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European Commission

José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso at the opening session of the Industrial policy conference

Industrial policy conference/Brussels

6 June 2013

Thank you Daniel,

Dear ministers,

Minister Bruton, Álvaro Santos Pereira, Vosganian,

Distinguished guests,

Ambassadors,

Members of the European Parliament,Ladies and gentlemen,

Dear friends,

Dear Antonio, Vice-President of the European Commission,

Thank you for inviting me to address this conference on "An industrial renaissance". A very special word of thanks to Antonio Tajani. Thank you for your very kind words and above all thank you for your enthusiasm and the competence you put in the development of industrial policy for Europe.

Renaissance is indeed the right term, because Europe must move beyond the crisis and because the task of building an ever closer Europe needs to continue. We know that easy solutions are not an option. We need a bold and comprehensive response, starting by the rebalancing of the European economy.

You will not be surprised that I will say many things that you have heard now from Antonio Tajani. This shows in fact the convergence of views and the commitment of all the European Commission around these priorities.

Within our Europe 2020 growth and jobs strategy, industrial policy has already been identified as an essential part and we believe we need to provide Europe's businesses with new key levers for growth and competitiveness, removing obstacles and tackling bottlenecks in the single market.

I welcome this opportunity to discuss European industry's role in this, because if the needs and challenges of our industrial companies are great, I'm convinced that their potential in helping us back to sustainable growth and job creation is also huge.

As you know last week, as part of the European Semester – the new mechanism of European economic governance, the Commission published its annual review of the economic and social priorities of the European Union as a whole and for each Member State.

The Commission has issued country-specific recommendations to guide national governments to improve their performance.

The role of the European Union in driving the reform process is more than ever acknowledged. And I am happy with the overall positive reaction that existed following the presentation of our recommendations. I think we have made real improvement compared to other years and this new system of economic governance is more and more important for the policy choices at national level. I am happy about this not only because it is needed to maintain the momentum, but also because at this point in the crisis national reform efforts are more relevant than ever, with the growing interdependence between national economies. We will only go forward if we move together, Member States and the European Union as well, working hand in hand – European institutions and Member States.

This is why the European Commission presented a response that we believe is both tailored to individual Member States and good for the European economy as a whole. Europe needs a consensus on policies that are both right for us as a Union, and right for each Member State.

When I make this reference to consensus, it is not just one of those political words that people sometimes like to say. Consensus is indeed essential, because one of the problems we have, and you, that come from the business community, many of you know that, is the issue of confidence. Investors' confidence, consumers' confidence. And of course we will not increase confidence when we see different governments trying to convey different messages or deepening sometimes completely futile debates, for instance like the debate between austerity and growth. This is not helpful. This can only divide public opinion and it can only reduce the confidence that is so critical for investors and for consumers if we want to re-launch the European economy.

So, what we have been doing is to prepare this new ground for consensus. And what is a new ground for consensus? It is of course that we need to keep rigour in our public finances. We know how much we were harmed by budget balances and by huge levels of public debt, but we need to put more emphasis on the structural reforms for competitiveness and addressing the social concerns, namely the huge social concern that is the rising level of unemployment, especially youth unemployment.

This is what I believe the new consensus for the European economy. Let's put it frankly, right, left and centre should meet from a political point of view where also different countries with different cultures in financial and economic terms should also meet. Because prolonging what I will call, with all respect, theological discussions about growth or about austerity is not really a contribution for the problems we have to solve. So let's address these concerns in a systematic way and let's implement what we have already agreed and not be constantly reopening the decisions that have been taken. Because this is also critical for confidence, and confidence is in very short supply in Europe. And only with confidence we can have the re-launch of our industry and of our economy.

The reality is, that we are undertaking this agenda of economic reform in very difficult times, still with public budgets under strain, with financial markets still suffering the effects of the financial crisis, with business confidence uncertain and citizens heavily burdened by the efforts demanded of them, especially in some more vulnerable countries.

But I believe from a structural point of view, our efforts are starting to bear fruit. A rebalancing of the European economy is taking place, as can be seen in the export performance of some of the weaker Member States or with the interest rates paid on sovereign debt.

