Moving forward to an industrial renaissance to overcome economic crisis | WPN World People News

One lesson has been learned in the crisis: Europe needs a strong industrial sector in order to resist downturns. This is the clear message of the conference "An industrial renaissance" taking place in Brussels. Hosted by European Commission President José Manuel Barroso and Vice President Antonio Tajani, the conference will look at how national and European efforts can maximize the effectiveness of EU interventions. It also takes stock of the progress on the industrial policy flagship initiative. The focus will be on the need to reverse the current decreasing trend of the evolution of industry in the EU, pointing out the role of manufacturing industry as an engine of growth. For example, can Europe do more to coordinate industrial policies in a partnership approach involving EU and national players as well as industry and enterprises?

The short-term economic outlook for Europe remains weak despite some signs of economic recovery. The importance of the manufacturing industry for growth, jobs, productivity, research and exports is now widely recognised. Therefore it is now the time to step up actions that increase industry’s share in economy. This is the only way to address the lasting legacy of the crisis – the serious loss of industrial base in many EU Member States.

The conference will discuss about the Industrial Compact for Europe to pave the way for the February 2014 European Council, which will be specifically devoted to industrial competitiveness and policy.

Raising industry’s contribution to EU GDP from 15.2% to 20%

Following the European Commission blueprint for raising industry’s contribution to EU GDP from 15.2% to 20% by 2020 (IP/12/1085), the conference will focus on progress made so far and what urgent further action can bring immediate benefits to help restore industrial growth.

The on-going crisis gives an even stronger incentive to continue policies of reversing the current trend. Europe must build upon its strengths:
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EU industry remains a global leader in a range of manufacturing sectors, including chemicals, machinery, metals and automotive sectors.

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The EU share of global exports has diminished these last few years but overall has remained remarkably resilient in the face of strong growth of China and other emerging economies.

European industry continues to be part of the solution. In particular, the conference is looking at how national and European efforts can maximise the effectiveness of EU interventions and at how Europe can do more to coordinate industrial policies in a partnership approach. Also, the key role and level of commitment by industry will be discussed. A specific panel will be dedicated to the crucial issue of access to finance.

What is the situation of European industry today?

The crisis since 2008 has deeply affected EU industry with major loss of employment (about 3.8 million industrial jobs lost) and production levels remaining more than 12% below the pre-crisis levels. The situation is differentiated between sectors, with high technology ones like pharmaceuticals coping better than mid and low technology ones, and between Member States, with some performing remarkably (like Poland and Slovakia) and others more in difficulty, like Greece and Spain.

There has been a relative decline in the role of industry in the EU economy over the last couple of decades and that, if Europe does not take the lead in the "new industrial revolution" (MEMO/12/761) now taking place globally, there might be a long-lasting damaging impact on growth and jobs prospects. Indeed, manufacturing remains the main driver for productivity, R&D expenditure, and exports.

What are the priorities of the EU Industrial Policy?

The Industrial Policy Communication Update of October 2012 outlines a strategy to reverse the declining role of industry in Europe from 15,6% of GDP (in 2011) to as much as 20% by 2020. The Communication announces actions in four main areas: 1. Investments in new technologies and innovation; 2. Access to markets; 3. Access to finance and capital markets; 4. Human capital and skills. In all four areas the Commission is currently implementing concrete measures (More information).

Boosting industrial investments, especially those in technologies and innovation that will give Europe the lead in the New Industrial Revolution currently taking place worldwide, requires a coherent and consistent set of policy initiatives in areas such as innovation, access to finance, the internal market and international trade, energy and environment, skills and employment.

For example, Europe will not be an attractive location for new industrial investments if the gap in energy prices with other regions of the world continues to grow. Following a request from the European Council of 22 May, the Commission will return to this issue by the end of the year.

Attract investment from third countries is crucial to help Europe exit recession.

How significant is sustainable (green) growth in these priorities? Opportunities for sustainable (green) growth exist in all industry sectors. Benefits can be obtained from export and in the Internal Market, including in Member States which are more in difficulty. The four main areas emphasise activities to better exploit the potential in, e.g., sustainable production, cleaner cars or smart grids (see below). A public consultation on a green entrepreneurship action plan will be launched soon. The plan should contribute to reinforcing the EU's efforts for sustainable growth.

What has been achieved so far?

1. Investments in innovation with enormous potential for growth and jobs

Investment in innovation in new sectors of high growth and in more traditional sectors is important to improve the competitiveness of EU firms. Six Commission task forces taking actions to foster innovation in the following fields:
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markets for advanced manufacturing technologies for clean production,

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markets for key enabling technologies,

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bio-based product markets,

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sustainable industrial policy and construction and raw materials,

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clean vehicles and vessels,

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smart grids.

Dedicated Commission task forces have been set up and defined roadmaps for each action line. The Commission will report on progress achieved by the task forces in September.

The first results of the mapping show the need:
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to focus actions on establishing public-private partnerships,

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cooperating with EIB (discussing with EIB dedicated financing facilities)

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defining standardisation needs,

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reviewing public procurement rules,

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preparing sector skills councils,

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gathering and promoting best practices from Member States.

