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European Commission Vice President responsible for Industry and Entrepreneurship
European Business Summit
European Business Summit / Brussels
15 May 2013
The Commission’s latest figures have confirmed that Europe is in a double dip recession.
The crisis has accelerated the loss of competitiveness and the industrial decline, which are the first causes of unemployment which is already above 12%.
Over 3.8 million jobs in industry have been lost since 2008. Competitiveness cannot be measured in macro-economic terms only. Industrial competitiveness plays a key role in re-launching growth and employment.
Industry represents 75% of EU exports and 80% of private investment in research. Each job in industry generates between 1 and 2 jobs in the service sector.
If we don't want to lose our know-how, it is also highly strategic to maintain a significant part of production sites in Europe.
Unfortunately, since 2000, our industrial decline has also been accelerated by the crisis. We went from over 20% of GDP stemming from manufacture to a current 15.2%.
In the past five years, China has increased its share of global manufacturing output by 7.7%. With a share of 21.7%, it has overtaken the United States and Europe.
Decrease in investments
This industrial decline is also linked to the decrease in investments. Private investment decreased by 350 billion euros between 2007 and 2011. The EU received no more than 23% of foreign direct investment in 2010, compared to 45% in 2001.
Our investment in R&D amounts to only 2% of GDP, far from our objective of 3%, and lower than that of the United States and Japan.
Delocalization and relocalization
Recently we observed that 40% of EU firms with more than 250 employees had re-localized.
The latest Commission report on industrial competitiveness shows relevant differences in the level of competitiveness among Members States and the gaps with our main competitors
For example, many Member States face serious problems with productivity levels, innovation capacity, business environment, electricity prices, access to funding and late payments.
We have to act now and try to solve these problems.
The industrial activities that re-localized the most are those in a situation of overcapacity or the more energy- and labour-intensive.
In particular, energy prices are one of the most influential factors in determining localisation of energy intensive industries.
Today electricity prices in Europe are double than those of the United States, and three times higher than in China.
We can't run away from the discussion, which influences our choices in terms of energy and environmental policy.
Moreover, we should be able to develop a true European policy on raw materials, otherwise we run the risk of seeing part of our production delocalise, for example that linked to rare earth, establish itself there where it can restock. Mostly, in China, which controls 95% of such strategic materials.
Difficulties in Growth for European enterprises
Along with few large champions, Europe has a forest of SMEs, often very small. Almost 90% of European enterprises have less than 10 employees.
Only 13% of European SMEs export outside the EU and only 26% of them take advantage of the internal market.
We have to support internationalization and clusters, improve the internal market, develop the Digital Agenda and unlock access to funding.
Innovation closer to the market
Innovation is crucial. Some European countries are more advanced and others are clearly lagging behind. According to our latest scoreboards Sweden, Denmark, Germany and Finland are at the top, while Romania, Lithuania, Bulgaria and Latvia find themselves far behind.
The current effort to re-direct support measures towards applied research is not enough.
For example, in Key Enabling Technologies, China is spending 90% of funds on applied research and the United States 76%. In Europe this percentage reaches only 18%.
Restructuring to come
The latest data indicates that there has been an increase in job losses linked to restructuring. The most affected sectors are automotive, steel and construction.
The crisis in many sectors is also linked to the decrease in internal demand toughened by austerity, and to the difficulty in exporting, due to an overrated Euro.
To react to this situation it will be necessary to concentrate on growth and investment, including public investment, and to have a central bank that is able to face competitive devaluations.
Moreover, we have to develop a real European industrial policy that is able to anticipate the needs of restructuring.
I have held high-level talks between entrepreneurs, social partners, Member States and the European Parliament for the automotive, steel and construction sectors.
Tomorrow, I am meeting Mr Davignon, industry and social partners, to discuss the steel plan we are presenting in June.
How our policies impact competitiveness
The first lesson to be learnt from the crisis is that industry is the cornerstone of the economy. The Member States with a stronger industrial base have fared much better than the rest.
We concentrated too much on finance and services and ended up excessively burdening industry.
Several policies directly influence industry's competitiveness. I would like to present some examples:
The first is our ENERGY AND CLIMATE POLICY
Energy prices are the result of the lack of a common market and of the constraints linked to the environmental policy, namely the preferential treatment accorded to renewable energies or ETS.
Certainly, the environmental policy must remain a priority, but its implementation should include measures which reduce the negative impact on industry and grant increased financial support for innovative solutions.
TRADE policy is another.
70% of global growth from now until 2020 will take place in emerging countries. It is therefore essential to guarantee our companies fair and impartial access to these markets.
All our international agreements need to be balanced in order they do not harm a specific sector or region. We should also take into account the cumulative effect of trade agreements and make the best use possible of trade defence instruments.
The third is COMPETITION
Competition rules are a great tool for competitiveness and innovation. But it is necessary to avoid their mechanical and rigid implementation.
We should consider the global dimension of competition. Rules governing state aids should allow support to the most innovative activities.
The fourth is ACCESS TO FINANCE
Restrictions and disparities in the conditions for accessing finance are the biggest obstacles to solve the crisis. This is especially true for Spain, Portugal, Italy and Greece who have predominant number of SMEs, most affected by the credit crunch.
Draghi himself recently stressed the need for actions.
The Commission and the European Investment Bank have to commit to an extraordinary effort, in synergy with the EU budget, in order to strengthen venture capital and credit insurance instruments.
Moreover, possible collaboration with the European Central Bank has to be explored.
A "smart" regulation
We need to dismantle the perception of Europe as an enemy to business. To this end, it is not always necessary to do more; sometimes helping enterprises means doing less.
Fewer rules, procedures and costs can help companies. Fitness check, competitiveness proofing and the principles of the Small Business Act should be our priorities.
I propose to go even further. I propose to work together on a genuine plan to simplify rules and to reduce administrative burdens.
Our legislation should be simple and stable in order to attract investments. Our impact analysis should systematically take into account the cumulative effects of different initiatives.
The upcoming European summits on Energy and Taxation (May, twenty-second) and Industry (June, twenty-seventh) will give us the opportunity to insist on the need to re-industrialize Europe.
It is necessary to complement the Fiscal Compact with an Industrial Compact and strengthening the Competitiveness Council's role.
On June sixth, with ministers and industry representatives, I will discuss the state of play of the new industrial policy in a High Level Conference here in Brussels.
The aim is to build up a strategic partnership for growth.
I would like to invite all of you to attend this event.