SPEECH/07/215

Charlie McCreevy

European Commissioner for Internal Market and Services




Speech by Commissioner McCreevy at the Annual Dinner of the IAVI

Irish Auctioneers and Valuers' Institute Gala Dinner
Kilkenny, 30 March 2007

Good evening Ladies and Gentlemen:

I am very pleased to be here this evening at the annual dinner of the IAVI.

When I began my time in Brussels I made a rule that I would not intervene in domestic political issues. I won't depart – very much - from that practice tonight. I admit that this is something of a challenge when we are in a period when the political temperature is rising - and not surprisingly the assets with which you are most concerned are at the centre of some of the debate.

In my current job I spend more time talking to people involved in other asset class markets – like equities and bonds – than I do in talking to property professionals. The asset class of most interest to me personally is as you probably know bloodstock.

What all asset investment classes have in common of course is their propensity to fluctuate in value. And I hope I am not being unfair in saying that the sellers or brokers for every asset class tend naturally to talk up their prospects. No asset class however goes up in a straight line forever. Excessive exuberance sometimes creates bubbles - all the more so the longer a bull market lasts: Gloom and doom more often than not create opportunities. But one thing is certain - that in the long term the value of assets - be it property, bonds, or equities - is to a very significant extent related to their real cash generating capacity relative to other asset classes or relative to other investment opportunities. That in turn is related to the underlying economic fundamentals which is what really drives the level of sustainable supply and demand.

So when we look to the prospects of property as an asset class – be it in Ireland or anywhere else – we can see that those prospects will be critically linked to the planning regime and the supply of development land, the infrastructure, the cost of capital, demographic trends, employment, and trends in real disposable incomes.

Some of these things are influenced and will continue to be influenced by domestic policy. Others – like the cost of capital, employment and disposable income trends - will partly be determined by policy at EU or ECB level, by the global economic environment, and by how Ireland and Europe's economies adapt themselves to the challenges of globalization.

And it is on that topic that I want to speak to you briefly this evening, setting it in a European context.

Across Europe, most Member State governments as well as the EU institutions – the Commission, the Council and the Parliament – are increasingly facing up to the fact that in a world where rivals are rising more and more rapidly and challenging us more and more intensely, the top priority of governments and regulators in the process of policy formation must be competitiveness. It must be at the heart of everything we do. I believe most Member State governments accept this – I am not sure all yet do.

I can understand why putting the competitiveness of our industries and our services as the number one priority in policy making is considered by some to be a harsh and narrow approach. But I profoundly disagree with their view. To those who take pride in placing the advancement of social policy at the top of their political agenda - the need to protect the old and unemployed, care for the sick, and look after the handicapped and disadvantaged, I can only say this: Social progress is a worthwhile, highly desirable, indeed essential end. But to make social progress requires a means: And the fastest social progress that has ever been made in this country – or indeed in any other country with which I have been familiar - has been made when we have had the means to achieve it.

It is only the fruits of growth that provides the wherewithal to help those unable to help themselves: The jobs that growth generates to reduce the number of people who are dependent. And the tax buoyancy that growth generates to provide for those who will always – through handicap or otherwise - remain dependant. I challenge anyone to point to an era when real advances in welfare were faster in Ireland than over the past ten years - when a policy of open markets, more competition, and low taxes drove growth, reduced dependency, and provided the resources to make real advances in looking after those unable to look after themselves.

I cannot stress too strongly the need for Europe and each and every Member State within it to avoid the cul-de-sac of protectionism, state intervention and regulation that destroy growth and lead to stagnation.

We have all seen the huge benefits of competition and open markets in telecoms, in mortgages, in the trading of manufactured goods, in air travel – In each and every case it has brought prices down, driven demand up, created more – not fewer - jobs, and left everyone better off.

But there is still much further to go. There are still significant pockets of protectionism and restrictive practices across large swathes of Europe's economies – even in the most economically liberal Member States like Ireland, Britain, the Netherlands, Denmark, and many of the emerging economies in the East.

That’s why at a European level I and my fellow Commissioners have a lot more work to do to prise heretofore protected markets open across Europe. That’s why in my case, for example, I am working on proposals for the liberalization of the postal service markets across the Member States, for the liberalization and opening up of the securities markets, for the liberalization of the pan-European payments market. I am working too to improve the framework for a more competitive market in public procurement. I also strongly support the work being done by my colleague the Energy Commissioner, Andreas Pieblags, to open up Europe's energy markets; the work of the Trade Commissioner, Peter Mandelson, to continue to open up markets beyond the EU's borders, and the vigorous enforcement of competition law within the EU by Neelie Kroes, the Competition Commissioner.

But it cannot all be left to the EU: Within Member States, governments should initiate competitiveness audits in respect of the services and activities that the State undertakes. There is a need to continually review and examine whether better value for money can be obtained by the adoption of better practices in public procurement, by more sub-contracting or through partnership arrangements in the management, administration, and delivery of government services.

The public sector in most countries has been relatively insulated from competitive forces. The consequence has been that the cost of public provision has been much higher than it should be. That’s why in so many areas – including transport, energy, and postal services - we have not seen the improvements in value, service delivery, and productivity that have been in evidence when these markets have been opened up to real competition. Protecting public services from competition has a cost in the form of higher taxes and higher charges on everyone with the knock on consequence of lower demand, lower employment levels and hence lower living standards right across the board. In the world in which we now live there can be no hiding place for the inefficiency and excess costs that are the inevitable bedfellows of protected labour, product and service markets. The quicker we face up to that fact across Europe – in areas like transport, energy and infrastructure in particular - the easier the transition will be, the more competitive we will become, and the better off we will be.

I said at the outset that I would avoid – almost - any intervention in domestic politics. But I will say a few safe, party politics – neutral words about domestic election prospects: The only thing on which I will bet is that between now and election day there will be many surprises, ups and downs, setbacks and opportunities - for all sides and for all parties. The election will end in a different way to which it began. Moods will ebb and flow. Volatility could be greater than ever as a younger electorate with more fluctuating loyalties –and few if any traditional loyalties at all – become more significant among the voting population.

My advice to all candidates at the start of the campaign is to keep a weighing scales in their bathroom and a pedometer around their waste. So that when the campaign ends - win or lose - they will be able to check their pedometer to see how many hundred miles they have walked over the three or four week period and then get on their weighing scales to see how many stone they have lost. Whatever their mental state after the election campaign they should at least be in better physical shape than before it.

Thank you very much indeed and enjoy the rest of the evening.