European Business: Leading or Lagging?

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May - June 2011 A New Europe Special EditionIssue #935-936a

E U R O P E A N B U S IN E S SEUROPENEW

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LEADING OR LAGGING?


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Dennis [email protected]

EUROPEAN BUSINESS

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Offering the wayforward

The virtuous Europeanway to business excellence

by Dennis Kefalakos, Editor

European Union businesses need no lessons fromanybody. Germany is the second largest world ex-porter - only behind low cost China - and together

with France, Holland, Finland, Sweden, Austria, Bel-gium, Italy and Spain have secured an expandingpresence in all global markets. Even smaller EUcountries like Denmark, Greece and Portugal offertheir special expertise and services in sectors like ship-ping and tourism.

That is why the European currency, the euro, issuch as strong monetary unit, being based on a prod-

uct and services net foreign surplus. Belgium, in thecenter of the EU, is the most outward looking coun-try of the world exporting and importing more than150% of its GNP every year.

Having established this European prerogative indoing business on a world scale, it is easy to destroythe myth that social Europe is an impediment tobusiness. Of course competition in internationalproducts and services markets oblige all and every EUcountry to pay attention, if they want to maintain andexpand their competitive advantages. German engi-neering, French specialties, Italian Design, Dutch andBelgian knowledge of world markets and the unique

position of Europe in the world tourist industry havebeen achieved with hard labor, long term planningand excellence in sciences and R&D. However therising might of the BRIC countries (Brazil, Russia,India and China) has now created new challenges forEurope. The qualities on which European productsand services conquered the world and made Euro-zone a net exporter are increasingly challenged, bylow cost products. If the European quality advan-tages melt down, Europe will face decline. In orderthe EU to avoid this dreadful prospect it has to investin education and scientific excellence. Fortunately the

brain drain that Europe suffered in the 1960s and1970s in favor of the US has now almost stopped.The US is no longer more of a paradise for scien-

tists than the EU. Europe has found the means andthe funds to support research and development on allfronts. It is not only the public resources that arebeing directed to basic research. The business sectoris financing its own programs of R&D with increas-ing success.

The EU is spending an increasing part of itsbudget to support innovation on all sectors of theeconomy favoring relevant initiatives in all memberstates. In short if Europe continues successfully in this

direction, high quality employment opportunities willprevail and European business will continue to ex-pand its impact and presence on all world markets.

by Cillian Donnelly,

European Business Edition Editor

That the global financial crisis hit Europe hard isundeniable. That Europe also has the resources,both human and industrial, to bring itself out ofthe crisis is also undeniable; however, the some-times-difficult way it has struggled forward overthe past two years or so highlights that, sadly,nothing is ever achieved with unmitigated ease intodays global economy.

Like all great crises, the recent financial plighthas provoked a serious debate; a prolonged argu-ment about the future, about where Europe can go

in the future. With difficulty, conversely, comesopportunity, and Europe now needs to be fully en-gaged with its own citizens and industry, and thoseof the wider world, if it is to fully explore whatcan, and needs, be done if its full growth potentialis to be met.

The European Business Summit is vital for fa-cilitating that debate. The question that it pro-poses this year, is Europe leading or lagging?, isparticularly apt, as emerging markets, such asChina and India, as well as a the old US power-house, all push forward to ensure their own wayout of financial trouble.

The steady rise of developing countries alsowarns Europe that failure to achieve its potentialnow can only result in long-term catch-up, whilethe Arab Spring, seen in the Middle East andNorth Africa, give hopes for the establishmentnew markets and global partners.

The views expressed in this special edition, aswell as those that will be heard at the event itself,represent different approaches and opinions, butall have one common goal: to ensure that Europedoes not, indeed, end up lagging behind rivalglobal markets.

Europe needs to innovate, we are told; it needs tovalue its graduates and nurture its great wealth ofhuman talent, it needs to listen to its citizens and itsindustrial sectors, and it needs to compete on thehighest global level with those equally determinedto determine their own growth and wealth.

As in the past, this 9th edition of the EuropeanBusiness Summit takes a look, critically and con-structively, at how such things can be achieved. Noone is under any illusions that Europe's problemscan be solved overnight, but without the courageand intellectual honesty to address such criticalmatters, then Europe will certainly find itself

struggling in the wake of its competitors. Thisforum offers the opposite; it offers the ideas to goforward.

In association with:

May-June 201102

Special Edition

NEW EUROPEEurope: Leading or Lagging?


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History shows that Europe is at its bestin times of challenge. Europe acted prom-ptly to the financial crisis of 2008 and therecent debt crises in some Eurozonemember states.

The EU took the lead in solving theconsequences of the American born fi-nancial crises. We succeeded in decidinga more performing European financial su-pervisory system during the Belgian pre-sidency of the EU last year. Othermeasures to strengthen the financial sy-stem have been decided or are in the pro-cess of decision making.

This financial crises has weakened thealready vulnerable debt position of a num-ber of member states. When the financialmarkets suddenly attacked Greek sove-reign debt in May of last year, the Union

was able to formulate an answer in a shorttime span.

Within the course of a few months, we

have set up a package including financialsupport, stronger economic coordination,stronger banks and a programme for moregrowth.

The European, bilateral and internatio-nal support for overly indebted memberstates amounts to more than 800 billion. The major component is the EuropeanFinancial Stability Facility of 440 bil-lion, which will be succeeded in 2013 by apermanent European Stability Mecha-nism of 500 billion. Strong conditiona-lities for reform are attached to financial

support. The European Stability Mecha-nism is the application of an idea I havedefended already beginning 2010, beforethe Greek crisis. I then proposed the cre-ation of a European Debt Agency which

would help substituting national sove-reign debt for European sovereign debt orEurobonds, an idea also promoted byothers in the mean time. I hope that oneday in the future the European StabilityMechanism will evolve into a real Euro-pean Debt Agency.

More economic coordination has been

decided. The so-called Six Pack is cur-rently being discussed with the EuropeanParliament. I am convinced that the Hun-garian Presidency will reach an agreementin June of this year, as planned by the Eu-ropean Council. The procedure to preventmacro-economic imbalances is most im-portant. I am in favour of the application,

where legally possible, of automaticity andreversed Qualified Majority Voting in de-cision making. Much underestimatedin the debate on macro-economic stabi-lity is the role of the European Systemic

Risk Board. Indeed, the Greek, Portu-guese and Irish crisis are to a large extentthe result of too abundant cheap cre-dits fuelling financial and real estate bub-bles. The European Systemic Risk Boardcan use the expertise and information ofthe European Central Bank and the na-

tional supervisors to monitor macro-fi-nancial stability and to warn the EU onimminent problems, so as to allowthe Union and member states to react.

Within the framework of the new Fi-nancial Supervisory system, we created aEuropean Banking Authority. This EBAalready now proves its crucial role in pre-serving a viable banking system via a new

stress test for the European banks. The te-sted scenarios and the method of peer re-

view of the outcome of the simulationsguarantee the credibility of this exercise.

The governments of the EU are commit-ted to recapitalize their banks if deemednecessary by the results of the stress test.

After this test we will be sure about thestrength of our banking system.

I am convinced that in the long run weneed a European Rescue Fund to recapi-talize European systemic banks in case ofproblems. Such fund could be financed bya levy paid by the insured financial insti-tutions and implemented in such a waythat it reduces the systemic risks caused

by banks which are too big to fail. A sin-gle market for capital requires a Europeansolution for failed banks, otherwise smal-ler member states always risk to be toosmall to bail out their banks.

A stable financial system and a stablemacro-economic environment are a pre-

requisite for economic growth, but not asufficient condition.

For this, the ambitious project of EU2020 is part of the answer. We drew les-sons from the weak points of the Lisbonstrategy. EU 2020 is more focused andownership has increased. We have decidedthe right ambitious targets to increaselong term economic growth via more pu-blic and private investments in Researchand Development, more and better edu-cation and training and by putting morepeople at work. I have always defended aninclusive growth model to preserve andstrengthen our social model. The targetsaiming at less early school leavers and lesspoverty are an expression of our EuropeanRhineland model.

The ambition to make Europe greeneris an opportunity for Europes industry toachieve a first mover advantage in theglobalised economy. A greener Europecan mobilise the best of Europe: skills, ca-pital and creativity.

The role of enterprises is key for ma-king EU 2020 a success. Enterprises con-tribute most to R&D and it is the role ofbusiness to explore new markets and ex-port high value added products to emer-ging countries, the markets of the future.Politics should support these efforts. Inthis respect I would like to stress the im-portance of the agreement reached duringthe Belgian rotating presidency of the EUon launching the European patent viaenhanced cooperation.

The Single Market Act is a powerful

engine for economic prosperity. Explo-ring economies of scale, increased com-petition in the largest market of the

world and more consumer choice is themost efficient way to improve the welfareof Europe.

