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José Manuel Durão Barroso
President of the European Commission
Speech by President Barroso at the IBEC CEO Conference 2013: "Let's choose growth"
28 February 2013
I would like to thank the President and the CEO of IBEC, Paul Rellis and Danny McCoy, for inviting me to join you today. It is a pleasure to speak to such a top-notch group of business leaders from Ireland and across the European Union. I am happy to do it together with my good friend Taoiseach Enda Kenny who is implementing such an ambitious programme for the Irish Presidency of the Council of the European Union.
Ladies and gentlemen,
The financial and economic crisis has fundamentally changed the parameters within which both business and politics are done. Instinctively I think we all know this – but have we really changed the way that we work to reflect this new reality? Is Europe really ready to embrace the competitiveness challenge? To continue and deepen the reforms that have recently begun? Or do some people still think we will "get back to normal" once the crisis has passed?
My theme today is that we must "choose growth" – and we must urgently and actively adapt our policies and attitudes to deliver it. We are all part of making this choice – politicians, businesspeople, trade union leaders and the public at large.
This morning I want to outline some of the growth enhancing policies being developed at EU level and to urge you to support them.
Over the past four years a concerted effort has been made by EU Member States to consolidate national budgets and to implement structural reforms. We see it in Spain, we see it in Ireland - the Taoiseach just mentioned it in very concrete terms - we see it in Portugal, we see the progress that can be made when the political will of governments and the determination of the population come together to build a better future.
The EU has provided crucial financial support for programme countries and put in place a range of new instruments to underpin our common currency, the euro.
Measures to promote growth and get the most out of our single market have been given priority. European spending has been re-oriented towards growth-releasing investment. And the governance of the euro area has been strengthened to ensure better economic and fiscal coordination.
As a result, in recent months the markets have been more stable and there are signs that confidence is starting to return. But we must avoid complacency. The situation remains fragile and there are unacceptably high rates of unemployment in many Member States, and growth rates remain generally speaking very depressed. As the European Commission's Winter Economic Forecasts published last week show, getting and keeping Europe on the path to sustained economic growth remains a formidable challenge.
The world is changing. New competitors have emerged, bringing new challenges but also new opportunities. Europe urgently needs to learn to perform better if we are to compete effectively with them.
And Europe is facing its own systemic issues: an ageing population, increasing energy costs, and now also systemic unemployment.
The economic crisis was triggered by events in the financial markets. But it exposed two very fundamental problems. The first, a loss of external competitiveness. The second, latent internal competitive imbalances that left the European Union, and the euro area in particular, vulnerable to asymmetric economic shocks.
On the surface, Europe's aggregate and average performance looked pretty good right up until the crisis. In more or less the decade up to 2008 European GDP growth outstripped that of the US and we created 3 million more jobs. And still today here in the European Union we have 5 EU Member States in the top 8 of the Global Competitiveness Index.
But under the surface lurks very uneven performance from one Member State to another. We have to go down to 22nd place in the Competitiveness Index to reach the 10th EU Member State, and the 15th is in 41st place of that Competitiveness Index.
These relative positions reflect the differences which exist inside the European Union as well as our comparative performance against global competitors. For example looking at productivity levels, the very best Member States are twice as productive as the worst.
This has an impact on relative standards of living, since high productivity levels mean that, even with high wages and other costs, unit costs can be kept at a competitive level. We therefore see that over the last decade those Member States who allowed wages to rise faster than productivity have experienced an average loss of around 30% compared to the most competitive and this is at the core of the problems we have been facing. There is almost a complete unequivocal correlation between these costs and the loss of competitiveness of some of our Member States.
Before the crisis there was a collective failure to address these emerging competitiveness gaps, even among those Member States who shared a common currency. The European mechanisms in place to correct the problems were sometimes ignored, sometimes deliberately circumvented.
The competitiveness challenge is rapidly becoming the most urgent problem European countries face today.