Just yesterday I received here in Brussels Prime Minister of Spain, Mariano Rajoy, and if you look at the figures of the transformation in Spain in recent years it is amazing the effort that Spain is doing. I could say the same also for Portugal, in terms of rebalancing the economy, addressing structural imbalances, some of them that were there for decades. Of course, we know this is happening with great sacrifices in the short-term for citizens of those countries, especially the most vulnerable, but I think we have to have the honesty, the intellectual and political honesty to recognise that efforts like these were really needed, if we want these economies to become more competitive. And indeed they will become and they are becoming more competitive.

Europe is moving on with the necessary fiscal consolidation. Starting from a deficit of 6.9, almost 7% of GDP in 2009, we now expect on average to be at 3.4% in the European Union this year. An increasing number of Member States are successfully correcting their excessive deficits. Any realistic look at the figures will underline the importance of this effort, and I think it has to be recognised.

Reform of the banking sector is also underway. We now have new, coherent rules for the financial sector, we have an agreement on a Single Supervisory Mechanism, and the agreement by all the Member States, not only the Euro area countries, and the Commission is now preparing the next step, a proposal for a Single Resolution Mechanism. Indeed, we started yesterday, through an orientation debate, the preparation of this new initiative that will come to the table of the Member States and the Parliament soon.

Completing the architecture of the Economic and Monetary Union, particularly the Banking Union, remains essential, not only to break the link between sovereign debt and private bank debt but above all, to underpin future sustainable growth and prevent the re-emergence of imbalances. And once again, it is also critically important for confidence, because our partners around the world, they are also looking at Europe and trying to see if we are really serious when we mean we will prevent crises like the one that has affected some our countries, of coming back again. And this is why the banking union remains very important and we should not now relax our efforts because there is a relatively more stable situation in the market.

What happens next is equally vital: how, and how soon, do we implement the reforms at all levels? And how do we support the necessary reforms, some of them demanding and very difficult to implement from a political point of view.

Some time ago I said, and there was a lot of debate, one thing that I consider simply a truism. I said that even if a policy is rightly implemented there are some limits, political and social, to the way we implement that.

It is quite clear. So we need to build the necessary support for the reforms that are indispensable, politically and socially. That is where leadership is necessary because it serves no purpose if we have the right policy but afterwards we do not have the right conditions to implement the right policy. We are not speaking here of intellectual models, we are speaking here about policy choices. And we need to have not only the policies right but the politics right.

We are in an extremely difficult moment in some parts of Europe, where this issue of the political support for the reforms is indispensable. That is also one of the reasons why it is important to have a clear commitment to the real economy in order to move Europe beyond the crisis as soon as possible and revive the hope of our businesses and citizens.

One of the points that I want to tell you very frankly, sometimes I am a little bit frustrated in our European debate, is that I see many leaders behaving not as leaders but as commentators. I don't see that in other parts of the world, I don't see some of the presidents or the leaders of other countries say: "Oh, we are really doing very badly, we are going from bad to worse every time". No, on the contrary, they say there is hope, of course based on measures and policies.

And today in Europe very often we see these leaders trying to have this role of commentators. Ok, we need independent commentators and they do their role, but that's not the first mission of the leaders that have not only to fix the situation of their economies, to design the right policies, but to have the political conditions to implement those reforms.

That being said, it is easy to see why industry plays such an important role in our Europe 2020 growth and jobs strategy. And I really want to welcome the input of the business community in Europe, the industrial community, Business Europe among others, for the leadership that you have been providing among your members and also the messages that we have been conveying to the leaders at the European level and national governments for the need to a stronger focus on industry. With 75% of our exports, 80% of private investment in research and innovation and around 75 million jobs, including the related services, industry plays a major role in Europe. We want it to play an even bigger role, and we have set the explicit objective of raising the share of industry in GDP from the current 16% to up to 20% by 2020. And this is perfectly achievable.

For the moment, uncertainty and the lack of confidence are the main obstacles in achieving this goal.

Our latest industrial outlook points to a general mood of insecurity. Some sectors, like the food and drinks industry and pharmaceuticals, are already back to or above pre-crisis levels. Others, manufacturing and machinery, have more trouble rebounding.

Overall economic growth is slightly negative, and expected to turn positive only in the second half of this year. On the other hand, global economic activity is increasing, and this could also boost Europe's economic prospects as well.

Under these circumstances, the first issue we need to focus on is restoring normal lending to the economy, because negative expectations lead to falling investment.