We soon start the debate on the newMulti Annual Financial Framework ofthe EU. I hope that the Commission willpresent ambitious proposals end of June2011and that the new budget framework

will serve our shared ambitions of EU2020. Europe is a common project and a

project of solidarity. Specific rebates runcounter to these principles, although fair-ness is an argument in favour of a genera-lized correction mechanism. An ownresource for the Union can help overco-ming the old debate of the juste retour.Such new resource should also serve thegreening of the economy; reducing nega-tive ecological externalities is best done atEuropean scale via proper levies. The re-sulting extra revenue can then be com-pensated by lower contributions bymember states, allowing for lower taxes on

labour. The Union should become moreengaged in promoting and financingtrans-European networks. This i s neededfor economic growth but it is also a meansto promote a healthy competition in theenergy sector.

Belgium sees a need for more Europe.

COMMENT

More Europe is neededBy Yves Leterme

A stable financial system and a stablemacro-economic environment are a

prerequisite for economic growth, but

not a sufficient condition

Europe: Leading or Lagging? May - June 2011 03Special Edition

NEW EUROPE

Yves Leterme, Prime Minister of Belgium


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The speeding up of thebudget consolidation andthe stability of the financialmarkets should top the todo list for Presidents VanRompuy and Barroso

by Rudi ThomaesCEO Federation of

Enterprises in Europe

How do CEOslook at Europes 06

The current recovery must

pave the way for sustain-

able growth towards and

beyond 2020

by Jrgen R.

Thumann

President ofBUSINESSEUROPE,

and co-chair ofTransAtlantic Business

Dialogue

Our Message is clear:Reform to Perform 07

My mandate is clear: tocontribute to the modernisa-tion and reinforcement of theEuropean industrial base

by Antonio

TajaniEuropean Commissioner

for Industry andEntrepreneurship

Europe needs astrong, diversified andcompetitive industrial base

09

The answer is that inno-vation in Europe is not onlya question of budget and ofspending, but of setting the

right regulatory framework.

by Judith

Merkies MEPMember of the European

Parliament's Industry,Research and Energy

Committee

Innovation Union: Isthe EU dreaming theimpossible dream?

10

We must urgently makethe decision to deliver a Eu-ropean digital single mar-ket based on the foundingprinciples of JacquesDelors 1992 vision

by Dr Erkki

OrmalaPresident,

DIGITALEUROPE

A Digital Future

11

The EU can achieve itsdream of a low carbon fu-ture without jeopardizingthe economy and jobs in

the process

by Isabelle MullerSecretary General,

EUROPIA

Managing thetransition to a lowcarbon future

12

We need to continue invest-ing in the transatlantic relation-ship, keeping the dialogue openand harmonising our rules of thegame as we leverage the inno-vative use of technologies

by Mikael

HagstromChairman, Executive

Council, AmCham EUPresident EMEA and

Asia Pacific, SAS

Institute

Cooperation is moreimportant than ever 18

In a changing world, Eu-rope and Asia face similarchallenges, not only to pre-serve the status quo, but toimprove the situation of ourcitizens

by Matthias

RueteDirector General for

Mobility and Transport,

European Commission

EU-Asia: solutions forsustainable transport 19

May-June 201104 Index

European Business:

The long-term prosperity

of Europes next generation

is dependent on her ability

to remain competitive

by Jan MhlfeitChairman of Microsoft

Europe

Fast Forward intoEuropes Future 14

Asian countries have nofinancial drag, so Europeneeds to become morepro-active, we need to look

at the demand for exports,for innovation

Mark Spelman

Global Head of Strategy

- Accenture

Europe laggingbehind? 15

As the campaigns of theIranian Cyber Army and

Anonymous show, this com-bination of rage and em-powering digitalconnectivity is a majorsource of risk for globalbusiness

by Dr Greg

AustinVice President of

Program Development

and Rapid Response,EastWest Institute

Days of race: Tele-porting business risk 21

Due to the economic crisismore than 3.5 million jobs inSMEs have been lost, which fur-ther underlines the specific need

to streamline and consolidateSMEs policy at European level

by Zsolt BecseyMinister of State for

Foreign EconomicRelations, Ministry forNational Economy of

Hungary

Entrepreneurship andSMEs: from declara-tion to implementation

16

This could be the beginningof a new chapter between the

European Union and itsMediterranean partners

by Rodi Kratsa

TsagaropoulouVice President of the

European Parliamentand member of the

Economic and MonetaryAffairs Committee

EU and GCC aheadof common chal-lenges and opportunities

17

It is clear the world is

moving away from Free

Market Capitalism to Sus-

tainable Capitalism

by Dipak C.

JainDean of INSEAD

The leaders oftomorrow 17


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05May-June 2011

Index

Leading or Lagging?

Transatlantic markets arethe laboratory of globaliza-tion.Together we face issuesthat neither of us faces withothers

by Daniel

HamiltonDirector, Centre forTransatlantic Relations,

Johns Hopkins University

The transatlanticeconomy: Daring tobe ambitious

22

So, how can we get out

of this stalemate? I think

that support from industry is

indispensable

by Hiroyuki

Ishige

Special Advisor to theMinistry of Economy,

Trade and Industry,Japan

Ending the Dohastalemate 23

The transatlantic market-place is the largest andmost significant bilateraltrading relationship in theworld

by Julian Knott

Secretary General TACD

Placing consumer pri-orities at the heart ofthe transatlantic partnership

24

Global economic and fi-nancial risks have persisted,and protectionism has fur-ther exacerbated

by Yang JiechiMinister of Foreign

Affairs of the PeoplesRepublic of China

China-Europe Tieson Steady Coursein a Fluid World

25

Countries across Europeneed to raise their labour mar-ket participation rate if they areto meet the EUs 2020 75%employment target

by Annemarie

MuntzPresident of Eurociett,

representing the privateemployment sector in

Europe

Single Market Act willprovide a welcomeboost to employment

29

Entrepreneurship andfinancial literacy are two ofthe most important soft

skills needed in the Eu-ropes labour market

by Caroline

JennerCEO, Junior

Achievement-YoungEnterprise Europe

Europe needs morebusiness -educationpartnerships

30

Regulatory reform must atall times keep sight of the

final goal: to ensure that Eu-rope has a well-functioningbanking system capable ofsupporting entrepreneurialactivity

by Danny

McCoyDirector General Irish

Business and Employers

Confederation

Balancing regulationand access to finance 33

The more possibilities weare offered today, the morewe can offer to generationsin the future

by Ignacio

SalinasCommunication Officer at

ThinkYoung

Young Entrepreneur-ship: Is It Possible? 34

As a major source for con-structive commentary and re-search, the AmericanUniversity in Cairo has andwill act as a key moderator fordebating and discussing so-cioeconomic change beyondthe Egyptian Spring

by Sherif KamelDean, AUC School of

Business

Beyond the EgyptianSpring 35

Substantial private invest-ment including foreign

investment would beneeded to address Indiashuge infrastructure deficitand the financing gap thataccompanies it

by Nirupama RaoIndias

Foreign Secretary.

The Emerging-Mar-ket Growth Engine 26

What is still missing, is a

permanent crisis management

and resolution mechanism

by Henryka

BochniarzPresident of Polish

Confederation of PrivateEmployers LEWIATAN

Ending uncertainty inNew Member States 27

One principal policy failure inthe run-up to the crisis was a

lack of imagination: we failed toappreciate just how intricate the

global economic and financialweb had become

by Dominique

Strauss-KahnManaging Director of the

International MonetaryFund.

New Policy Paradigmsfor a New World 28


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May-June 201106

Special Edition

NEW EUROPE

EUROPEAN BUSINESS 2011

How do CEOs look at Europes future

position in the world economy?

Europe: Leading or Lagging?

In a world where 85% of the economicgrowth will be realized outside the Eu-ropean Union, its obvious we should re-flect on our stakes and potential withrespect to the positioning of the EU intomorrows world economy. We knowthat our political position remains han-dicaped by the persistent inability of

European political stars to speak withone voice (this has often to do with localelectoral agendas, rather than with fun-damental differences in opinion on fo-reign affairs). But the Union hasforemost economic and monetary foun-dations. Therefore our Federation hasrequested Accenture to carry out a sur-

vey and focus on future growth perspec-tives with over 400 C-level managers inthe context of the European BusinessSummit which takes place on 18th and19th May in Brussels.

When we look at the results of thesurvey, we tend to focus our attention onnew signals from the corporate world. I

will highlight a few of them. However,lets first look at repeated claims withhigh scores. They should rank first inour conclusions for policy action.