Not because competitiveness is an end in itself. But because it is the means to drive prosperity, to sustain European living standards, European values, our societies, our natural environment. Interestingly it is precisely those European countries with the most effective social protection systems that remain among the most successful and competitive economies in the world, thanks to high productivity levels. This is why we should focus on productivity and on the critical effectiveness of competitiveness.
Ladies and gentlemen,
Europe faces a moment of truth. Either we recognise that "business as usual" will consign us to a gradual decline, to the second rank of the new global order. Or we take the bold and ambitious course of sustainable growth.
The European Commission has tabled a clear strategy for sustainable, smart and inclusive growth. Our policy was endorsed by all 27 Member States – and now needs to be implemented.
By setting common goals, our agenda for growth, the Europe 2020 strategy seeks to support reform, inspire confidence and restore investment - and it needs your support, the support of the business community, and I am happy to say that Business Europe, the organisation that represents business at European level has been very supportive of all this commitment to reform at European level.
Indeed we are working closely with Business Europe as well as the other social partners, since the active involvement of the private sector is essential.
This is a transformative agenda, which gears up all available tools to promote Europe's future and lasting competitiveness.
Tools such as trade policy. Access to our single market is a coveted prize for our international partners. Negotiating with one voice on behalf of the European Union, the European Commission is opening up considerable opportunities for European business in return.
We have concluded a number of agreements with key partners such as South Korea - this one is already being implemented successfully - and now we have concluded with Singapore. We should soon finalise a deal with Canada. We are about to start negotiating a very ambitious deal with Japan And under the Irish Presidency we hope to be able to start negotiating a deep and comprehensive new trade agreement with the US which could bring us an increase of 1% of EU GDP.
The single market remains Europe's greatest asset when it comes to competitiveness. It allows European businesses the scope to grow to a size where they can become world leaders. Many of you in this audience have built your businesses through access to European markets. Much of the inward investment Ireland has enjoyed is due to that access to the single market, that is by value the most important market in the world.
But there is also more to be had from our single market. That is why the European Commission has presented two packages of proposals to tackle some of the remaining barriers to doing business across the EU. Barriers to entrepreneurship such as punitive insolvency regimes. Restrictions to e-commerce such as difficulties in cross-border card payments or divergent copyright rules.
And, given the real difficulty that entrepreneurs and businesses have to obtain the financing they need to expand their businesses, the urgent need to develop alternative sources of long term funding which deal with Europe's over-reliance on bank lending.
Despite all the advances of the single market, today we continue to have 27 mini-markets in certain key infrastructures. We have therefore prioritised measures to complete the opening up of core network industries such as rail and energy.
Ireland is a case in point. A few years ago who would have thought that an island could be exporting electricity? Thanks to an EU funded interconnector [a 300 million euro loan from the European Investment Bank and a 100 million euro grant from the European Union budget] Ireland's new renewable energy sources can be developed and sold into the UK market.
The Commission will not only be keeping the pressure up for agreement on all these single market measures, but we will pay particular attention to the effective implementation of the reforms on the ground.
Because we are very aware that how regulation is designed and implemented has a direct impact on competitiveness. I know this is a topic on which IBEC has strong views and that many of you are critical of what you see as "Brussels red tape". Things are changing. We are pursuing a policy of "smart regulation". Regulation only where needed and regulation that must reach its intended objectives and deliver sustainable prosperity without strangling economic operators, in particular SMEs.
The European Commission is taking action in this field very seriously. We have reduced red tape – we have exceeded the target of 25% promised by the end of 2012. That means, according to some estimates, 40 billion euros of savings to businesses across Europe.
We are rigorous in our impact assessments, estimating costs and benefits. We have put in place a micro and SME test with a presumption they should be excluded from legislation.
We are launching fitness checks to screen the body of existing law to see where the overall regulatory burden at EU and national levels could be reduced by eliminating overlapping and unnecessary requirements.
Ladies and gentlemen,
European competitiveness also depends on Europe's people and societal well-being.
Profound reform has a clear and immediate social impact. Whilst society as a whole will benefit, it is not an option that some sectors of the population alone bear the brunt of the change whilst others cream off the profits.
