Industry matters: absolutely. So let me start by commending Business Europe for holding this conference. It is a good sign of the mobilisation in the run-up to our March European Council, that will discuss the very themes – industry, energy – that you will be focusing on these two days.
I won't speak overly long, because my speech is an "appetizer"! But I've come tonight because I want to focus on one theme, and one theme only: competitiveness. It is the red thread in everything that we're doing at the European Council. It is going to be the key for our economies' lasting recovery.
I want to reassure you, Mrs President: the European Council debate on industry is definitely taking place! It was important that the leaders had the necessary time to prepare, and to my mind it makes sense to discuss both this issue and energy in close connection, so this is what we will do in March.
I am not sure that every cloud has a silver lining… but one thing is for sure. If there is one thing that the crisis has brought us it is a much-needed wake-up call. In many countries, problems had been left ignored for too long. Complacency crept in on essential aspects of competitiveness – including industry. The sense of urgency about completing the Single Market started to wane, and for years now progress has been much too slow.
For four years now, all our efforts have been focused on overcoming the crisis, on driving forward our common strategy for economic recovery. Working simultaneously on four strands.
– First, financial stability;
– second, structural reforms for competitiveness, growth and jobs;
– third, immediate measures for jobs, especially for young people;
– and fourth, renovating the eurozone's architecture, so it can be strong and resilient for the future.
I never said that the economic crisis is over, because it is not. Growth is still fragile, uneven. But the worst is behind us. And we have done a lot already. Reforms are happening all over Europe, or are being planned - I am referring to the recent announcement by the President of France. Together, we've laid to rest any existential threats to the eurozone.
The currency area is getting the solid foundations it deserves; and today already its architecture is very different from just few years ago. We are emerging from our Union's longest-ever recession. We may be stronger today, but the global economy remains fluid.
Some emerging economies are also facing huge challenges, and these could in time affect our growth prospects too.
Lower global demand means fewer exports. But the drop of the exchange rates of emerging economies can push our euro upwards, with a negative impact on our exports. So as we go forward, no European country can afford a return to complacency. This is something on which business, should be speaking up, in every European country, loud and clear. We need a strong industrial base.
The share of manufacturing in the European Union these last years has been going down, and there are still wide differences between member states. Just to take two examples: in Germany manufacturing's share of GDP is of 22% whereas in the United Kingdom it is 11% – meaning half! And France too is lagging, with a share similar to the UK. Industry remains important for growth, but also for the current account of the balance of payments.
And for industry, barriers in all the sectors that I listed – from business and digital services, to energy and defence – all these barriers matter also. Industrial competitiveness will hinge also on being able to have access to cheaper energy, to better business services, to wider markets.
I know I don't need to convince you that the Single Market is Europe's strongest asset. But knowing that isn't enough. We need to mobilise for the Single Market, win back that sense of urgency. Just like it did in the 1980s, still today the Single Market has what it takes to change the 'name of the game' for our economies. The potential is real.
But the truth is that we have a real fragmentation challenge. For services, for our energy market, for our digital market, for telecom, for our defence industry. I organised three or four European Councils focused on these issues and each time the diagnosis was the same - fragmentation. We have too many players in Europe compared with e.g. the US. In all these areas, barriers still hold strong, and bringing them down could make all the difference. This is the real battle front!
It's a false conundrum to pitch services and industry against one another. Saint-Simon's saying from the early nineteenth century "Tout pour l'industrie, tout par elle" is outdated today. Services and industry don't happen at each other's expense: more often than not, they go hand in hand! It is well known (or at least it should be!) that every single new industrial job creates up to two new jobs in other sectors like services. Twenty-five per cent of private sector jobs are in industry, and often highly skilled. It would be artificial to think of them as separate from the rest of the economy.
As a Union, we are working hard to bring down the remaining unjustified barriers for services. The member states are peer-reviewing each other's measures, precisely towards that goal. And their governments are also working very closely on the fight against unemployment, especially for young people.
Our 8 billion euro Youth Employment Initiative is being launched right now, and each country is at work on its own Youth guarantee action plan. But here again, success is very much going to hinge on business : most of these new jobs should be private sector jobs, and this is only going to happen if business is fully on board. Companies, major multinationals even – I'm thinking for instance of Nestle – have well understood that this is an opportunity and pledged to create more jobs for young Europeans; and I hope many more will follow.
Competitive industry needs a skilled workforce: that goes without saying. But if you look more closely at the situation in each European country, you see that there are still large differences in skills achievements and in effectiveness of vocational training systems.
That's precisely what the member states together are trying to address, each in its own country and together too, with the framework we are creating for traineeships and vocational training.
Today in Europe, there are actually 2 million open job vacancies, and most are in science, technology, engineering and mathematics. This challenge is not about to go away: the demand for these jobs keeps growing. Things are only going to change if industry is properly involved in shaping curricula and promoting the skills that you need. That's particular true for digital skills. We are looking at up to 900.000 ITC vacancies by 2015!
And it's why last October, the European Council launched several initiatives to help accelerate the digital catch-up across Europe.
