A New Strategy for Europe - New York...
Transcript of A New Strategy for Europe - New York...
0 08.04.2016
Karl Aiginger
H:\user\aig\vortrag\21stAustria_NY_130416.pptx
A New Strategy for EuropeReaping the benefits of change
4th Austrian Investor and Business Conference
New York City, April 13th, 2016
1 08.04.2016
Outline
Europe: Status 2016
The new strategy: benchmark, 3 principles, 7 drivers
Developed by 34 teams, at request of EU-Commission
Kenneth Arrow, Barry Eichengreen, Jeff Sachs on board
The hidden potential of Europe
Lessons for and learning from Austria
Summary
Annex: data, graphs, documents, figures.
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Europe:
A success model in a difficult stage
Indicators of the long run success
From 6 to 28 (+), largest economic area
From trade agreement to common market and currency
Peace, soft power, spreading "rule of law" ( Jeffrey Sachs)
Strengths of Europe:
Rising median incomes, high life expectancy
Rather stable world market share, export surplus
Manufacturing, energy efficiency, renewables
Integration machine (w.r.t. Eastern Europe: World Bank).
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Challenges and weaknesses call
for a new strategy
Challenges
Globalization, ageing, heterogeneity, new technologies
Climate change, political instability, refugees, polarization
Weakness signs
Lost decade, unemployment, R&D gap, poverty
Governance, Euro crisis, imbalances, exit parties, BREXIT
“not in a good state" (Junker, 2015); “broken system”
New long run strategy commissioned to 33 teams
Karl Aiginger: NEW DYNAMICS FOR EUROPE: REAPING THE BENEFITS OF SOCIO-ECOLOGICAL TRANSITION (http://Synthesis-Summary.foreurope.eu).
4 08.04.2016
Outline
Europe: Status 2016
The new strategy: benchmark, 3 principles, 7 drivers
Developed by 34 teams, at request of EU-Commission
Kenneth Arrow, Barry Eichengreen, Jeff Sachs on board
The hidden potential of Europe
Lessons for and learning from Austria
Summary
Annex: data, graphs, documents, figures.
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Europe as role model for successful regions 2050:
Stronger dynamics based on innovation and human capital
Less differences in incomes, higher employment
World leader in environmental technology, energy efficiency
Heterogeneous preferences, pluralistic policy approach
Open area, enjoying globalization; inviting neighbours
A genuine European model of wellbeing
Deepening existing strengths
Not copying US or Asian models.
The WWWforEurope vision in a nutshell
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High and rising wellbeing
This benchmark substitutes GDP and GDP growth
Theoretical underpinning: Beyond GDP concept
Stiglitz – Sen – Fitoussi Commission 2009
Operationalisation
Three strategic goals
With several objectives within each goal
Measurable by Better life indicators OECD, EU.
A new benchmark of performance
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The three strategic goals for wellbeing
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Simultaneity between goals and instruments Instead of silo strategies
The latter are expensive and inefficient
High-Road-Strategy Forfeiting low costs and standards (“low.cost competitiveness”)
Based on capabilities, ambitions (USP of excellent firms)
Two-stage strategyFirst stage: Consolidation and reprogramming
Second stage: Socio-ecological transition: given low growth
First stage not business as usual but
investment in change: decarbonisation, skill upgrade.
Guiding principles
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Innovation: boosting and redirecting
Dynamics: reducing inequality, investment in change
Welfare: from protection to social investment
Employment: symmetric flexibility + upgrading skills
Energy: decoupling and decarbonisation
Public sector: halving taxes on labour
Finance: recommitting to real economy & societal needs.
Seven drivers of change
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Why it should work this time:
Going for compromises, not corner solutions
Bundling reforms, partial compensation, fairness
Taking business, social partners, NGO’s on board
Inviting youth, migrants, new actors
Monitoring progress by indicators (“nowcasting” GDP)
Necessity of change is understood
Potential for excellence exists.