So this is one of the main issues we now direct our attention to, so that companies' longer-term prospects and scenarios can be adequately supported.

Despite massive backing provided by governments and a supportive monetary stance of the ECB, lending conditions remain tight and access to finance is limited. This is especially the case in countries most hit by the banking and sovereign debt crisis, and even beyond. Today, Germany is the only country where SMEs are reporting a positive improvement in the availability of funds.

And this problem, the problem of fragmentation in the internal market, because of very different lending conditions is indeed a problem that we have to address in a more resolute way.

In its last lending survey, the ECB has recognised the problem. We have a problem of transmission of the monitoring policies, and it is actually clear now that the lending to companies, in many cases, depends not so much on the quality of the borrower but on the geographical location of the company. Apart from being unfair, I believe this is completely dysfunctional in a single market, so we have to address this.

Of course the stable solution for this can only come from the rebalancing of the economy, from the healthy reforms to be implemented. So for restoring of confidence there will be no quick fixes. But we should at the same time work for concrete, short terms solutions. And indeed all possible ways and means at our disposal, including the European Investment Bank actions, should be geared towards developing solutions for this problem of financing the economy, especially for SMEs. And we are working, by the way, with the EIB, and I hope some progress will be achieved and announced for the next European Council.

It is equally important for the European economy that Council and Parliament soon adopt the Multi-annual Financial Framework for 2014 to 2020, so that Europe can 'put its money where its mouth is' and support its growth agenda with the investments needed to really kick-start that growth across the European Union.

As you know, the European Commission has proposed a more ambitious project for the financing of the next seven years. Unanimity was required; the agreement between Member States was clearly below our initial proposal. But it will be much more negative for Europe. Even this proposal now is not implemented. We need this for our regions. We need this, for instance, for the Youth Employment Initiative. 6 billion euros, some say, is not enough. They are right probably, but it's better to have those 6 billion as soon as possible than not to have anything for this Youth Employment Initiative.

So I hope that the Council and the Parliament, with the support of the Commission, which always acts as an honest broker, will come to a solution. Because we need these programmes up and running for the 1 January 2014.

We also need to focus the available resources on where it really matters, and investments in research and development in particular are vital to guarantee and improve our industrial competitiveness.

Another issue is the skills for growth. And we know that this matter is now receiving greater attention and we can also use some of our financial instruments at European level to support decisions that mainly have to be taken at national level, for instance in terms of vocational training. Or better adapting our system of education to the real needs of our industry, addressing what it has now been recognised as the skills mismatch that exists in Europe.

Despite all the negative comments that we hear sometimes, the European Union attracts 10 times more R&D investments from the United States than China and India combined. That's just an example; I could give you many others. Investors from within and outside Europe still believe, and rightly so, in our economy and industry's growth potential.

Yesterday I received a very important delegation of business leaders from Australia, headed by the Governor General, and they were coming here precisely because of their great interest in Europe. And it was interesting to listen to them and to see that sometimes they express much more confidence in Europe than we, Europeans, sometimes express ourselves.

But the reality is that we need to step up the pace even further, and pull all Member States along, so we are now putting in place the framework and 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 technologies to support industrial leadership.

The European Venture Capital Fund adopted last year will also make it easier for companies to raise funds across Europe, with the European Investment Bank channelling an extra 10 to 15 billion euro to innovation and skills. And from 2014 onwards, we will have additional European financial instruments for equity finance and loan guarantees for innovative enterprises.

We should also waste no time or effort to deal smartly with natural resources: energy needs and costs are another key challenge for European industry, and one we take very seriously.

While the United States is on its way to become a net exporter of gas instead of an importer, as a result of the shale gas boom, Europe's import dependence is further increasing and, for oil and gas, is set to grow to over 80% by 2035. Already in 2012, industry gas prices were four times lower in the US than in Europe. For electricity prices, the EU is almost twice as expensive as the US.

The striking differences between energy prices in different Member States are equally revealing and clearly call for more European action in this crucial field.

As you probably know, these actions were on the agenda of last month's European Council meeting, and I was proud to present some policy orientations that I can say that were broadly approved by all Member States. Five areas:

  • completing the internal energy market, ending fragmentation by overcoming the remaining barriers;

  • investing in innovation and connecting infrastructure;

  • committing to greater energy efficiency;

  • exploiting renewable sources more cheaply and more cost-efficiently;

  • diversifying supplies by tapping new international sources.

