New ideas to boost Europe’s economy
The euro crisis may be abating, but with European Union still mired in recession, how can its economies recover and compete? At the 2013 Brussels Economic Forum’s panel on securing the European competitiveness in a global perspective, a variety of ideas were offered to boost competitiveness, from cutting red tape to taxing better. Further capitalising on the Single Market, in particular as regards services and network industries, openness and innovation, with investment in R&D and in education and skill formation, were identified as major building blocks of a high-productivity strategy for European competitiveness.
Jürgen R. Thumann, the President of Business Europe, said that it was futile to blame some countries for not matching up to others. “It does not help the European business community if we finger-point amongst countries about raising wages or increasing competitiveness. We should look at successful countries and see what we can learn,” he said. As a German, he suggested that his countrymen could support weaker economies specifically via foreign direct investment. “With our surpluses, we Germans should not try to become less competitive. We should invest in deficit countries,” he said, suggesting the Greek tourist sector as one area of investment.
Thumann was adamant that both businesses and governments should support the European Commission recommendations on economic policy, warning that previous episodes of watering down or backtracking had weakened reform efforts. This included issues like the continuing consolidation of public finances, access to credit, making the best use of EU funds, youth employment and completing the single market. Thumann also gave his backing to the EU’s recently launched negotiations on a trade agreement with the United States, saying it promised a vital boost to the economy.
Martin Jahn, a Supervisory Board member of Škoda Auto and President of the Czech Automotive Industry Association, said that EU enlargement had shown how to profit from competition. “The whole enlargement process made us much stronger competitively,” he said. Jahn argued that raising new taxes would not solve any of the fiscal crises, saying, “I don’t think we need higher taxation. I think we just need more effective taxation collection.” And he said that contrary to some of the claims about the euro, it had actually been a boon to the economy. “I don’t believe there is a euro crisis. The euro has been a very successful project, and increases the global competitiveness of Europe. We have a few countries in the euro facing structural problems that have nothing to do with the euro,” he said.
Anne Bucher, the director for structural reforms and competitiveness in the European Commission’s Directorate-General for Economic and Financial Affairs, expressed her concern about Europe’s economic imbalances. “Some describe Europe as a convergence machine, and with the crisis, this machine has been severely impaired,” she said. Bucher said the current recession was prompting firms to diversify into other sectors. “But these SMEs will need lending for their risky activities and this is what we are trying to support,” she said. Like Thumann, she suggested that surplus countries have a contribution to make. “The excess savings in the surplus countries needs to be channelled to deficit countries in the form of foreign direct investment,” she said.
Guillermo de la Dehesa Romero, a vice-chairman and non-executive director at Banco Santander, warned that competitiveness was a relative and subjective term; he preferred to talk about international performance. He focused on the issue of global supply chains, which he said had completely changed international business. “They can coordinate complexity at distance,” he said. “Now trade is in parts, components, services, technology, marketing – it is much more complex.”Filippo di Mauro, a Senior Adviser in the Research Department of the European Central Bank (ECB), said it was a very positive sign that Europe could debate competitiveness. “We are out of the emergency situation and the proof of it is that we are now discussing the engines of growth,” he said. But he added that many of the expected reforms to the labour market were too timid. “Adjustment is taking place, but is this enough? My answer is no,” he said.