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José Manuel Durão Barroso
President of the European Commission
Speech by President Barroso: "An EU strategy for industrial competitiveness"
11th European Business Summit/Brussels
16 May 2013
Dear President Thumann,
Dear Minister President Kris Peeters,
Distinguished members of BusinessEurope,
Ladies and gentlemen,
Thank you for having invited me for the closing session of this eleventh European Business Summit - the eighth one for me! - on a theme, "Unlocking industrial opportunities", which currently features amongst the top priorities for the European Union and the European Commission as well.
Thank you also for BusinessEurope's proposals for an industrial compact and a pro-industrial growth framework which will no doubt be a source of inspiration for the Commission.
Business and industry are indeed facing today considerable challenges.
Our latest industrial outlook points to a general mood of uncertainty. Some sectors, like the food and drinks industry and pharmaceuticals, are already back to, or above, pre-crisis levels.
Others, like manufacturing and machinery, have more trouble rebounding. According to our latest forecasts, overall economic growth too is slightly negative, and expected to turn positive only in the second half of this year.
Negative expectations in business lead to falling investment, which in turn leads to less growth and less confidence to invest more, so we really need to break this vicious cycle. On the other hand, the global economic outlook in other regions of the world is more of a cause for confidence, if we succeed in reaping some of the benefits for Europe.
Our policy response is clear: we address in a comprehensive manner the different challenges, challenges of fiscal consolidation. We continue the structural reforms for competitiveness and also we promote the investments that give hope to the real economy. And of course we pursue an active agenda linking Europe even closer to the international economy.
Only by moving ahead on all these fronts can we remove the uncertainty that drags down our growth potential in the short term, and help our companies move forward and make plans for the long term.
Ladies and gentlemen,
We must not underestimate the complexity of the crisis Europe has been facing, nor believe we can counter it with easy solutions or promising quick fixes. We cannot do that.
The financial crisis, this kind of financial crisis was a new type of it. It was the result of many factors: the irresponsibility of a significant part of the financial sector, further aggravating unsustainable public debt, created by governments, and also highlighting the lack of competitiveness in some of our Member States. Which is a problem in terms of relative competitiveness, namely in a integrated economic and monetary union and also in terms of the relative competitiveness of these countries to other parts of the world.
So we need to find answers to all of these questions:
First, fiscal consolidation. Europe is moving on with fiscal consolidation. Starting from an overall deficit of above 6% of GDP in 2010, we now expect it to fall to 3.4% in the European Union and 2.9% in the euro area this year, this on average. Any realistic look at the figures will underline the importance of this effort. But public debt will continue to grow in the near future, although at a slower pace, reaching 96% of GDP in the euro area and almost 91% of GDP in the European Union in 2014. This is an increase of close to 30 % since the start of the crisis.
Second, as the crisis has shown, the link between sovereign debt and bank debt has to be broken once and for all. For this Europe needs an integrated system of banking supervision and resolution, to create what we call the Banking Union, a key pillar of the fully fledged Economic and Monetary Union the Commission is calling for with the adoption of its "Blueprint" at the end of last year. We now have an agreement on a Single Supervisory Mechanism, and the Commission is preparing the next step, a proposal for a Single Resolution Mechanism.
If you want we can come further to this point later, because one of the points you mentioned, Mr Thumann, regarding the problems of financing the real economy, has to do with the very strange fact that in the same monetary union we have very different, let's say, costs of lending to the companies. And sometimes this is not explained by the quality of the borrower, sometimes it's explained by the geographical location of the enterprise. Which means that in fact we are watching a fragmentation in the internal market when it comes to financing the companies.
This is why, to have a complete and stable solution, we need also progress on the banking union. At the same time we have other instruments that we are wishing to use, namely with the European Investment Bank, and I know the ECB is also attentive to this, to address the issue in the short term. But let’s have no illusions: this matter can only be solved if, apart from correcting some imbalances that persist in our economy – including by the way huge imbalances in terms of competitiveness, that's why the reforms are important -, we also need a more integrated economic and monetary union to avoid this problem that we see still today in terms of divergence of the costs of capital for financing the real economy.
Third, we need to continue to push Europe's competitiveness agenda. Later this month, we will adopt the country-specific recommendations as part of the European Semester, mapping out how individual Member States are proceeding with the structural reforms needed to boost competitiveness, enhance growth and create the much-needed conditions for job creation.