In my view the call for simplifica-tion, the lack of STEM-skills (Science,

Technology, Engineering and Mathe-matics) and superfast broadband-infra-structure seem to remain top priorities.None of them are easy, but none of them

are mission impossible either. Take theadministrative burden and pitfalls. Lookat the way projects are blocked by admi-nistrative procedures.

They are simply a nightmare for in-vestors, even when they are very careful.Other employers are faced with surrea-

listic rules in some member states thatrender early quitting the labour marketmore attractive than staying. Such rules,combined with the limited influx of newSTEM-skills create unhealthy tensionsin the labour market.

The business community shouldpush harder on these points and repli-cate, together with the governments,some best practices to boost the availa-

bility of STEM- and other skills and toincrease the employment level with the55+ age category.

The extremely interesting study car-ried out by Accenture revealed for mepersonally four additional strikingpoints. First a cry for a European longterm industrial policy. This is the pointof greatest disappointment with the C-level managers interviewed. I assumethat this reaction is fuelled by the im-pressive policy-declarations observed onother continents, China in particular.

Second, and rather new, a call forwell coordinated economic diplomacy,for instance to attract foreign inve-stment and foreign talent. I'm reallyconvinced this is the way ahead to domore with less in building bridges withemerging markets. For example, why notconcluding at European level agree-ments with China on pilot projects inEuropean and Chinese cities and/or re-gions for smart grids or on standardisa-tion of plugs and charging units forelectric cars.

A third area of great concern is theneed to widen the labour pool. In anearlier report, published by the Federa-tion of Enterprises in Belgium and In-sead, we flagged the advent of post-crisisshortages on the labour market. In themidst of the current high unemploy-

ment figures, we face today more andmore shortages in a large range of pro-fessions. More than 35% of the mana-gers point at the lack of labour mobilityin Europe and 28% plead for fast pro-gress in mutual recognition of profes-sional qualifications. Also a smartimmigration policy to attract foreign ta-lent is back on the agenda. It is clear thatthis skill issue will be critical for both,

growth and moderation of inflation inthe Union.

Finally, business executives considerthat we should look more intensively atexporting services to emerging markets.

They refer to healthcare, education andfinance. I am personally convinced thatthis is indeed key for our future for fourreasons:

first, these domains are mission cri-tical for the emerging countries them-selves and very large public spending

will take place in this area;

second, these are domains in whichEurope has an offer which is second tonone;

third, there exists of course a stronglink between these services and Euro-pean advanced products and softwareand, last but not least, a breakthrough inthis area could pave the way for buildingstrong top-level human bridges betweenthe EU and those emerging markets.

I am convinced that a focus on ex-porting these services throughout thisdecennium will later prove to be a great

asset in our global positioning. I shouldnot conclude without emphasizing thatfor Europes managers the speeding upof the budget consolidation and the sta-bility of the financial markets should topthe to do list for Presidents Van Rom-puy and Barroso.

Rudi homaes

CEO, Federation ofEnterprises in Belgium

A woman works on an iPad under a projected clouded sky at the CeBIT Fair in Hanover, Germany, 28 February 2011. |EPA/JOCHENLUEBKE

More than35% of the

managers point at thelack of labour mobility

in Europe and 28%plead for fast progress

in mutual recognition ofprofessional

qualifications

By Rudi Tomaes

The answer to our currentproblems lies with theconsumer, but withoutconfidence there will be nogrowth. Internally, thatmeans deepening theinternal market, externallywe need to promote trade

- Jos Barroso

President of the European

Commission

VERBATIM


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NEW EUROPE

The 9th European Business Summit willfocus on Europes place in the global eco-nomy. How can Europe move from lag-ging to leading and what are the businessopportunities where it can regain thelead?

The challenge ahead of us is immense.The position of Europe in todays worldeconomy is under pressure. Emerging

economies are pushing hard. Global chal-lenges such as climate change, scarce na-tural resources, challenges of globalisationand demographic change put Europe fur-ther to the test.

The recovery in the EU has so far pro-ved stronger than expected, despite un-certainty still running high in financialand sovereign debt markets. In its recentspring Economic Outlook for 2011 BU-SINESSEUROPE forecasts real GDPgrowth to reach 1.8% in the EU 27.

However, the recovery has been une-

ven, with those countries with strong ex-ternal competitiveness and sounder publicfinances showing greater resilience and amore broadly based recovery at present.

There is an ongoing rebalancing of theEuropean economy, which imply particu-larly severe challenges for certain coun-tries having to catching up in difficultcircumstances. But the need for reforms isnot confined to the countries with thegreatest difficulties.

Rebuilding solid foundations of eco-nomic growth in our continent as a whole

is the highest priority. This will require aclear reform commitment from each andevery government in Europe, and a newpolitical culture which promotes respon-sibility. Substanti al risks still remain for2011 and beyond. At present, the biggestconcerns are related to rising commodity

prices, but the health of public financesand the financial sector remain an impor-tant threat for the European and globalrecovery, and must be addressed withoutany further delay.

Most of these risks interact with eachother and affect financial market stabilityand investment perspectives of our com-panies. The risk of disorderly correctionof global imbalances and unilateral appro-aches is still present. We must remain

alert of the danger of protectionism andthis is why a robust policy framework isalso needed at the global level.

The crisis has generated many que-stions: about market functioning, aboutthe role of the state and governments inthe economy. Not least, about the contri-bution of business to society. Althoughthis debate is legitimate and necessary, itis important to recognise that the freemarket economy has brought tremendousgrowth and welfare to Europes citizens.

I believe that in order to strengthen

the European economy, we have to goback to the fundamental values of themarket economy. Let me recap on those

values: reward work and productive inve-stments; encourage reasonable risk-ta-king; ensure transparency on market

value; protect and develop intellectualproperty rights; identify and provide sanc-tions for fraud; ban distortions of compe-tition, fight protectionism; and finally,finance affordable public services and so-cial security. Implementing these princi-ples is essential for the prosperity of

European citizens The development of companies andthe revitalisation of the Single Market iscentral to achieve this prosperity.. Whe-rever companies operate in a business-friendly environment, they are successfulin producing first-class goods and servi-

ces, in creating jobs, and in developingnew technologies. When companies aresuccessful, they create not only well paid

jobs but also the wealth that is needed tofinance public services and social security.

The appropriate policy response to thechallenges ahead will vary from countryto country. But there is one common ob-

jective: to go for growth. We are aware ofthe formidable task ahead. To put our eco-nomies back on track, the EU needs togrow with a minimum of 2% in the co-ming years. It should also ensure large

government primary surpluses at the sametime. This is a pre-condition to put publicdebt on a downward trend by 2014. Thiscan only be achieved through a reneweddrive for growth and competitivenesscombined with smart but resolute fiscalconsolidation.

Our message is clear: reform to per-form. Europe must react to avoid econo-mic decline. Europe still the worldslargest exporter has leading opportuni-ties. The current recovery must pave the

way for sustainable growth towards andbeyond 2020. This growth must be basedon knowledge and innovation and anchora competitive, high-employment andgreen economy that can compete on theglobal stage.

The 9th European Business Summit -Brussels number one business event -

initiated by BUSINESSEUROPE andthe Federation of Enterprises in Belgium(FEB) - will debate these challenges and,moreover, formulate concrete recommen-dations for action by business and po-licy-makers together to put Europe backon centre stage.

EUROPEAN BUSINESS 2011

Our Message is clear: Reform to Perform

European Commissioner for Industry and Entrepreneurship, Antonio Tajani |EPA/OLIVIER HOSLET EPA/OLIVIER HOSLET

By Jrgen R. Thumann

The fiscal strategy has toprioritise Research andDevelopment, innovation andeducation. They are key for thefuture, for increasingcompetitiveness - Herman Van

Rompuy

President of the European

Council

VERBATIM

Jrgen R. ThumannPresident of BUSI-

NESSEUROPE, andco-chair of TransAtlantic

Business Dialogue

The crisis hasgenerated many

questions: about marketfunctioning, about the

role of the state andgovernments in theeconomy. Not least,

about the contributionof business to society


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NEW EUROPE

It is a great pleasure and an honour to begiven the opportunity to participate in theEuropean Business Summit. It has be-

come an important annual meeting forthe business community and policy ma-kers on a European level. The future ofEuropean industry in the global economy is an issue that is particularly close tomy heart. As Commissioner for Enter-prise and Industry, my mandate is clear:to contribute to the modernisation andreinforcement of the European industrialbase.

The strength of European industryI often hear negative discussions on

how European industry only plays aminor role on the global scale, surpassedby emerging economies that are stronger.I completely reject the myth of the de-in-dustrialisation of Europe. In fact, indu-strial production showed strong growth inrecent years, until the crisis of 2008/2009.