Human capital matters hugely. But to allow for job creation, companies need access to financial capital, and that precisely has been hit hard with the crisis. It's been a longstanding concern for the European Council. Our longer-term solution to fight credit fragmentation is of course the new banking union. We plan to complete it by the end of current legislature - that is in fact by April. It is our top priority, and we are now much closer to the end that to the beginning. But the Union, through the EU budget and the EIB (our common investment bank), has also put forward more immediate measures, for the most affected countries. With 23 billion euros worth of support specifically for SMEs, in the case of the EIB last year. European companies, on the whole, are more dependent on bank credit than their competitors elsewhere in the world. That's why we have got EU measures on venture capital, but this is something on which we have to go even further and that is a serious understatement.
Let me turn to another major topic: energy. In the European Council we discussed it last May and we will return to it again in March. Because we need to keep up the pressure. The deadline for completing the energy market is end of 2014, and there is much that still needs to happen by then – as I outlined again to leaders in a letter last week.
One aspect that really matters on energy is to better coordinate. And make a habit of it.
Because especially on energy decisions, coordinating has to become a second nature. Some reflexes are already there. There are discussions that are already taking place. See the recent Franco-German announcement for instance. But frankly we need more. Wherever there are risks of spill-over effects of national decisions, we have to keep talking.
Of course, energy is a central topic in all our discussions with international partners too.
For instance tomorrow in our summit with Russia. Because the global energy landscape is changing fast. The shale gas revolution is probably going to leave our continent as the only one to remain dependent on energy imports – worldwide.
The consequences for us are many-fold. But leaving aside geo-political implications (think of the Middle-East…), there are three aspects to which I would like to point.
First, obviously, climate change. Shale gas means fossil fuels, that were on the verge of a global shortage, have become plentiful again. Which means that I am not saying this is bad news, of course. But things aren't looking as good as they used to from a climate change perspective. The incentive to reform has become less strong.
Working towards the Paris 2015 conference on climate change is going to be a long-fought global battle. Without question, we need a deal to which all countries contribute. Their pledges – as all UN parties agreed last November in Warsaw – must be made well in advance of the Paris conference, preferably in the first quarter of 2015. The Commission has just proposed a 2030 framework for climate and energy, and the March European Council will have a first discussion on this basis. It is important that we find a good balance between our climate ambitions, our competitiveness imperative, our need for reliable and affordable energy sources. And at the same time we need to continue to mobilise our international partners to deliver. At the moment, we Europeans are still lagging on our energy efficiency goal for 2020. And we cannot afford to let our current good progress slip on our other two goals: emissions and renewables.
The second aspect of the shale gas revolution that I want to stress is its impact on our production capacity. Cheaper fuel from abroad means also less of an incentive to keep up our gas plants. Plants are closing, investments are being pushed back. Ultimately, what could be at stake is our security of supply.
Third, and of this aspect you are all well aware, competitiveness. High energy prices are obviously a struggle for industry. It means that the competitive edge we have on energy efficiency, the gains we make through energy savings, are immediately absorbed into energy bills.
In recent years the price gap has been growing between the European Union and its major economic competitors. On average, EU industry gas prices are now three to four times more expensive than comparable prices in the United States, India or Russia, and twelve per cent above those of China. These are recent figures: from the analysis of energy prices that leaders asked the Commission to produce after our last energy discussion in May. And that report shows clearly the extent of the challenge, the wide divergences (also price-wise) between member states and between industries.
For us Europeans the smartest way to bring down energy prices is to team up and connect – and as I said, here the deadline for completing the single energy market is end of 2014. It is important that we keep sight of the bigger picture: our continent is not resource-rich – not at all –, so in the long-run, what will determine our energy future is our ability to stay in the lead on renewables, green technology, and energy efficiency.
This is still where in the long run our competitive advantage lies: at the end of the day the cheapest energy is the one that didn't have to be used in the first place. The incentives should be market-driven, not dependent on government targets and instruments. Because there is future there. Real business opportunities.
And this is my last point: innovation and commercialisation. Some of the best research happens in Europe. But we're still not good enough at bringing those ideas to the markets.
And the so-called 'patenting gap', also known as 'commercialisation gap' keeps getting wider with the United States.
This is something that needs to be tackled head on. The new Single European Patent is designed precisely to bring the cost and hassle of patenting down. But bridging the 'patenting gap' will only happen with the full commitment and mobilisation of business.
Cutting-edge industrial technologies often require large-scale spending on research and commercialisation. We have European funding (with Horizon 2020) to promote common European efforts.
Our December European Council on defence industry and projects of European interest – like next-generation drones or satellite communication – showed that there could be more ways and means to better cooperate. It is about rationalising investments and it is a way forward.
The new EU funds for research, Horizon 2020, are there for the taking. A seven-year perspective, and a total of 80 billion euros, that's far from little! This is actually the biggest R&D programme in the world. And for this cycle we want business to be more involved in Horizon 2020, especially SMEs. But private R&D remains also absolutely key. It has to grow, and in several countries it hasn't for some time -- even since long before the crisis.
This is also the responsibility of business. On this, no one can be as proactive as you can.
Which is why, once again, I am glad to see so many leading business figures here tonight.
And why I wish you a very fruitful two days of discussions, this evening and tomorrow. I look forward to your conclusions. They will feed into the thinking for the draft conclusions that I will submit to the Heads of State or Government by the end of March.
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