Facilitators for change
11 08.04.2016
Outline
Europe: Status 2016
The new strategy: benchmark, 3 principles, 7 drivers
Developed by 34 teams, at request of EU-Commission
Kenneth Arrow, Barry Eichengreen, Jeff Sachs on board
The hidden potential of Europe
Lessons for and learning from Austria
Summary
Annex: data, graphs, documents, figures.
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Share of Europe in World GDP 2015*
*) GDP based on purchasing-power-parity (PPP), share of world total; IMF (http://www.imf.org).
Core Europe: Germany, France, Netherlands, Belgium, Austria, Finland.
EU plus neighbors: Albania, Bosnia and Herzegovina, Kosovo, Croatia, Macedonia, Montenegro, Serbia, Armenia, Azerbaijan, Georgia, Moldova, Ukraine, Turkey, Switzerland, Norway. EU plus wider neighbors: Russia, Belarus, Israel, North Africa (Algeria, Egypt, Libya, Morocco, Sudan, Tunisia).
7.6
12.2
17.3
20.6
22.7
17.2
15.9
19.3
-5.0
5.0
15.0
25.0
Core Europe Euro area EU28 EU plus
direct
neighbours
Eu plus
wider
neighbours
China USA USA +
Canada +
Mexico
USA 15,9
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The share of manufacturing in GDP:
larger in Europe than in US (at current prices)
10
12
14
16
18
20
22
24
26
28
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
EU-15
USA
EU-15 USA
1960 21.3% 25.2%
2000 16.4% 14.3%
2014 13.6% 11.9%
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Europe: Rather stable world market sharesShare of exports (in % of world exports)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
EU-15
Germany
USA
China EU-15 USA
1995 15.4% 11.5%
2014 13.7% 8.8%
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Share of GDP 2010/2050
1) OECD members.
2) Albania, Bosnia/Herzegovina,Kosovo, Croatia, Macedonia, Montenegro, Serbia; Armenia, Azerbajan, Georgia,
Moldova, Ukraine, Turkey; Switzerland, Norway.
S: OECD Economic Outlook No 93 - June 2013 - Long-term baseline projections.
2010 2050 2010/2050
% p.a.
Euro area 17.9 8.7 1.5
EU-27 24.2 12.4 1.7
EU plus wider neighbours 2)30.0 28.0 2.5
France 3.5 1.9 1.8
Germany 4.8 1.8 0.9
Austria 0.5 0.3 1.6
USA 22.8 13.3 2.0
China 15.9 23.9 4.5
India 6.3 15.6 5.8
Share in GDP in %1)
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Refugee crisis opens potential for new dynamics
Argument of ageing and decreasing labor supply is trash
Need for common European solutions became evident
Brexit danger leads to rethinking which issues are regulated
Hidden assets of Europe
EU not based on low, stagnant wages and dirty energy
Higher importance of energy efficiency, renewables
Work life cycle, lower working hours, more leisure
Incomes of “low 90%” are rising
EU outperforming the US (© Wharton 2015)?
Current problems can be turned
into part of the solution
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Danger of disintegration (failed “Euro”)
Political polarization within Europe and some members
Political instability in neighborhood, return to cold war
Muddling through with alternating crises and green spots
Reaping the chances
Decarbonization
Lower income spread
Experience of heterogeneity
Learning from each other and best practice
Which scenario is most probable?
Europe 2050: three scenarios
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20%: Danger of disintegration (failed “Euro”)
Political polarization within Europe and some members
Political instability in neighborhood, return to cold war *
30%: Muddling through with alternating crises and green spots*
50%: Reaping the chances
Decarbonization
Lower income spread
Experience of heterogeneity
Learning from each other and best practice
The 21st century can still become Europe’s century.