I firmly believe that European indu-stry must use the resources it has at its di-sposal to continue to be a leader in themany markets for products and services,and to conquer new ones. Europe can andmust remain a place for generating jobs

and investment in industry. Continuedgrowth will only be possible with the sup-port of the EU institutions.

The role of European industry todayEuropean industry has changed signi-

ficantly over the past fifteen years, with

the significant growth of productivity andthe increasing advances made on an inter-national scale. Although jobs were lost,many others were created in sectors di-rectly related to industry such as business

services.Europe remains a great industrial

power. We are the world's leading expor-ter of goods such as chemicals, machinetools or automobiles. European industryis also very active in some sectors withhigh potential for development that arerelated to "green" economy.

The challenges for European industryThere are major challenges ahead for

European industry. While nobody unde-restimates the significance of the emer-

ging global powers of China, India orBrazil, we must have confidence in ourown enterprises, both large and small, andtheir ability to innovate and adapt to theadvantages that internationalisation poses.

The policy makers at European levelintend to create the best environmentpossible for industrial development in Eu-rope. This is the ultimate goal of our flag-ship initiative for integrated industrialpolicy in the era of globalization, adoptedby the Commission last October as partof the "Europe 2020" strategy. I wish to

highlight sustainable development, inno-vation and trade as examples of areas thatwe are currently working on.

Sustainable developmentOne of my aims on assuming the role

of Commissioner for Industry was to im-

prove energy efficiency, promote betteruses of natural resources, to reduce carbonemissions these are goals that must befully integrated into modern industrialpolicy.

Indeed, we must take into considera-tion the specificities of particular sectorsand the problems that Small and MediumSized Enterprises (SMEs) are facing.

With a smart and stable regulatory fra-mework we can develop our industrialbase so that it is both more sensitive toenvironmental and health and supportsthe competitiveness of the industry, beca-use now it is of competitive advantage toconquer these new markets related to"green economy".

InnovationLarge emerging markets have establi-shed very ambitious strategies in theseareas. We must not be left behind. For th isreason, the communication on industrialpolicy put in place the elements of a po-licy for industrial innovation, which iscomplementary to the strategy of researchand innovation purpose of the initiative:"A Union for innovation." In particular,

we identified some of the technologiesthat are critical to the future of our indu-stry: key enabling technologies such as

nanotechnology, photonics, advanced ma-terials and biotechnology.The potential of these technologies re-

mains largely unexploited in Europe. Onthis basis, my intention is to launch an ini-tiative to promote the deployment, adoptionand commercialization on a large scale. In

this way, we will ensure that European in-dustry remains at the forefront of innova-tion. Innovation, ultimately, is the largestindustry that contributes to improving ourquality of life. We are moving towards a

world where products are becoming moresophisticated and are better able to meet ourneeds.

The new European industrial policyis based on both greater integration andcoherence at EU level and closer coope-ration with Member States and betweenMember States themselves. We startedmonitoring performance and competiti-

veness policies at national level last yearand exchanged good practices withMember States, for example in the fieldof access to credit SMEs. European in-

dustry still has much to offer and we willprovide adequate support to enable it tosuccessfully face the challenges of globa-lization.

TradeThe success of industry depends on its

capacity to benefit from globalisation. Th-erefore, we should not oppose a policy offree trade, and an industrial policy of pro-tectionism. In fact, trade policy can be agreat tool for promoting the competitive-ness of our industry, provided that the

agreements that we enter into with thirdcountries are based on principles of reci-procity. We are currently introducing a"competitiveness test" on free trade agre-ements specifically to ensure that newagreements can maximize profits and mi-nimize costs for our industry.

INDUSTRY

Europe needs a strong, diversifiedand competitive industrial base

Europe's biggest wind energy park, Alto Minho I, in the northern region of Viana do Castelo, Portugal. The 120 turbines divided between five sub-stations produce 530 gigawatts annually orone per cent of Portugal's energy. |EPA/ESTELASILVA

By Antonio Tajani

Antonio Tajani

EuropeanCommissioner for

Industry andEntrepreneurship

Europe remains agreat industrial

power. We are the world'sleading exporter of goods

such as chemicals,machine tools or

automobiles. European

industry is also very activein some sectors with highpotential for developmentthat are related to "green"

economy.


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INDUSTRY

Innovation Union: Is the EU

dreaming the impossible dream?


Conservatism and innovation do not go well to-gether. Conservative parties govern most EU co-untries and it looks as if only austerity is on thetop of their minds. Yet, the work is not finishedafter the current crisis management. The work isnot finished after sole austerity measures. To be

prepared for life after crisis management, EUMember States must find ways to boost the eco-nomy and tackle societal challenges on the way.

The EU must dream the impossible dream.The current economic crisis has brought aboutlarge budget cuts to reduce the extensive longterm budget deficits most EU Member Statesface. Nearly every Member State has reducedthe budget for innovation and research and hasstricken financial incentives. The question the-refore is: how can innovation be boosted intimes of tight budgets?

The answer is that innovation in Europe is not

only a question of budget and of spending, but ofsetting the right regulatory framework. The latterentails doing away with part of the old legacy of le-gislation, some rules have proven to impede in-novation rather than to stimulate. It means boldchoices, impelling a change in economic climate.It demands a focus on innovation throughout allpolicies: lowering thresholds to finance, incentivi-zing start-ups and venture capital, giving entre-preneurship a key role in higher education,defragment, de-bureaucratize, . and all theother de-s.

Innovation fugitivesThe enemies of creativity are red tape and infle-xibility. Many creative minds over the years fledfrom Europe and became innovation refugees inplaces such as Silicon Valley. These innovatorssimply saw no other option, as they had been mar-ked losers in their different home countries in Eu-

rope or had the mark of bankruptcy stampedupon their face, the stay-away sign for Europeanbanks and investors. In the United States, or othermore innovation friendly areas, they found a warm

welcome and a new beginning.Europe has forgotten the usefulness of trial anderror. Many of the implemented rules and finan-cial regulations of the EU and the Member Sta-

tes prevent start-ups to start over again after theyhave failed. Not taking away these barriers meansmore innovation fugitives fleeing away from Eu-rope to places where they are judged upon theircourage, not on their failures. The EU must ensureall its programmes service innovation. At the sametime it must step up the risk shared finance faci-lity, especially to stimulate start-ups. InnovativeSMEs are in many cases far ahead of policy ma-kers in terms of vision. It is about time for policymakers to support these smart visions.

Therefore, EU programmes have to becomemuch more accessible to start-ups and SMEs, or

anyone else with creative ideas for that matter. Thebest way to start focusing, to cut red tape, to reachout and provide service is by creating an easily ac-cessible 'one-stop shop', a front desk for stakehol-ders to help and direct them through the maze offorms and other requirements to the right sup-port progamme and to a network of potentialpartners.Innovation is not a special policy, it is a goal, amindset, reason for all EU programmes and po-licies to serve innovation. This mindset impliesthat funds under the New Common StrategicFramework for Research and Innovation, but also

the Common Agricultural Policy, the StructuralFunds and the Cohesion Fund must be aimed atstimulating innovation.Besides providing for a more innovative friendlyenvironment we must also acknowledge the factthat innovation is not just about technological orproduct development or recovering from the eco-nomic crisis. It is also about more dynamic work-

places, about empowering employees to improveprocesses and about facing our societal challenges.Challenges such as the ageing population and our

ever scarcer resources. Targeted policy by the EUand the Member States could stimulate busines-ses to adapt their workplace and become moreemployee-driven, as this contributes to 75% of thesuccess of technological innovation.

Merge Einstein with Steve JobsWhy would other continents have more visionaryleaders on innovation and on resource efficiencythan Europe? It is time that Europe kisses itselfout of its hundred-years-sleep. For far too long ourlarge industries stuck to the old ways. They sh-ould follow the example of innovative SMEs and

spark a strategy for a complete resource overhaulbefore 2020. Moreover, with our creative and in-novative capacity in Europe, as well as our importdependency on raw materials, resource efficiencyshould be the key driver and main focus of our ef-forts for more innovation. Not only the future ofour industry, but our future jobs depend upon it.

The European Steve Jobs and Bill Gates exist, but

why don't we know their names? We need toboost a culture of excellence, risk taking, creativityand entrepreneurship. Europe has had technolo-

gical breakthroughs and claimed academic suc-cess. However, the Americans were much moreprosperous by carrying these breakthroughs to themarket and claiming business success. We have tomerge Einstein with Steve Jobs and keep him orher on European soil.

The time has come for Europe to put serious ef-fort into bringing about a mindset change towardsinnovative and curiosity-driven thinking as wellas risk-taking, and allow for a more permissive at-titude towards failure. We must recognize thatevery citizen is a possible innovator and by boo-sting creativity throughout Europe we can incre-

ase this potential. The European Parliamentsupported the focus on citizen-centred innova-tion, during the vote on May 12, making a call formore social innovation at the workplace and pro-posing measures to stimulate a more risk-takingattitude for business.Dreams do not only come true on other conti-nents, Europe can realise its dreams.

