Speech by President Barroso: “Time for extra growth”

José Manuel Durão Barroso — President of the European Commission

VOKA conference/Brussels

Brussels, 6-12-2012 — /europawire.eu/ — Ladies and gentlemen,

It is a great pleasure for me to be here today.

The impressive turnout shows that Flemish entrepreneurs mean business when they talk about leaving the crisis behind. The equally impressive location can give us all inspiration in how to do so.

Up until fifty years ago, the Tour & Taxis site was one of the flagships of Belgian economy. The fact that it has recently found a new and creative purpose can inspire us while we are trying to find the best sustainable answers to the challenges facing the European economy.

Ladies and gentlemen,

Despite these challenges and difficulties, Europe is still a major powerhouse in the world economy. The European Union remains the largest trade block, the largest source and recipient of foreign direct investment.

We have managed to hold on to our 20 % share of total world exports despite the rise of new very important competitors. So the picture is not as bleak as some would like to paint it.

Europe has also taken bold steps in response to the financial and economic crisis.

We are well ahead some of our main partners, for instance, in implementing the G20 commitments on the reform of the financial sector.

We have also agreed at the highest level an economic agenda, Europe 2020, that sets us on course towards smart, sustainable and inclusive growth.

It has clear benchmarks, which are monitored and translated into national, country-specific guidance. Just last week, the Commission adopted the Annual Growth Survey and the Alert Mechanism report for 2013. It will lead, next spring, to the adoption of Country-Specific Recommendations.

The Commission has a unique role to play as a driver of this reform agenda – by providing sober and objective analysis to underpin policy choices that matter for each country and for the EU as a whole.

The new set-up for economic governance provides progress that was unthinkable even two years ago. You have probably already heard about the ‘six-pack’, which is a new legislation in terms of reinforcing economic governance. These measures give the European level the task to scrutinize whether Member States are implementing the agreed decisions and to act if they are not, both preventively and correctively. I hope that the next legislation, the so-called two-pack, will be approved soon, for it is extremely important for increased governance in the euro area and beyond the euro area.

You, as entrepreneurs, know well that high ambitions without implementation are nothing else than good intentions. We have seen in the past how rules that were agreed, were not properly implemented by Member States in the absence of strong mechanisms of control and enforcement at EU level. And we have seen how the consequences have affected us all. That reality – of how our fates are interlinked –, is for me at the core of today’s European politics and European policies. In today’s interdependent world, we can only stand our ground if we stand together as a European Union.

Last week, the Commission had adopted its Blueprint on how to complete our Economic and Monetary Union, proposing a long-term vision as well as the concrete steps that could be taken in the very short and the medium term.

We should not shy away from the debate on how the present European Union must evolve, both in the economic and in political terms. The Commission will lead the way.

Before the European elections of 2014, we will set out the objectives to be pursued, the way to make the European Union more open, more democratic, more effective, and the model to make it a union for the peoples of Europe.

Ladies and gentlemen,

It is in a similar vein that I would want to frame the current debate about the European budget – the so-called Multi-annual Financial Framework for the years 2014 to 2020. As you know, these are traditionally difficult discussions. This is my third time discussing this kind of issues at European Council level. And so there is nothing dramatic about the fact that the debate has been prolonged until early next year. The current economic times do not make things easier.

But there are two things I would like you to keep in mind. Firstly, the European Union budget is only around 2% of total public expenditure in Europe and 1% of European Gross National Income.

Secondly, the impact of a euro spent at European level, rather than at national level, can have a bigger return on investment and can be much more tangible.

Let me take one example: for Horizon 2020 – our European framework for research and innovation – the Commission has proposed 80 billion euro, and we are fighting for it not to be cut in the current debate. Each billion cut from the Horizon 2020 programme would mean 4000 SMEs are deprived of financing for innovation or 600 top researchers and their teams would no longer be able to carry out their work.

Access to finance is another major issue which the Commission is helping to tackle. One out of four Flemish SMEs is worried about its financing. To assist such SMEs, the Commission has proposed creating a true single market for venture capital funds and targeted use of cohesion funds to support SMEs in some countries.

Finalising the single market is also a way to create further opportunities. In October the Commission adopted the Single Market Act II, which sets out twelve new key actions for growth in the internal market. They focus on fully integrated transport, energy and digital networks, mobility of cross-border businesses and citizens, support to the digital economy and social entrepreneurship, cohesion and consumer confidence.

For an open economy such as yours, here in Belgium and in Flanders, where the European internal market accounts for 68% of exports, this is a promising package, and I hope to be able to count on your full and vocal support.

We are not only exploiting the potential of trade within the EU, because there are still barriers inside the European Union, not so much in terms of goods, but in terms of services and in some other areas, but we are also looking beyond Europe’s borders. The reality is that world growth will be increasingly generated outside of Europe, one third of which will come from China alone. This is to some extent natural, because these are emerging economies with a much greater growth potential. That is why we need to tap into these new sources of growth, through multilateral and bilateral negotiations.

To take only one example: with our Free Trade Agreement with Korea in place for more than one year, exports in sectors that are crucial for Flemish growth and jobs, such a machinery and chemicals, are up by a quarter.

Ladies and gentlemen,

The European growth agenda is a complement, not an alternative for national governments’ reform efforts. The two should go hand in hand.

For Belgium, what needs to be done is well known and I would like to pay tribute to the government’s commitment to reform.

Efforts toward fiscal consolidation should continue and should concentrate on the expenditure side, with efficiency gains in public administration and better regulation being vital.

It should also be used as an opportunity to make the tax system more growth friendly, for instance by shifting taxes from labour to consumption and environment.

What has to be achieved – not only here but in all Member States – is what we call SMART fiscal consolidation. And indeed: it is good news that public Research and Development expenditure in Belgium is increasing, which is essential to help Belgium on its way to the 3% GDP target set out in our Europe 2020 growth strategy.

I hope private R&D investment, which has slightly decreased, will start to pick up again too.

Fiscal consolidation and increasing competitiveness go hand in hand, and a balanced and ambitious structural reform agenda is also an essential component of our response to the post-crisis challenges. Belgium has initiated reforms, but this will require sustained efforts in the years to come.

Such reforms need to tackle in particular the retail sector as well as the labour market, which suffers from a persistently high share of long-term unemployed, low employment participation of the elderly and high youth unemployment in certain regions. There is a need to pursue the initiated reform of the unemployment benefit system, so as to reduce disincentives to work and strengthen the focus of employment support and activation policies.

Crucially, entrepreneurs too have their part to play. And it is a vital part because you are the real engine of the Belgian economy and the European economy. We can only make progress if you continue to invest; if you continue to diversify in terms of products and markets; if you convert knowledge into new products, new services, new processes; if you search and find new opportunities for growth.

Ladies and gentlemen,

To conclude, growth and jobs are at the heart of the policy decisions the Commission is focussed on, both when we set out strategic orientations and when we implement concrete decisions. And I believe Europe, in spite of all the challenges, is making real progress.

Europe is at a defining moment and we need to seize this opportunity for Europe to grow and look towards the future.

Though it will take time, I am confident that the European economy will overcome the current difficulties.

Part of that confidence comes from whenever I meet people like you that are entrepreneurs, that have not given up, and I see the strength, the resilience, the conviction of our entrepreneurs, our companies, our innovators, our qualified labour force all over Europe; I see difficulties and challenges, but I also see many signs of hope.

I thank you for your attention.