The profitability of the three
scenarios
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Outline
Europe: Status 2016
The new strategy: benchmark, 3 principles, 7 drivers
Developed by 34 teams, at request of EU-Commission
Kenneth Arrow, Barry Eichengreen, Jeff Sachs on board
The hidden potential of Europe
Lessons for and learning from Austria
Summary
Annex: data, graphs, documents, figures.
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Austria’s position as of 2016
Wealthy, diversified, large external surplus (3 bn € vs. US)
High performance (growth bonus 2000/12), low volatility,
Large manufacturing, tourism, high road: 4th in R&D
4th in per capita GDP, 20% above EU, higher than D, F, UK
Low unemployment, income spread, stabilizing institutions
Top position in environmental technology, renewables
Risks, but even more chances from neighborhood
CEE, Black Sea, Middle East, North Africa.
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Austria’s position
S: Eurostat (AMECO); WIFO.
100
105
110
115
120
125
130
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Austria
Germany
EU28
2000/2015 2016
EU-28 +20.3% +1.6%Germany +18.0% +1.3%
Austria +22.2% +1.6%
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Equal distance to fast growing
neighbors and Western Europe
Distance from Vienna:
Lisbon 2,900 km
Tripoli 2,400 km
Ankara 2,100 km
Kiev 1,300 km
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Challenges and hangover 2013/15
Challenges
Pressure from emerging countries
Deepening specialization, frontier strategy needed
Hangover/low growth 2013-15
Loss of market shares after 12 years of higher growth
Crises in “new neighbor countries”: Ukraine, Russia, N-Africa
Neglected low third and migrants in education
Leniency in frontier strategy due to budget consolidation
Too much money spent for past priorities rel. to the future.
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Wrong myths about Austria
Ageing society leads to labor shortage; definitely wrong
Inflexibility of labor, burden by social standards
High exposure of banks, risky geographical position
Public sector risks (see maturity, interest, structure of finance)
Chances dominate (if some homework is done)
Vivid neighborhood (incl. CEE), plus diversification (China, US)
Fiscal and financial reforms progress, education deficits addressed
Adequate “model” for more inclusive and decarbonized future
Austria grows faster than Germany and EU since 2000
It will match probable top W-Europe in the next decade.
25 08.04.2016
Outline
Europe: Status 2016
The new strategy: benchmark, 3 principles, 7 drivers
Developed by 34 teams, at request of EU-Commission
Kenneth Arrow, Barry Eichengreen, Jeff Sachs on board
The hidden potential of Europe
Lessons for and learning from Austria
Summary
Annex: data, graphs, documents, figures.
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A new strategy for EuropeBased on strength and preferences
No: continuation of political inertia and pessimism
No: sorry, we have low growth and a lost decade
No: sorry, we have rising emissions and higher poverty
Strategy has to turn problems into growth dynamos
Decarbonisation, empowering the low third (unskilled)
Investing and stabilizing neighborhood
Refugees end labor shortage and inflexibilities
Brexit threat lead to reconsider overregulation
EU has the potential for the best model of the 21st century
Less income divergences, plurality, lead in sustainability.
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Austria will overcome hangover
and – to some extent – lead to new strategy
High-road strategy, dynamic, open
Manufacturing base, high R&D, surplus, diversification
Threat of low growth due to ageing no longer founded
Investing into vivid neighborhood
Dynamics by low income spread and decarbonisation
Chances from neighborhood outweigh risks
Given - homework is done and - strategy is implemented.
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Karl Aiginger
H:\user\aig\vortrag\21stAustria_NY_130416.pptx 4.4.2016, 9:20
A New Strategy for EuropeReaping the benefits of change
4th Austrian Investor and Business Conference
New York City, April 13th, 2016
29 08.04.2016
Austria´s “ability to deliver goals”
Beyond GDP goals Rank Strength Lead country
Austria
Income pillar 2 Household income Luxembourg
Social pillar 4 Youth unemployment Netherlands
Ecological pillar 7 Share of renewables Italy
Overall wellbeing 2 Income Sweden
Karl Aiginger: A New Strategy for Europe, Vienna-Brussels, 2016 (http://Synthesis-Summary.foreurope.eu).