Judith Merkies MEP

Member of the EuropeanParliament's Industry,Research and EnergyCommittee

The European Commissioner for Research, Innovation and Science, Maire Geoghegan-Quinn presents the European Innovation Scoreboard 2010 at the EU Commission headquartersin Brussels , Belgium 01 February 2011. According to the European Commission, the EU is failing to close the innovation performance gap with its main international competitors, the USand Japan. |EPA/OLIVIERHOSLET

We mustrecognize that

every citizen is apossible innovator andby boosting creativity

throughout Europe we

can increase thispotential

By Judith Merkies

More than ever, innovation isdisruptive and messy. It can't becontrolled or predicted. The

only way to ensure it canflourish is to create the bestpossible environment -- andthen get out of the way. It's aquestion of learning to live witha mess

- Eric Schmidt

Executive Chairman, Google

VERBATIM


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NEW EUROPE

Europe is at a cross road. In the cli-mate of a continuing fiscal crisis most ofour energy is focused on short-term fiscal

consolidation. This issue must be resol-ved in an appropriate way to restore ma-croeconomic stability which ultimately isa precondition for growth and prosperityin Europe.

At the same time a digital revolutionis sweeping societies and businessesacross the globe. Countries which havebeen quick to respond are enjoying thebenefits and making their way to the topof world rankings. Emerging economiesare a case in point; their impressive posi-

tive growth figures can be attributed totheir willingness to embrace this digitallydriven revolution. Europe too has a win-dow of opportunity to capitalise on thegrowth potential embedded in this digi-tally driven revolution.

Investing in innovation is a prerequi-site for harnessing Europes growth po-tential and ensuring macro-economicstabili ty. DIGITALEUROPE applaud sthe European Commission for its foresi-ght in responding to this need through

flaship initiatives like the InnovationUnion, a highlight of the Barroso II Pre-sidency. The Innovation Union ackno-

wledges that the creation of a competitiveinnovative ICT industry sector is a cor-ner stone of job creation and long termeconomic dividends in the EU. DIGI-

TALEUROPE shares the EuropeanCommissions view that there is a need tofocus EU innovation on the Grand Ch-allenges, but we are also conscious thatthe greatest challenge of all in Europe is

to restore economic growth.

The ICT industry sector is one of themost rapidly growing industries globally.ICTs enable us to address the Grand Ch-allenges. Yet today, as we accelerate intothe digital age, Europe still has no singlemarket for digital services. This lack of asingle market will limit Europes growthopportunity unnecessarily. Creation of adigital single market by 2015 would yielda 4% point growth in the European GDPby 2020. This corresponds to a 500 bil-

lion increase translating to over 1000for every European citizen.

Without a functioning single marketthe Innovation Union will not live up toits potential as investment in ideas willnot be commercialised, new jobs will notbe created. Europe must act decisively toremove the barriers that limit our abilityto leverage the benefits of a culture of in-novation and the European digital singlemarket. European citizens and businessalike know the frustration and problems

of cross-border eCommerce. Less than10% of the eCommerce in Europe is cur-rently cross-border. Extending businessfrom one member state to another canincur 2 million additional costs for acompany due to diverging rules and re-gulations in different member states.

It is a neat coincidence that the con-clusion of the European Unions LisbonStrategy and discussions around its suc-cessor, Europe 2020, happened when theeconomic and political shape of the

world was being rapidly remodeled. TheEuropean Union must think very care-fully about its ambitions, its challengesand how to achieve its goals urgently. If

we are committed to becoming theworlds leading knowledge economy, Eu-ropes political leaders must actively focuson overcoming the fragmentation in di-gital industries, markets and communi-ties. Failure to do so means Europe riskslosing its economic, political and culturallead.

Commissioner Kroes Digital Agendafor Europe is an important roadmap forthe Barosso II Commission; it reflectsand addresses many of our current chal-lenges. To deliver a successful EuropeanDigital Agenda each member state has arole to play in recognising the benefits forits citizens and businesses, but also for ci-tizens and businesses across the EU. TheDigital Agenda is rightly focussed on thecompletion of the digital single market,and while many EU countries agree inprinciple that this is an import ant ambi-

tion many continue to reserve the rightto exclude their particular interests ou-tside the digital single market. The con-sequences are evident. Recent data showsundisputedly that Europe is losing gro-und rapidly. European websites are vir-tually absent from the list of most visited

web sites in the world. And, even morealarming, is the trend we see in the gro-

wth of the leading internet service com-panies in the world. It is no longer theUS which is dominating this space: Chi-

nese internet services providers are chal-lenging American companies withhundreds of millions of customers andrapid expansion into foreign markets.Among the five most valuable Internetcompanies in the world after Google andAmazon are two Chinese companies,Baidu and Tencent, with over $30 billionmarket cap well before eBay. No Euro-pean company is visible on this list.

It is clear that digital technology cre-ates entirely new business models, which

in turn generate new jobs. Europe mustseize the opportunity to create morehigh-value jobs for its citizens. We arefaced with a choice of which route wetake to deal with current social and eco-nomic challenges. To DIGITALEU-ROPE the choice is clear: we musturgently make the decision to deliver aEuropean digital single market based onthe founding principles of Jacques De-lors 1992 vision of a single market. TheDigital Agenda for Europe provides theroadmap and the Innovation Union is a

vehicle that will deliver rewards. Publicpolicies must support the consolidationof our global position and be a bold forcefor change. Investment in innovation isone turn-key, the other is the political

will to deliver of a digital single marketin Europe.

INDUSTRY

A Digital Future

European Commissioner in Charge of Digital Agenda, Neelie Kroes watches a robot reaching for a toy car after the opening of fet11, The European Future Technologies Conference andExhibition held under the auspices of the Hungarian EU Presidency in Budapest, 4 May 2011. | EPA/LAJOS SOOS HUNGARY OUT

By Dr Erkki Ormala

Dr Erkki Ormala

President,

DIGITALEUROPE

Without afunctioning

single market theInnovation Unionwill not live up to

its potential asinvestment in ideas

will not becommercialised


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May-June 201112

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NEW EUROPE

As the EU seeks to set in place an energyroadmap to transition Europe to a lowcarbon future, it must be sure to safeguardgrowth and mobility in the process.

While the Europe 2020 Strategy and

other initiatives set ambitious targets forenergy savings and emissions reduction, inpractice, the transition to a competitive,low carbon economy will be gradual andtake several decades.

Europe will require a secure, reliableand affordable energy source to underpineconomic growth during this transitionphase.

Mobility is of course vital for the EUeconomy and today 90% of EU transportis fuelled by oil. Even the most optimi-stic scenarios from the InternationalEnergy Agency predict that oil will repre-sent at least 70% of fuels for transport in2035.

Oil and oil refined products will con-tinue, to make an important contributionto EU growth. They offer a secure supplyof energy that delivers affordable mobility

and economic value and without a robustdomestic refining industry Europe will bemore dependent on third countries.

It is essential to maintain the econo-mic and social value of cost-effective mo-bility during the transition and the goodnews is that further efficiency improve-ments and lower carbon fuel optionscould achieve the EUs policy objectivesfor a low carbon society. Transport isamong the least cost-efficient sectors toreduce emissions and placing greater po-licy focus on delivering fuel efficiencygains could offer a substantial and cost-effective contribution to CO2 reductionsin the transportation sector.

The oil industry works in close coope-ration with the transport industry in de-

veloping new fuels for use in theadvanced, fuel-efficient engines of the fu-ture. In the domestic vehicle sector agreat deal has been done already and webelieve that with new vehicle design, newengines and lower carbon fuels, we canalso achieve fuel efficiency in Heavy DutyVehicles of up to 20% in the next decade.

The same is true for the Aviation sectorwhere a reduction of 25-50% in fuel con-sumption could be achieved through moreefficient aircraft design and operation, and25-75% CO2 reductions are also possiblein the Marine sector.

A clear policy framework could enablethe EU to meet its new energy and emis-sions targets. Comparative cost analysisfor both society and the environment sh-ould be carried out on all new forms ofenergy and transportation, and we mustavoid mandating specific technologiesthat might prevent us from leveragingnew innovations in the future. With theconsistent application of energy taxationlevels to all energy products and a frame-

work for consistent and predictable CO2abatement across the entire economy, theEU can achieve its dream of a low carbonfuture without jeopardizing the economyand jobs in the process.