In this respect, the Commission is finalising the strategic annual Union Work Programme for European standardisation (to be adopted before summer break) and preparing implementation of then research framework programme Horizon 2020.

Moreover, the Commission signed an agreement with EIB for breakthrough of Key Enabling Technologies to ensure improved access to finance for investments in key enabling technologies (MEMO/13/150).

With regard to the clean vehicles priority line, the Commission adopted strategy for alternative fuels which includes the legislative proposal on the roll-out of infrastructure for alternative power-trains.

Concerning biotechnology the Commission launched the bio-economy observatory with the aim of making the data it will collect publicly available through a dedicated web portal in 2014 (IP/13/113).

Steel has a future in Europe: In the next days the Commission will put forward its steel action plan, which proposes joint and coordinated action of the Commission, Member States and industry to boost demand for steel. Further actions will be proposed to improving access to foreign markets, ensuring affordable energy costs, establishing international fair play for climate policies, boosting innovation and assisting restructuring.

Reducing administrative burden

Regulatory fitness checks: At the end of 2012, the Commission launched a new Regulatory Fitness and Performance Programme (REFIT) to screen the entire body of EU law and identify burdens, gaps and inconsistencies in order to correct them. Wherever this is appropriate, the Commission will suggest corrections and improvements. The screening results of the REFIT programme will be published in Summer 2013. The REFIT programme will also provide the follow-up to the concerns raised by businesses in context of the Top10 consultation (see below). MEMO/13/168

Competitiveness proofing, i.e. analysis of the impact on competitiveness of all policy proposals: Cutting red tape and listening to the voice of businesses have been firmly embedded in the Commission's work for several years. As much as possible, the Commission takes the impacts into account when designing legislation and simplifies the existing regulatory environment. For this purpose, the Commission is implementing policy instruments and initiatives:
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The Commission's impact assessment system systematically assesses all significant costs and benefits of every proposal made by the Commission.

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The Commission introduced a scoreboard to cover regulatory initiatives with a significant SME impact. The scoreboard will show how exemptions and lighter regimes proposed by the Commission are followed-up by the European Parliament and the Council and how they are implemented by Member States for the benefit of SMEs.

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The needs of SMEs and good administration in the implementation of EU legislation in the Member States will be a main focus for the advice provided to the Commission by the High Level Group on Administrative Burden ("Stoiber Group").

Top ten: Less legislative burden for SMEs: Support for SMEs to find capital wwwwwith a view to simplify life for SMEs by easing burdensome EU laws, the Commission carried out a broad consultation in which roughly 1 000 SMEs and business organisations identified the top 10 most burdensome EU laws. (see MEMO/13/168).

2. Better access to Internal Market and international markets

Globalisation and the good achievements of EU industry in this respect, calls for better market conditions – improvements in the functioning of the Internal Market and opening up international markets:

The Product Safety and Market Surveillance package was proposed in February 2013 to improve product safety and help national market surveillance authorities to cooperate better and ensure a level playing field for companies and safer products for consumers. Better coordination of product safety checks, especially at the EU external borders, will eliminate unfair competition from dishonest or criminal rogue operators (IP/13/111).

In the internal market blockages in the trade of industrial products still exist. Taking the results of a public consultation concluded in April (IP/13/77) into account, the Commission will present this year a strategic initiative to enhance the quality and efficiency of the internal market legislation for industrial products, eliminate remaining trade barriers, in particular for products with high-growth potential, ensure more consistency in the application of the legislation, and simplify its management and implementation.

The need to make entrepreneurship an attractive and accessible prospect for European citizen, the Commission launched in January 2013 the Entrepreneurship 2020 Action Plan to unleash Europe’s entrepreneurial potential and remove obstacles.

Several studies have shown that the level of productivity in business services is substantially below that of the U.S., explaining a large part of the productivity gap between the EU and the U.S. at the macroeconomic level. Since March 2013 a High-Level Group on Business Services examinees the obstacles to a well-functioning single market in this field. In particular the HLG should make policy recommendations and help policy-makers to identify ways to improve the level of productivity and innovation of business services.

The Commission is implementing an ambitious trade and investments agenda, including the launch of negotiations with Japan and with U.S. for a Transatlantic Trade and Investment Partnership.

Missions for Growth led by Vice-President Tajani have taken place since last October in Egypt, Tunisia, Morocco, Peru and Chile. Upcoming ones are foreseen this year in Russia (17-18 June), China (18-19 July) and Myanmar (13-15 November). Accompanied by up to 50 representatives of European companies and industry associations, the visits are designed to help companies and SMEs internationalise their activities, and to reinforce cooperation in areas such as industrial innovation, key enabling technologies, tourism, space and access to raw materials.

A new SME IPR Helpdesk for the ASEAN region has been established, following a successful experience in China. A third help desk should be launched by the end of the year for the Mercosur region. These Helpdesks, co-funded by the Commission, provide free information and services for European businesses to protect and enforce their intellectual property rights.