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Low growth in core Europe: vivid
neighborhood
2000/2015 2000/2020 2010/2015 2015/2020
Germany 1.1 1.2 1.6 1.4
France 1.1 1.2 0.8 1.7
Core Europe1) 1.1 1.2 1.1 1.5
Euro area 1.0 1.2 0.6 1.6
EU28 1.4 1.5 1.0 1.9
EU plus direct neighbours2) 1.6 1.7 1.2 2.1
EU plus wider neighbours3) 1.9 1.9 1.2 2.0
EU-CEE4) 3.2 3.2 2.3 3.1
North Africa5) 4.1 4.3 3.1 4.6
USA 1.8 2.0 2.1 2.5
China 9.6 8.7 7.8 6.2
1) Germany, France, Netherlands, Belgium, Austria, Finland.2) Albania, Bosnia and Herzegovina, Kosovo, Croatia, Macedonia, Montenegro, Serbia, Armenia, Azerbaijan, Georgia, Moldava, Ukraine, Turkey, Switzerland, Norway.3) Russia, Belarus, Israel, North Africa5).4) Bulgaria, Croatia, Czech Republic, Estonia, Hungaria, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia.5) Algeria, Egypt, Libya, Morocco, Sudan, Tunisia.
Source: World Economic Outlook, October 2015, International Monetary Fund. http://www.imf.org
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Productivity more important than costs
Competitive advantage:
Quality, sophisticated products, technology
Growth drivers:
Innovation, education, universities
Ambitions/Institutions:
Social empowerment, ecological excellence, trust
Objectives: Three strategic goals
Europe has to go for a high-road strategy.
It has to be a high-road strategy
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In the very long run (rich countries) will have lower growth
Supported by decreasing marginal utility of income
Increasing non material values with rising income
Burn outs are neither warranted nor necessary
But over the next 10 years we have to have decent growth
For returning to full employment, paying back public debt
Favouring redistribution
Jobs for migrants and refugees
Driven by investment in decarbonisation and social innovations
Tripling GDP up to 2100 (1.5% p.a.) neitherfeasible nor warranted.
It has to be a two-stage strategy
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New infrastructure much less dependent on fossils
Social innovations prepare for second stage
Changing institutions, behaviour, awareness
Redefine competitiveness towards beyond-GDP goals
Reduce dominance of GDP, address goals directly
Start double decoupling (emission and labour)
Support industry moving towards 4.0 (lower material/ energy)
Energy Roadmap 2050
Zero Net Emission Goal (OECD, COP 21 Paris 2015).
Even the first stage cannot be business
as usual but investment in change
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Low growth in core Europe: vivid
neighborhood (2000-2015)
*) Gross domestic product based on purchasing-power-parity (PPP), share of world total.
Core Europe: Germany, France, Netherlands, Belgium, Austria, Finland.
EU plus neighbours: Albania, Bosnia and Herzegovina, Kosovo, Croatia, Macedonia, Montenegro, Serbia, Armenia, Azerbaijan, Georgia, Moldava, Ukraine, Turkey, Switzerland, Norway.
EU plus wider neighbours: Russia, Belarus, Israel, North Africa (Algeria, Egypt, Libya, Morocco, Sudan, Tunisia).
Source: World Economic Outlook, October 2015, International Monetary Fund. http://www.imf.org
1.01.1
1.4
1.6
1.9
0.0
0.5
1.0
1.5
2.0
Core Europe Euro area EU28 EU plus direct
neighbors
Eu plus wider
neighbors
USA 1,8
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Defining Europe
Core Europe: Germany, France, Netherlands, Belgium,
Austria, Finland.