INDUSTRY

Managing the transition

to a low carbon future

Isabelle Muller

Secretary General,EUROPIA

French car maker Renault presents an electric engine car at the Grimaldi Forum of Monaco during the sixth 'Ever Monaco' exhibition, in Monaco, on 31 March 2011. |EPA/BRUNOBEBERTCORBISOUT

By Isabelle Muller


Transport is among the least cost-efficient sectors to reduceemissions and placing greater policy focus on delivering fuel

efficiency gains could offer a substantial and cost-effectivecontribution to CO2 reductions in the transportation sector


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May-June 201114Special Edition


| Reprints | Our world in 2011|

This article originally appeared in New Europes Our world in 2011 special edition

The complete contents of this edition can be found athttp://www.neurope.eu/2011

Prague - What will life be like for Eu-ropeans in 2020? Faster, I hope. This

may come as unwelcome news to those who blame technological progress forthe already frantic pace of their lives.But look at what technology is achie-

ving now and think about what all thisspeed could mean for the way humanbeings spend their time in future.

Consider Europes research commu-nity. When Marie Cur ie began her pio-neering work into radium-isolation shedid not know what she was looking for,or that it would take 4 backbreaking

years of stirring pitchblende to yield justenough radium to cover the tip of a te-

aspoon. Maries vision and diligenceeventually earned her two Nobel prizesand paved the way for the radiotherapyused to treat cancer. Fast forward 100

years and compare the drudgery of Ma-ries experience to that of the Europeanscientists who are building on her le-gacy. Today, researchers working on bre-akthrough drug trials at the Universityof Newcastle have used cloud compu-ting to cut the amount of time it takesto achieve research results by 99%.

Similarly, an image segmentation te-chnique developed by Antonio Crimini

from Microsoft Research is showinghuge potential for speeding up radiationtreatment, with some estimates sugge-sting that as much as 4 million hourscould be saved globally in particularlycomplex cases.

Months and years spent undergoingresearch or radiotherapy could soon becompressed into a matter of weeks ordays. Just think what both these advan-ces could mean not only for medicalprogress, but also for the quality of lifefor cancer sufferers and their families.

The breakneck speed at which tech-nology changes means no one can trulyknow how great its social impact will bein 2020.

But I do know that the pace atwhich it metamorphoses means that re-gulation must leave room for the indu-stry to breathe if Europe is to recoverand flourish. Online privacy and secu-rity are just two examples of thorny is-sues regulators must get right both inrelation to personal data but also cloudcomputing and its impact on scienceand business. The debate may seemcomplex and the answers often elusive,but the fact it even exists is a reflectionof the freedom and power technologyhas brought to millions.

For technology to remain the life-blood of European business, science andinnovation, it needs a regulatory frame-

work that is both visionary and instruc-tive. And it must be genuinelyEuropean.

Thats why we are fully supportive ofthe Commissions Innovation Unionand its aspiration to make Europe anexciting and easy place to break researchfrontiers and produce new products.

There is much to be praised in theCommission blueprint, which builds onthe Europe 2020 economic strategy andcalls for a multi-pronged approach tocreating a single market for innovationby 2020. But progress in this area must

be built on the free and flowing exch-ange of ideas that can only come froman ongoing conversation between poli-cymakers, businesses, academia andother stakeholders.

In the 21st century, Europes prospe-rity will be built on her ability to remaincompetitive, flexible and an incubator ofexceptional talent. But she must alsohave workers who are able to executethe vision of her entrepreneurs andscientists. At present the gap that per-sists between employers needs and wor-kers skills is growing.

In 5 years 90% of European jobs willrequire some form of computing skills.They will no longer be the domain ofexperts but the non-exchangeable cur-rency for the European worker who will

work longer and change jobs many

times in his or her life. Digital skills willbe the reading and writing for 21 st cen-tury: without them Europes workers

will be the illiterates of the global labormarket. Thats why its so importantthat Europe takes the vital steps to in-

vest in its future even at a time of crisis.Even when budgets are tight there is

a role for us all to play. Governmentsand policymakers must maintain appro-priate levels of investment if Europes

workforce is to get the education andICT skills it so badly needs. The privatesector can also help by sharing its ex-pertise and knowledge, particularly witholder workers, the disabled or those to

whom technology and its applicationsdo not always come automatically.

The European Commission and theMember States need to design the in-centives and instruments for up-skillingand training to prepare the youth andthe workforce for the jobs of to morrow.

The long-term prosperity of Europesnext generation is dependent on her

ability to remain competitive.Without adequate investments intoresearch and mechanisms to support in-novation that will help Europes talentsthrive, there will be no fast-forward intothe future.

Fast Forward into Europes Future

A guest tries out the new Microsoft operating system Windows Phone 7 on a handset during the launch in Singapore 12 October 2010 |ANA/EPA/STEPHEN MORRISON

By Jan Mhlfeit

Jan Mhlfeit

Chairman,Microsoft Europe

The breakneck speed at which technology changes means noone can truly know how great its social impact will be in 2020


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NEW EUROPE

Mark Spelman could be described asa tall, high fly ing, globetrotting, grey sui-ted big grinned executive who likes tokeep Europe on her toes, Europe is lag-ging behind is one of the first things hetells me as weve been trying to have aphone interview on the Thursday beforethe European Business Summit and fi-nally manage to talk.

Ive been flying around the worldand just got back from Rio in Brasil

where the world stage is turning itsglance more and more often, he says ha-ving just given me a sweeping tour of wh-ats happening globally, how the worldseconomy is growing at 4% and how apartfrom Europe everyone else is forgingahead not necessarily in the countries one

would expect.Rio for example is hosting the RIO

+20 in June next year and theyre veryexcited notes Spelman, a UN Confe-rence on Sustainable Development, a hottopic for growth, jobs and demand on theglobal scene.

I was also in China just before thatmeeting with those involved in theSmartGrid there and could feel theenergy for this great move in innovation,says Spelman Accentures managing di-rector for the Accenture Strategy service

line. He also leads Accentures strategicthink tank the Institute for High Per-formance, has responsibility for Accen-tures global relationship with the WorldEconomic Forum and is the chairman ofthe American Chamber of CommercesEuropean Union Executive Council.

The difference he notes between Eu-rope and the rest of the world in theirgrowth is a continued concentration so-lely on the fiscal stability issues, one

week its Greece, one week its Spain, thenPortugal, so one of my concerns is that

many leaders are so preoccupied with fi-scal stability that other areas are not get-ting attention.

The world is moving forward, andquickly Asian countries have no finan-cial drag, so Europe needs to becomemore pro-active, we need to look at thedemand for exports, for innovation, sup-ply of services and others and answerthat, Spelman emphasizes form the Ac-centure offices in London.

Within the global market trajectoryit is critical for Europes competitivenessthat it does not stand still, Spelman re-peats. Of course he understands the needfor fiscal stability first but calls for a seg-mented reality where one half is concer-ned with this and the other with growth,SMEs need to be better equipped, In-novation needs to be better funded, the

decrease in consumption, all these mustbe addressed.Looking at emerging economies he

does postulate that all is not rosy forthem with issues as inflation for exampleand around commodity production andprice volatility particularly, there are is-sues there as well.

His concerns are no different fromglobal economists looking on the globalstage and rating global competitiveness.

The following morning on 13 Maythe European Commissioner responsible

for economic and monetary affairs held apress conference to share the results of aEurostat report released moments beforeand give his Spring Forecast with FirstQuarter (Q1) figures for Europes eco-nomy the underlying goal.

The Forecast was more positive thaneven he had expected it may be Fridaythe 13th but for once I have some goodnews on the real economy in Europe, helightly mentioned before going back tothe risks and vulnerabilities still on thehorizon, not least in the sovereign debtareas.

Job creation remains unsatisfactoryhe began, developments remain unevenacross member states, growth prospectshave been slightly upgraded compared tolast autumn, more over demand is themain engine of growth.

In fact the EU GDP has increasedby 0.8 % in t Q1, not failing to mentionthat 0.8 is exactly double that of the USnumber.

In slight accordance with Spelmansprediction Rehn did not fail to mentionthat activity in China continues to out-pace economic activity in the advancedeconomies.

The overall sentiment indicatorsshow activity gathering pace in the nextquarter whereas recovery remains varied

within the member states themselves.

The GDP is projected to grow by1.25% in 2011 and by 2% next year in2012 surpassing the pre-crisis levels.

As far as Greece was concerned, thefiscal effort of the past year is unprece-dented as over 7% of the GDP has beenreduced, however he warned that inter-nal political squabbles must be put asidefor recovery to take place, a politicalcomment nto often spouted from theBerlaymont indicating its severit y.

Lagging behind or growing? That isthe question.

In slight increments growth is there,if comparing to the wor ld stage were de-finitely not kicking our heels to the tuneof the Zorba any more, but even someeconomists would agree that the lastthing Europe is doing, at this stage, is aslow dance.

INTERVIEW: INDUSTRY

Europe lagging behind?