From that point of view I think I have to say that these developments in energy in the United States can be very good, not only for the United States – certainly they are – but for the global economy and for Europe. Because it will increase supply and it will mean that Europe will not be so dependent on others sources of energy.

So we are making headway to a European energy community and there is much we can do if we act together as a Union. This is about our competitiveness, about our energy security and sustainability, and about our credibility in facing the challenges.

My message to the governments of Europe is therefore clear: we need to act boldly and consistently, implement the reforms we have signed up to, and target all available funds to make the necessary investments as much, as efficiently and a soon as possible, with a sense of urgency. That is the reason why the Commission has presented, to name one example, the Connecting Europe Facility in the discussions about the European Union budget for 2014-2020. We have to develop these connections at European level so that we can have the infrastructure corresponding to a real integrated market.

One specific issue that Antonio Tajani already mentioned is steel. It is estimated that the energy bill represents up to 40% of total operational costs in the steel sector, so the energy issue should be an important feature in the Steel Action Plan to be adopted by the Commission next week.

To make our industrial companies and entrepreneurs more competitive and more robust, we need to provide them with greater market access and better market conditions.

Both in the internal market and in international markets, I see a lot of potential.

Completing the single market for goods - which still accounts for 75% of intra-EU trade - and for services remains crucial. Rapid product innovation, globalisation of supply chains, digitalisation and e-Commerce all have a profound impact on the European industrial landscape.

Our regulatory framework is not up to date and still too fragmented, and we are in the process of reviewing how that can be remedied.

European competition policy also plays a key role, because vibrant competition in the internal single market is, we believe, the best preparation for global competition. Applied firmly and intelligently, competition rules power growth, and provide businesses and consumers with lower prices and better products.

Last but not least I would like to mention our active trade agenda. With growth in Europe remaining slow for some time to come, external demand will be a major source of growth for our economies. We need to embrace those opportunities by pushing for more trade and investment liberalisation across the world, while improving the competitiveness of European companies on the world stage and helping to open up third country markets.

If we succeed in negotiating a broad and comprehensive trade agreement with the United States, for instance (the so-called TTIP), including on tariffs, but even more importantly in lowering regulatory barriers on both sides and working towards common standards, we will give a tremendous boost to our industries at a time when they need it dearly.

I think this is also in the interest of the United States certainly. President Obama has already assumed this priority. And of course I think it will be also good for the general trend in the global economy where we need to resist protectionism, which means that we need to fight for more open markets, as we are doing in the European Commission, for instance by launching new negotiations – we expect to launch soon with the United States, but we have also already started with Japan and others have already been implemented. We are very close to concluding with Canada for instance. So we are fighting hard for liberalising markets of course in the respect of the rules of international trade. Free and fair trade should be the name of the game.

So, to conclude, ladies and gentlemen, thank you for your patience, but I just wanted to share with you many aspects because I really want you to know how much important they are for our everyday work in the Commission. Not only of course for the very good work of Antonio Tajani as responsible for this area, but where we try to mainstream, to put this as a horizontal priority for many of our colleagues in the Commission.

Because I really believe that there is no way back to "business as usual". We will not come to a situation like before. We are in tremendous challenges in terms of global competition. We say this very often, but the reality is that we will not always take the practical consequences of this. It is easy to say in terms of analysis that the world is changing, the globalisation is increasing and so on, but afterwards, in terms of the actual decisions, I think there is sometimes the temptation to do things as if we were in normal times. And we are not in normal times. We are in fact in very transformational times in Europe and outside.

So, I think it is the time to take decisions now. This is the matter that is going to be already on the agenda of this European Council. I mentioned that I received yesterday the Prime Minister of Spain, today I will meet the Prime Minister of Britain. I will be with the Prime Minister of Italy next week and of course I am in touch with all the Heads of State or Government and this is the sense of urgency on behalf of the European Commission that I will convey to them for them to be able to find and consolidate a new consensus to avoid sterile debates, to not to reopen issues that have been already discussed and solved, to focus on implementation and to see what more we can do in practical terms to respond to the urgency that our citizens across Europe feel very very deeply.

I thank you for your attention.


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