Direct neighbors: Albania, Bosnia and Herzegovina,
Kosovo, Croatia, Macedonia, Montenegro, Serbia,
Armenia, Azerbaijan, Georgia, Moldava, Ukraine, Turkey,
Switzerland, Norway.
Wider neighbors: Russia, Belarus, Israel, North Africa.
Source: World Economic Outlook, October 2015, International Monetary
Fund. http://www.imf.org
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Equalizing US position in technology
driven industries in exports
30.0
35.0
40.0
45.0
50.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Deutschland USA EU15 EU28
1996 2014
EU 15 33.1% 36.8%
EU 28 33.3% 38.1%
USA 44.0% 34.9%
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EU: 'not in a good state': economically, public opinion
Pessimism will phase out if there is a forward-looking strategy
dynamics, employment, lead in decarbonisation
Europe will become a success model again
investment into change
exchange with neighbours (Fulbright, ERP)
Europe will become the best model for dynamic high-income regions.
A new strategy is necessary and
feasible
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Challenges for Austria
Pressure from catching up economies
Dependent on external demand as small country
Upgrading skills of lower third neglected
Integrating migrants (2nd gen) into school and training
Needed: Adapting vocational training
Frontier strategy for universities and innovation
Deepening specialization and smart diversification
Loss of market shares by political instability and investment trough
Mobilizing structures and redirecting public sector.
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Debt, public sector, uncovered risks
Public debt is medium, private debt is low
Financial risks low (interest, maturity, structure, rating)
Structural deficits are decreasing, Heta risk exists but "priced in"
Share of public sector large, inefficiencies abundant
Public sector pays for pensions for those not needing support
Governance reforms could reveal big chances
For cutting expenditures, taxes
Boosting investment in skill
Innovation, ecology
Labor highly taxed; energy, tobacco, alcohol, transport not.
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Risk in the financial sector
Exposure to Central, Eastern and SE-Economies (CESEE)
60% (gross) and 40% (net) of GDP, but rather diversified
Restructuring has taken place, Banking supervision
Restructuring and resolution Act 2015
Strong institutions, sometimes reluctant to change
Pro-European opinions dominate, critical to EU governance
Refugee crisis favors right wing tendencies incl. admiration for authority.
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Risks are more than
compensated for Austria
Potential: rising population & vivid neighborhood
Successful diversification (China, US)
External surplus, low private debt, public deficits declining
Need for continuous reforms & technological excellence is on rise
In Austria critical about public sector and institutions (bureaucracy) in all rating reports strong institutional effectiveness!!!
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Cross roads for Austria & Europe
Frontier or backlash innovation system
Upgrading skills or polarization
Political integration vs. extreme parties
Deploring the past or investing in future
Low trend in labor productivity, higher in resources
Inside orientation (fences) or enjoying diversity, heterogeneity.
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Prospects for Austria
Lower growth based on ageing/ declining work force
Is now definitely wrong; increasing supply up to 2030
And even later if migration trends continue
Headline fiscal deficit declines (disguised by HETA resolution)
Recovering CEE, peace in neighborhood vs. refugees
Persistent large current account surplus
Positive net investment position
Great challenges Austria, larger chances.
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Austria’s growth since 2000 –
higher than in Germany
100
105
110
115
120
125
130
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Austria Germany
Euro area EU28
2000/2015 2016
EU-28 +20.2% +1.6%
Euro area +15.6% +1.4%
Germany +18.0% +1.3%Austria +22.2% +1.6%
S: Eurostat (AMECO); WIFO.
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Europe: A new strategy is needed
Based on strengths and preferences
“Europe is not in a good state”, economically, public opinion
Pessimism and ad hoc solutions are overcome by a new strategy
Dynamics, employment, lead in decarbonization
Problems can be turned into solutions
Refugees and labor shortage and inflexibility
Increase awareness of common solution needed
Brexit referendum helps to rethink what has to be regulated
Europe has the potential for best model for rich regions
Less income divergence, plurality, lead in sustainability.