International Monetary Fund (IMF) Deputy Director, Poul Thomsen (R), accompanied by European Central Bank (ECB) head of mission, Rasmus Ruffer (L), and Troika representativefrom the European Commission, Juergen Kroeger, during a press conference to present the agreement between the Portuguese authorities and Troika on the economic aid program, in Li-sbon, Portugal, 5 May 2011. |EPA/MARIOCRUZ

Interview by Alia Papageorgiou

Mark Spelman

Global Head of

Strategy - Accenture

Within theglobal markettrajectory it is

critical for Europescompetitivenessthat it does not

stand still


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May-June 201116

Special Edition


The Hungarian EU Presidency is convinced thatthe success of economic development strategy de-pends on how policy initiatives affect SMEs.SME policy and the systematic implementationof measures, according to the "Think Small First"principle, are the first presidential priorities ech-oing the last European Business Summits clo-sing sentence:

There are many economic priorities, but the

number one priority should be boosting the per-formance of small and medium-sized companies.The question is what has been achieved duringone year?

SMEs are usually referred to as the backboneof the European economy. As a significant sourceof job-creation, SMEs account for a great poten-tial to contribute to full employment and EU em-ployment rate target of 75% by 2020. Severalstudies have established direct link betweenSMEs and overall economic growth rate. Due tothe economic crisis more than 3.5 million jobs inSMEs have been lost, which further underlines

the specific need to streamline and consolidateSMEs policy at European level in order to restorethe job-creating capacity of SMEs at the centre ofEurope's economic recovery. The SME sectorcontributes to innovation, is a source of competi-tion, provides flexibility in the labour market, andmost crucially, is a source of job creation. As Eu-ropean small and medium-sized enterprises playa central role in the performance of Europeaneconomy making them more competitive willcontribute to the Europe 2020 Strategy from em-ployment to social exclusion related targets, frominternal trade and cross-border business activitiesto the renewal of the European industrial policy.

There is a necessity to develop strong synergieswith the Small Business Act, the Single MarketAct and Smart Regulation for Europe. SME po-licy and the systematic implementation andmainstreaming of simplification measures accor-ding to the "Think Small First" principle, are th-erefore the first priority issues.

The Midterm-Review of the Small BusinessAct (SBA) for Europe focuses on implementa-tion of agreed measures and achieving concretesolutions for outstanding problems.lThe review highlights the progress made in

implementing the SBA, both at EU and nationallevels. At the same time it indicates progressingdirections and measures for the sake of SMEsde-

velopment. Reducing administrative burdens onSMEs is of vital importance at the EU level as

well as the national one.The new Hungarian governments programme

that has been introduced recently intends to cut

drastically the bureaucratic burden on businesses.In Hungary it is currently HUF 3,000 billion,which is 10.5% of the gross domestic product. Bu-sinesses should start to feel the effects of cuts HUF2,000 billion in the bureaucracy by 2012 genera-ting an additional GDP growth of 1.2%-1.3%.lFacilitating access to finance for SMEs is the

first European priority including modification ofregulation relevant to the new type financial in-struments. It is necessary to support the SMEsaccess to bank and other financial resources, andimprove the regulation of new financing instru-ments (availability of state credit guarantee in-struments, venture capital funds, simplifyingprocedures of EU funding programmes).lSMEs ability for innovation, development of

a new approach to innovation focusing on thepromotion of non-technological innovation (rea-ching 80% in case of SMEs) should be strength-ened. Their contribution to a resource-efficienteconomy is essential.

l

Support of SMEs internationalization, out-lining the SMEsinternational activity both in andoutside Europe. Great emphasis is placed on theissue of internationalization and enhancingSMEs entry to export markets with particular re-gard to the identification of the main obstacles toforeign market entry and the connection betweeninnovation and internationalization. In contrast totheir contribution to the intra-EU trade (25%),the internationalization of SMEs outside the EUis fairly limited as only 14% of them purchase theirsupplies overseas, and as only 13% of them exportbeyond the EUs borders. SMEs cross-border

trade activities provide extra job creation oppor-tunities for them.l Exchange of best practices on training and

educational programmes organized to promotestarting enterprise activity and becoming succes-sful entrepreneurs. Promoting entrepreneurshipand job creation (Erasmus for Young Entrepre-neurs programme to foster cross-border networ-king, mentoring schemes for femaleentrepreneurs, transfer of business, ent-repreneurship education). Education and trainingare essential factors for later employability, com-petitiveness, innovation, cultural development andare tools to promote social inclusion. EnterpriseEurope Network provides support to encourageSMEs to become innovative and strengthen theirtechnological capacity. The European Commis-sion is committed to more extended use of thenetwork.lProgress in monitoring and stronger coordi-

nation of SBA implementation.

l

Support of the establishment of SME En-voys.An SBA conference will be organized in

Gdll, near Budapest within the HungarianEU Presidency timetable under the title Mobi-lising SMEs for Europes Future on 24-25 May2011 with the future of cohesion policy and theimprovement of the regulation of new financinginstruments in focus. The European Entreprene-urship Award will be awarded and best practices

will be presented reflecting the different ways inwhich regions, centres, cities, towns and commu-nities have creatively implemented entrepreneur-

ship-friendly environments and practices. TheHungarian Presidency is the last member of theSpanish-Belgian-Hungarian trio. Its priorities

were built on the results delivered by the Spanishand Belgian Presidencies. As a continuation wedetermined to pass the relay baton to the forth-coming Polish Presidency with clearly visible re-sults in the field of SMEs. The adoption of theSingle Market Act will be high on the agenda.The twelve levers to boost growth and streng-then confidence are accompanied by high expec-tations. A key action for each lever and prioritymeasures should be adopted to relaunch the sin-gle market by the end of 2012. The first lever andof utmost importance is Access to finance forSMEs. The success of the reformed economiccooperation, the enhanced surveillance of the fi-nancial markets and the efficient implementationof the EU 2020 Strategy requires the completionof the internal market with SMEs as the key fac-tors to Europe's competitiveness.

EU WORLD

Entrepreneurship and SMEs: from declaration to implementation

European Commissioner for Employment, Social Affairs and Inclusion Laszlo Andor (C) chats with participants prior to the meeting of EU employment ministers, at Grassalkovich Ca-

stle in Gdll, 30 km northeast of Budapest, Hungary, 17 January 2011. |EPA/ZSOLTSZIGETVARYHUNGARY OUT

By Zsolt Becsey

Zsolt BecseyMinister of State forForeign EconomicRelations, Ministry for

National Economy ofHungary

SMEs are usually referred to as the backbone of the Europeaneconomy. As a significant source of job-creation, SMEsaccount for a great potential to contribute to full employment

and EU employment rate target of 75% by 2020. Several studieshave established direct link between SMEs and overall economicgrowth rate


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NEW EUROPE

The Arab Spring has highlighted new politi-cal reality as well as new economic perspecti-

ves for hundred of millions of people. Thiscould be the beginning of a new chapter bet-

ween the European Union and its Mediterra-nean partners.

With most of these countries still having

much of their economic development ahead ofthem, it is clear that an ambitious EU policytowards the Gulf Cooperation Council(GCC) and its member states is essential. Bu-siness climate has to be improved to attract in-

vestment in infrastructure and developmentprojects in the large Mediterranean area. It

would be a lost opportunity if the EU and theGCC, as two major political and economic ac-tors at global level and additionally involved inthe Mediterranean area, were to take divergingpaths at a time when regional arrangementsfor stability are changing and regional econo-

mic governance is under reconsideration. Inaddition, mutual benefits would arise fromcloser and more in-depth relations as the twoentities have shared interests in internationalsecurity, in combating terrorism, in diploma-tic mediation in the Middle East, in regionalcrisis management and in intercultural dialo-

gue while the scope for cooperation is so wide-ranging, in fields such as education, scientificresearch and renewable energy.

In this regard, it is crucial that the businesscommunity and Arab sovereign funds are in-

volved to deliver the tools to help North

Africa and the Middle East achieve its long-standing potential. In conclusion, the EU hashuge advantages to draw on by cooperating

with many of the new players emerging in theGulf, provided that, at the highest level, thereis the necessary political will on both sides.

EU WORLD

EU and GCC ahead of common

challenges and opportunitiesBy Rodi Kratsa-Tsagaropoulou

Rodi Kratsa-

Tsagaropoulou

Vice President of theEuropean Parliamentand member of the

Economic and MonetaryAffairs Committee

Qatar Prime Minister and Foreign Minister Sheikh Hamad Bin Jassim Bin Jabr Al-Thani (C) walk with Saudi Arabia Fo-reign Minister Crown Prince Saud Al-Faysal (2-R) and the head of the Gulf Cooperation Council (GCC) Abdullatif al-Zayani (L) upon his arrival at a GCC Foreign Ministers meeting, 1 May 2011. |EPA/STR

Business schools are here to position tomor-row's leaders. But what are we using for guide-posts these days? The time has come to revisitprevious methods and to modify them, given thecurrent global environment.

