and port labour where practices sometimes amount to a 'closed shop'. This is why the Commission will soon present proposals to address both sectors, to open markets and ensure equal conditions for competition.

I find it surprising that these kind of practices still exist in 21st century Europe.

At a time of economic crisis affecting all the continent, we surely need to pull together and “think European” - beyond national or individual interests.

Frankly, this is not a time for self-interest.

Ladies and gentlemen

Europe has achieved an enormous amount since 1950 when France's foreign minister, Robert Schuman, proposed the creation of what we now know as the European Union. The European Union has changed Europe.

Since then, Europe has delivered more than half a century of stability, peace and prosperity. Wars are a thing of the past.

We have gone a long way towards building a single pan-European market. We launched a single currency. In economic terms, at least, we have buried the most divisive of our historical rivalries. That's part of being together in the same boat.

Europe’s economy is the largest in the world. Countries in the European Union have accumulated huge amounts of capital and skills. The European Union has created the world’s best legal environment, providing justice and guaranteeing fair treatment of its citizens and businesses.

All this has allowed European Union to prosper, for which we have to be better than our global competitors. But instead of building on past achievements and increasing integration, we face the dangers of disintegration and deterioration.

Europe needs thorough reform to push its economy forward to sustainable growth and competitiveness again. There is a lot of unfinished work to do.

I have no doubt that, if all of us here today work together in a transparent way and with Europe’s wider interests at the forefront of our minds – we can do it.

Thank you for your attention.

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