3. Access to finance and capitals

Access to finance of industry business, in particular of SMEs, remains difficult and is one of the main reasons for the current economic downturn. Therefore to improve lending to the real economy by better mobilising and targeting public resources, including those of the EIB, the Commission intends to enlarge our loan guarantees covering lending to SMEs under the new COSME and Horizon 2020 programmes as of 2014.
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Each euro dedicated to our guarantees has a power to stimulate - on average – 30 Euros in bank loans. Moreover we are working with the European Investment Bank on new formulas that can be suitable to finance industrial investments, especially for innovation, energy saving and sustainable growth (MEMO/13/393).

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The new Directive on Late payments, entered into force on 16 March, is a key tool to ensure liquidity for companies, notably SMEs, and avoid bankruptcies. The Commission is closely monitoring the implementation of the Directive in Member States and has launched an important information campaign that will continue throughout this year and 2014.

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The Green Paper on long-term financing of the European economy has been adopted in March. Key questions addressed in the consultation include whether Europe's historically heavy dependence on banks to finance long-term investment will and should give way to a more diversified system with significantly higher shares of direct capital market financing and greater involvement of institutional investors or to other alternatives. The financing needs of SMEs deserve particular attention as they have the potential to underpin long-term growth.

The proposal for a 'European Venture Capital Funds' should be formally adopted before the summer. It will facilitate cross-border fundraising and create a genuine internal market for venture capital funds. With the help of a European passport fund managers can market their funds across the EU (IP/11/1513).

Two recent proposals to attract investors through more visible SME markets and more visible listed SMEs:
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A proposal for the Markets in Financial Instruments Directive (MiFID) to sustain the development of stock markets specialised in SMEs.

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A proposal for a modification of the Transparency Directive to give better information on listed SMEs.

The Commission and the EIB are working on new formulas to reach farther with new formulas that can be suitable to finance industrial investments, especially for innovation, energy saving and sustainable growth.

The difficult access to finance for SMEs is more significant in some Member States and compared to large companies

In spite of the expansion of money supply by the ECB, the surplus of liquidity has difficulties in finding its way into the real economy, especially to SMEs. As a matter of fact, bank loans to SMEs as a percentage of GDP have been cut down dramatically since the beginning of the crisis.

According to the ECB surveys on the Access to Finance of Small and Medium-Sized Enterprises, the differences across Euro Area Member States are stark: while German SMEs have been experiencing a relative softening in bank lending conditions, in other countries like Spain the percentage of SMEs facing financing obstacles reached 51% and in Greece stayed at 64% in the period between October 2012 and March 2013.

Also, the lack of alternative ways to channel liquidity into SMEs has resulted in very different levels of liquidity in SMEs compared to larger companies. Some calculations, in DG Enterprise’s April 2013 Monthly Note, suggest that “excess liquidity” in the industrial sector increased at the onset of the crisis reaching a peak level of 7.4% of GDP in 2010 and remaining high at 6.7% in 2011, compared to 5% of GDP in average over the 2005-2011 period. This suggests that, for some larger companies, liquidity might not be the main obstacle to a recovery in investments.

4. Human capital and skills

Jobs for highly-qualified people are expected to rise by 16 million between now and 2020. This means equipping labour force for industrial transformations, notably by better anticipating skills needs and mismatches. In this area, the Commission will in particular further promote cooperation of employers, workers and relevant authorities.

For instance, a Grand Coalition for Digital Jobs has been launched (IP/13/182), to address up to 900 000 job vacancies expected to exist in Europe in Information and Communication technologies by 2015, and the Commission has put forward a strategy to "Rethink education" including targeted recommendations to Member States for modernising education and training systems and ensuring in particular a much stronger focus on developing transversal skills and basic skills at all levels, especially entrepreneurial and IT skills.

The EU Skills Panorama website, online since December, provides information and intelligence that can help improve the capacity for skills assessment and anticipation, improve responsiveness of education and training systems and enhance the matching of supply and demand for labour across Europe.

Besides horizontal initiatives, the Commission continues to develop and implement tailor-made sectoral actions, for instance including automotive, construction, steel, shipbuilding and refining.

Member States’ and industry's active role is crucial in success industrial relaunch

Member States’ and industry's active role and engagement is crucial. The Council has welcomed the Commission’s Industrial Policy Communication Update. It is now key to further explore and develop synergies between EU and national-level initiatives. In order to face competition from large economies such as the United States or China, the EU must further reinforce consistency in its overall industrial policy. National circumstances and specificities need to be taken into account and therefore the Commission addresses country-specific recommendations in the framework of the European Semester. Developments in the area of economic governance could pave the way for better coordination of micro-economic and competitiveness policies.

Industry must seize the opportunity to play its part in carrying out the necessary investments to give a competitive lead to Europe. Industry has welcomed the new orientation in EU policies but it is necessary to know what steps are being taken by the private sector and about their expectations on European and national policies.

There is an urgent need to relaunch investments in technologies and innovation. The Commission’s actions are devised to improve the investment climate and restore confidence by private actors.

Source: European Commission