In the wake of the economic crisis, we haveseen a tip in the balance of power in the busi-ness world. Growth drivers are in Asia and LatinAmerica. But innovation, consumer demand andmanagement are still driven from the developed

world. Clearly, the leaders of tomorrow mustthink beyond the US-Europe centric world andmove beyond the conventional boundaries of bu-siness.

The leaders of the more competitive, diverseand interconnected world of tomorrow needthree things:

1. The ability to anticipate - to fathom trendsand be opportunistic as well as to head off trou-ble;

2. The courage to deal with ambiguity - theemerging market growth drivers are unchartedterritory, literally, and there are few past practi-ces to follow;

3. Cross-cultural adaptability in order to em-brace, develop and extract the best opportunities

from our increasingly diverse world.It is clear the world is moving away from

Free Market Capitalism to Sustainable Capita-lism. We see that wealth creation also meanscreating social wellness and environmental pre-servation.

We see that true value-based prosperity cre-ates profits while benefiting people and the pla-net. This is the way tomorrow's business leaders

will move from success to significance, and it isup to business schools to ensure they find theright pathway.

EU WORLD

The leaders of tomorrowBy Dipak C. Jain

Dipak C. Jain

Dean of INSEAD

INSEAD students preparing to take on tomorrow's business opportunities

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May-June 201118

Special Edition


As a European working for an internatio-nal company based in the US with Europeas its largest market, I know firsthand the

value of the transatlantic economy. De-spite the economic crisis and the globaldownturn, the United States and Europeremain each others most important mar-kets; no other global regions are as intert-

wined and integrated as the transatlantic

economy.The two economies continue to accountfor well over two thirds of global bankingassets and three quarters of global finan-cial services; the US remains the principalsource of foreign direct investment in theEU. The transatlantic relationship re-mains strong but not as dominant as inthe past.

Given the economic crisis and the risein competition from other regions, we areat a turning point now, and for that reasonI would argue that the transatlantic eco-nomic partnership is more important thanever. Because our economies are so linked,if one of us should start to lag behind ingrowth, the others growth will be impe-ded. So key to getting ahead is finding

ways to cooperate and support one ano-ther to maximise our common interests.

Whats the best way to help spur eachothers economies? There is growing reco-gnition in the US and the EU that inno-

vation holds the potential to driveeconomic growth, increase employmentand enhance competitiveness. Both Presi-dents Obama and Barroso flagged inno-

vation as essential to recovery in theirState of the Union addresses. For any realprogress to be made however, the US andthe EU need to be working and investingtogether to find solutions to some of thechallenges facing us today.

Before this can happen though, both re-gions need to ensure the innovation en-gine is running smoothly. It can take upto 10 or 15 years to develop practical ap-plications for many technologies inclu-ding advanced healthcare systems, smartgrids, or electric cars. But we cant affordto wait. We need to work now to removebarriers to research, development and get-ting products to market. So in the area ofhealth care for instance, we need to enable

medical documents to be seen by patientsand doctors in any country. This meansthe data kept by hospitals needs to be re-leased, which is difficult with existinglaws. Cloud computing which is a net-

work of remote servers hosted on the in-ternet to store, manage and process dataholds tremendous opportunity. Such mas-sive data centres have the processingpower potential on a massive scale andcan be applied to some of the many chal-lenges we face today. There are plenty ofopportunities outside of technology, too including innovation in design, marke-ting, public sector innovation and socialinnovation.

Both in the US and here in Europethere are some other hurdles to overcome educational systems on both sides of theAtlantic could use an overhaul. In Europe

we need to find systems that encourageand nourish risk taking and creativity. Inthe US we need to ensure science, mathand computing are just as appealing assports. In general both regions can do alot more to encourage cross disciplinarystudies. Tomorrows research will need totackle several problems at once across abroad range of disciplines.

We also need to invest in our peoplepower by facilitating business-educationlinks, improving access to markets and en-suring the free movement of people, espe-

cially researchers and scientists. They needto be able to cross borders easily withinthe EU as well as to be able to travel tothe US. We need to encourage collabora-tive efforts and ideas wherever possible.So we could mutually explore someoptions including a special researcherstatus that could be created to overcomeborder restrictions; visas could be devisedto ease access for third country research-ers; or perhaps a jobs data base could becreated between the EU and US to helpidentify employment opportunities.

Lastly, we need to make it easier forcompanies large and small in the EU andUS to patent their inventions and streng-then their ability to protect their intellec-tual property rights.

I have outlined just a few of the real op-portunities for transatlantic cooperationand economic benefit for both regions.But given that both the US and EU arefacing massive debt levels and high unem-

ployment right now, the reaction to a cri-sis can often be to protect what is oursand put up barriers to anyone else. This

would be a huge mistake and would havenegative consequences for everyone.

By working together we will develop alarger transatlantic marketplace where we

will not only reap benefits within it, butwe will also be better able to jointly facethe global competitive environment. Al-though the competitive advantages differsomewhat between the US and the EU,the challenges have striking similarities,such as growing deficits, aging popula-tions and demographic changes. So I willclose by saying we need to continue inve-sting in the relationship, keeping the dia-logue open and harmonising our rules ofthe game as we leverage the innovative useof technologies. It is the only way to ach-ieve an advantageous business environ-ment and a level playing field on a globalbasis.

EU WORLD

Cooperation is more important than ever

|EPA/JulianStratenschulte

By Mikael Hagstrom

Trade in goods and services, andinvestment, lead to economicgrowth. But it also brings aboutinterdependence and, ideally,

also better mutualunderstanding - Karel De Gucht

European Commissioner

for Trade

VERBATIM

Mikael HagstrmChairman, ExecutiveCouncil, AmCham EUPresident EMEA and Asia

Pacific, SAS Institute

In Europe weneed to find

systems that encourageand nourish risk taking

and creativity

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Europe and Asia have a close relationshipbased on shared interests. In both cases,international contacts and a commitmentto trade are part of our heritage. Tran-

sport is essential for both. In a changingworld, Europe and Asia face similar ch-allenges, not only to preserve the statusquo, but to improve the situation of ourcitizens.

According to the UN, world popula-tion, now 7 billion people, is likely togrow to 9 billion by 2050. While Euro-pe's population is expected to stabilise,the population of Asia is expected to growby 1 billion people, most of them in Southand South-East Asia. Clearly, continued

world population growth, combined withcurrent consumption patterns poses chal-lenges to our environment, including cli-mate change, to economic well-being, andto international peace and security. Wehave to change a lot about the way we dothings, and that applies to transport as toany other major economic sector.

This is the context in which the Eu-ropean Commission published a WhitePaper at the end of March this year, withthe title "Roadmap to a Single European

Transport Area Towards a competitiveand resource efficient transport system".

This is a strategic document that assesses

recent transport policy, looks at long-termchallenges and draws a framework for po-licy action in the ten years to come, topromote growth and jobs while using re-sources more efficiently.

The prosperity of the EU owes much

to the internal market and to our tradewith the rest of the world. Efficient tran-sport connections have made this possi-ble: the EU relies heavily on its densetransport network and advanced logistics.In parts of Europe where the network is

most developed, congestion and bottle-necks are present, and the projected gro-wth in the volume of transport is a causeof concern. In other parts of Europe, thereis a lack of infrastructure. We intend tofill this "infrastructure gap" between we-stern and eastern parts of Europe, to cre-ate a transport system capable of servingour continent and its 500 million people.

We are aware that Asian partner co-untries are making similar plans, particu-larly within ASEAN, and look forward tosharing ideas from both sides.

In Europe, transport directly employs10 million people and accounts for 5% ofGDP. Many European companies are

world leaders in infrastructure, logistics,traffic management systems and manu-facturing of tr ansport equipment. We areparticularly proud of our high-speedtrains, and of the role of companies likeAirbus on the world scene. The integra-tion of the world economy provides newopportunities, and we welcome competi-tion based on reciprocal market openingand on fair practices in line with inter-nationally agreed norms. Asia is our

partner.Today's transport technology increa-

singly depends on fossil fuels, primarilyoil, and this fact is reflected in Interna-tional Energy Agency projections for de-mand growth: from 84 million barrels per

day (mb/d) in 2009 to about 100 mb/d in2035, with much of the demand comingfrom Asian countries like China. Thenumber of cars worldwide is projected togrow from 750 million today to 2.2 bil-lion in 2050. It is difficult to imagine that

oil supply can easily keep pace with thisincrease in demand without significantupward pressure on prices.

Oil also

European Business: Leading or Lagging?

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