On all fronts, we have to show the credibility and consistency of our reform efforts. And this in a sustained, determined and firm way.
Rebalancing and restabilising our economy is, of course, a necessary but in itself insufficient condition to get Europe back on track towards sustainable growth and employment.
It is only by complementing our budgetary and macroeconomic approach with specific policies and investments in areas that provide a support to the real economy, that we can really foster growth.
Let me just quote a few examples of what we have on the table at this point in time:
Second, for industry to progress in the 21st century , we need to focus on research, innovation and skills. We are making progress in creating the right framework, with measures such as the unitary patent, faster standard setting, modernised procurement rules and a European passport for venture capital funds. Our new research and innovation programme, Horizon 2020 will be 30% larger than its predecessor, with around 71 billion euro. It will focus on excellence and on linking research to markets, in particular through key enabling technologies to support industrial leadership.
Third, we need investments not only in research and innovation, but also in pan-European networks, with for instance the Connecting Europe Facility which is very much supported by business in general. And once again I want to thank all those that have supported it when we were discussing this with the member states for the next Multiannual Financial Framework.
This is why a timely adoption of the Multi Annual Framework by the Council and the Parliament – because we have not yet the final adoption - is so important. I came in at the last moments of the previous debate - one of the reasons why we have different prices of energy is that we could not yet have an internal market for energy. To have a real internal market for energy we have to avoid market and energy islands. We need also a pan-European infrastructure. So some investment there is needed. This mostly will come from the private sector, but I can tell you in some cases we needed to have some support from the public sector, because it was important to bring also the private sector investment.
Fourth, industrial competitiveness also requires smart and lean regulation, for which a combined effort from the European Parliament, the Council and national governments is needed, of course with the Commission driving this agenda.
Let me give you an example of a sector where reforms are urgently needed: the digital economy is driving growth and jobs across the entire economy in the US, Asia and other emerging countries. But Europe is lagging behind.
Until five years ago, through the global success of mobile phones and 3G, it was world leader in communication technologies and services. This is no longer true, with the fragmentation of our telecoms markets.
The Commission will therefore present ambitious plans to create a true telecoms single market for Europe in time for the October European Council.
Last point I would like to mention is affordable energy – I already made a small reference -, which will be a major topic of the European Council discussions next week. Though the energy mix is different in every Member State, all are facing the same challenges and a European approach is the way forward.
Differences in energy prices are a result of the fragmentation of our market. Again, the completion of a fully functioning, interconnected and integrated internal energy market is central to Europe's competitiveness.
All of this is critical to enhance the competitiveness of our businesses.
A third domain in which the Commission takes the lead for the benefit of our industry is international trade.
At a time when some countries are flirting with protectionism, Europe has resolutely chosen to move further on the way to trade openness, without of course being naïve, and this also means that we also need to protect our industry when others do not play by the rules of the game.
The reasons for our ambitious trade policy are clear:
Strong growth in emerging economies has been an engine for growth within Europe - not a threat to it - and it will prove to be the case in the future as well.
If we would successfully complete all trade and investment negotiations we are currently engaged in, that would boost Europe's GDP by more than 2% or around 250 billion euro, according to some of our studies.
Our internal and external openness has strengthened - not weakened - our capacity to create jobs. Long-term evidence indicates that in Europe a 1% increase in openness of the economy results in an increase of 0.6% in labour productivity.
That is why we have managed to hold on to our share of world trade over the years, rather than lose out to emerging markets. Europe still accounts for some 20% of world trade – excluding oil - and we are still the most powerful trading bloc in the world measured in value added, where we account for 22% of trade flows.
External demand will be the main driver for Europe's growth in the near future, and we are building on that by pushing for more trade and investment liberalisation across the world, while improving the strength of our companies to compete on the world stage.
The upcoming negotiation of the Transatlantic Trade and Investment Partnership with the US has the potential to become a real game changer in this regard. And this is why I particularly value and welcome the business alliance for a Transatlantic Trade and Investment Partnership announced today by several business organisations, BusinessEurope, AmCham EU, Eurochambers and others.
To conclude, ladies and gentlemen,
In each of these areas we can only succeed with your close involvement. Whether we are conducting trade negotiations, reinforcing our energy policy to better meet the demands of European enterprise, creating a single market for the telecom industry or fighting for smarter regulation, we need your experience, we need your input and we need your expertise.
And above all, we need your active and vocal support, which I am sure we can always count on.
I thank you very much for your attention.