Speech - Presentation of the reports on industrial competitiveness
European Commission - SPEECH/13/745 25/09/2013
European Commission Vice President responsible for Industry and Entrepreneurship
Presentation of the reports on industrial competitiveness
Press conference / Brussels
25 September 2013
Introduction: a mixed picture
A year ago the Commission presented a strategy for the re-industrialisation of Europe, with the objective of increasing the share of GDP earned through manufacturing from 15% to 20% by 2020.
Today we are presenting two reports:
Both reports show a mixed picture.
Despite some timid signs of recovery, the EU has not yet shrugged off the crisis.
While manufacturing has grown for the second month running – also thanks to positive export figures – the industrial base continues to shrink, from 15.5% last year to the current 15.1%.
The employment situation is dire, with half of all young people unable to find work in Greece, Portugal, Spain and southern Italy.
To reverse this trend, a much more robust recovery is needed. Unlike the United States, the EU is still a long way from its pre-crisis levels.
The data we are presenting today are in line with those published a month ago in the World Economic Forum’s competitiveness report, which shows that the EU as a whole has lost ground.
The report suggests that the focus on tackling debt probably distracted our attention from issues of competitiveness.
In the same way, our reports show that the root of the crisis is the growing competitiveness gap between European economies.
Despite purposeful action by the Commission under Europe 2020 to relaunch competitiveness and reforms in many Member States, there are still major structural imbalances. The productivity gap remains wide, with some countries hampered by punitive taxation, inefficient public sectors or slow judicial systems. Not to mention the limited capacity for innovation, the cost of energy and inadequate infrastructure.
Four groups and many differences
The first report on industrial competitiveness in the EU Member States identifies four groups:
1. Highly competitive countries (Germany, Denmark, Sweden, Austria and Luxembourg);
2. Countries whose competitiveness is higher than the EU average on most of indicators, but which still need reforms (Belgium, the Netherlands, the UK, Ireland, Finland, France and Spain);
3. Countries with an average-to-low level of competitiveness, which are more or less treading water (Italy, Cyprus, Portugal, Slovenia, Malta and Greece);
4. Countries with a low level of competitiveness, but which are making progress (Estonia, Poland, Slovakia, the Czech Republic, Croatia, Hungary, Latvia, Lithuania, Romania and Bulgaria).
The report groups together the countries in the first and second groups with all the countries that are above the EU average on most of the indicators.
The scores are based on 10 indicators, chosen from among the 30 most important indicators of industrial competitiveness:
(i) labour productivity (ii) level of training (iii) level of exports (iv) capacity to innovate (v) energy intensity (vi) cost of energy (vii) business environment (viii) adequateness of infrastructure (ix) access to credit (x) levels of investment in manufacturing.
An industry-friendly EU not yet achieved
The second report on the competitiveness of European industry shows an overall improvement in the business climate and environmental sustainability, as well as a trade surplus of EUR 365 billion.
However, domestic demand remains weak. Similarly, investment is still low and has fallen by 350 billion since 2007 (from 21.1% to 17.7% of GDP). Whereas in 2001 the EU attracted 45% of global foreign investment, today we are at around 20%.
Access to finance has become more restrictive, particularly for SMEs. The cost of energy – already the highest among our competitors – has increased even further and is around double that in the United States and more than triple that in China. Consequently, every day we read about industries leaving Europe to invest in countries where energy costs are more sustainable.
All these factors have contributed to poor results in two key areas: productivity and employment. It is here that we are falling behind the United States and Japan.
While the EU’s average productivity level is 126, that of Japan and the United States is 132 and 135 respectively. Comparison of unemployment is even less flattering: 7% in the United States, 3.8% in Japan and 11% in the EU. Since the start of the crisis in Europe, almost 4 million jobs have been lost in industry.
As you can see from the slide, things are no better when it comes to innovation. In the eight sectors which are key to technological and market leadership on the global stage, Europe is (just) ahead of the United States only in aerospace, pharmaceuticals and TLC equipment. The United States is well ahead of us in biotechnology, computer hardware, internet, semiconductors and software.
An Industrial Compact to go with the Fiscal Compact
It is clear from the two reports that a process of de‑industrialisation is going on in most EU Member States.
In the October 2012 communication approved by the Member States, the Commission took up the challenge of reversing this continuing decline.
Much has already been done in the context of Europe 2020. We have devised industrial plans for, among others, shipbuilding, cars, steel and construction, as well as a strategy to strengthen the defence and security industry. The task forces for strengthening the six leading sectors identified in the communication – advanced manufacturing, key enabling technologies, the bio-economy, smart grids, raw materials, sustainable transport and construction – are operational.
However, today’s data show that we need to do more and act urgently. A further loss of human resources and industrial capacity in key sectors could take us to a point of no return, weaken us and make us more technologically dependent.
The February 2014 European Council will be the first dedicated to industry. It is an opportunity not to be missed.
This is why we are working on an Industrial Compact, in the context of Europe 2020, which will allow us to increase the pace of reform – both at EU and national level. This is essential if we want to attract fresh investment in industry.
In this regard, I have written to the Ministers for Industry of the 28 Member States and intend to start a discussion on the contents of the Compact as early as tomorrow during the Competitiveness Council.
As I have already explained to the Ministers, among the options to explore are the actions to take forward and the governance to implement them effectively
We know which problems need to be solved to unleash industrial potential: a public sector that works with business, sustainable energy costs, modern infrastructure and research and training that are geared to the market.
However, repeating like a mantra that reforms are needed – some of which we’ve been waiting a decade for – will get us nowhere. This is why today I want to stress the theme of governance in making reforms effective.
In the light of past experience and the urgent need to give younger generations prospects, it is vital that we question the real effectiveness of the instruments we have.
Personally, I am convinced that, to make the process of convergence between countries more effective, we must strengthen coordination with the Member States – not only in terms of macro measures for tax consolidation, but also at the micro level, which is more closely connected to industrial competitiveness.
I think that besides the Fiscal Compact we need an Industrial Compact to balance and integrate action for growth and to attract investments and industrial manufacturing.
I believe Europe will make it
Going out of the crisis, reindustrialising, going back to growth and creating work is not a mission impossible.
I am optimistic, also because of the important steps forward that we have already done. It's important to go on with the reform process.