Here in Ireland, and all around Europe, too many young people are asking if they will ever find a job or have the same quality of life as their parents.
We need to give these young people a better prospect. That is why in the recent budget negotiations the Commission fought to secure a large increase in funding for youth. Under the Erasmus programme more students will benefit from mobility opportunities. And a new Youth Employment Initiative will provide 6 billion euro in much-needed support for young people in regions with youth unemployment rates above 25%.
The Commission has proposed recently a Youth Guarantee under which every young European should be guaranteed a job, further education, or work-focussed training at the latest four months after becoming unemployed.
Ministers are discussing our proposal in Brussels today. I call on them to adopt it now to keep the ambition and to restore a sense of hope among our young people.
The sad fact is that we simultaneously have high levels of unemployment and skill shortages. The shortfall in ICT professionals could reach 700 000 by 2015. Opportunities exist and we must train our young people to fill them.
We need Irish and Europe businesspeople to help us identify and fill the skills gap in this and other sectors. You are key players in helping ensure that both vocational training and more academic education are effectively meeting labour market needs.
Next week the European Commission will launch the Grand Coalition for Digital Jobs. Working in partnership with business, industry associations, and Member States, we are already collecting pledges on new jobs, internships, training places, start-up funding, and free online university courses.
Ladies and gentlemen,
Through European trade policy, the single market, European social policy, and smart regulation, the European Commission is gearing up all the tools at its disposal to drive competitiveness.
Yet Europe's ability to meet the competitiveness challenge, to choose growth, will increasingly depend on actions by Member States rather than on regulation from Brussels.
Reforms in areas such as labour markets, pensions, public administration and education to name but a few. This is mainly a national responsibility. Areas where specific solutions are needed, reflecting the diversity of Member States' particular circumstances, social models, traditions, risks and opportunities.
Reforms that touch daily local life. For example, to make the local service sector more competitive. Here in Dublin, we see the wider benefits that the liberalisation of the taxi sector has brought and it is felt positively by consumers.
These are things that should not be regulated from Brussels. But since they make a real difference to the relative economic well-being of a Member State, they are increasingly matters of common concern, especially in the context of a shared currency.
So there is a role for the European level to work in close cooperation and partnership with Member States to identify growth-boosting reforms that are specific and right for each country.
And to ensure that the complacency and imbalances of the past do not re-emerge.
Europe is on the way towards such a new model through our enhanced system of economic governance, with its country-specific recommendations and specific surveillance mechanisms for macro-economic and fiscal policy.
We are building a stronger base than ever for sustaining European competitiveness and avoiding the mistakes of the past.
For Europeans, competitiveness can never be just about reducing the costs of products and services. It requires careful balancing within a complex mosaic of economic, social and political factors. It means hard work and often results in profound change. That is why it is an inherently political responsibility.
So an increased pooling of economic policy-making, and that is what we are seeing now in Europe, because the crisis has shown how much dependent we are on the decisions or non-decision of others, that the mistakes of one country can have a huge impact on the euro area economy in Europe as a whole and sometimes even a global impact.So an increased pooling of economic policy-making needs to be matched by an increase in democracy and accountability at European level.
For this reason the blueprint for the deepening of economic and monetary union that the European Commission presented last year identifies the need to move towards political union.
Because a choice for growth cannot be imposed from Brussels. Being competitive requires a constant effort, it involves active choices by business, government at all levels, and ultimately by citizens. As I said a moment ago, this agenda needs your support. You can take the opportunities I have outlined and grow your businesses.
But I would ask you also to speak out for Europe. Confidence is returning to Ireland and to Europe. The Irish economy is turning the corner. The employment figures just published today suggest clearly that this may be happening. It shows that the programmes can work. It shows that there is light at the end of the tunnel and it shows that you can be part of creating that positive, growth enhancing climate.
I hope that together, we will take the right decision. I hope that Europeans will choose growth – sustainable growth, not artificial growth fuelled by irresponsible public debt or irresponsible private debt. We are on the way to sustainable growth and Ireland, I am sure, is part of this European solution.
I thank you for your attention.