February 27, 2009
Briefing Note For Closing Plenary Session
This briefing note has been prepared by FEB for the Closing Pleanary Session at the 2009 EBS. The session will run between 11.15 and 12.30 on Friday 27th March 2009. The session will be moderated by John Defterios, Host, CNN´s Marketplace, President, FBC Media.
The world is currently faced with probably the wort recession since World War II. Production is radically being cut, jobs are being lost and wealth is being destroyed due to falling house and share prices. In such a context it would be understandable to lose sight of the major medium- and long-term challenges. This would be a mistake as the failure to adequately respond to these challenges, would jeopardize future growth and jobs. In fact, the moment has never been more suitable to push through the necessary reforms. Crises are opportunities for change!
In its communication of the 26th of November regarding a European Economic Recovery Plan, the European Commission proposed that the Member States and the EU implement an immediate budgetary impulse amounting to €200 billion to boost demand. However, according to the Commission, this short-term action needs to be set-up in such a manner that it reinforces Europe’s competitiveness in the long term.
The financial and economic crisis will also have a very negative impact on the public finances of the Member States. According to the European Commission, the government balance is projected to increase from -0.9% of GDP in 2007 to -4.8% of GDP in 2010. As a result, government debt will increase as well, from 58.7% of GDP in 2007 to 70.9% of GDP in 2010. In 2009, Europe will approximately issue some €1000 billion of new debt obligations, which will put upwards pressure on interest rates.
The need to align short-term action with long-term goals demonstrates that the current crisis cannot be taken as an excuse to postpone the necessary reforms. Globalization, climate change and energy security, ageing, technological change,…, these are all challenges which are here to stay. Failure to respond will only jeopardize future growth and jobs. That is why in the following fields Europe should take immediate action and have the ambition to excel:
1. Cost competitiveness
Large differences in terms of cost competitiveness between Member States should be avoided. As the last couple of months have demonstrated, this will lead to important trade surpluses in some countries and large trade deficits in other countries, which will make it for the deficit countries more costly, and perhaps even difficult, to finance their debt and, in the worst of cases, put the cohesion of the euro zone area at risk. An ambitious implementation of the Lisbon agenda is crucial in order to avoid these undesired developments.
Europe needs to massively invest in research and development and innovation in order to make it in the very rapidly changing globalized economy of the 21st century. Which role does the European Union need to play in order to create a truly knowledge economy (e.g. in terms of finance, lead markets, critical mass,…)?
3. Human capital
A knowledge economy requires a different a kind of employees. High-quality education and lifelong learning will become one of the major cornerstones of Europe’s competitiveness. Attracting foreign and retaining European talent should also be a top priority for the European Union.
Today, the focus of European businesses is still too much on the European market. The ambition should be to increase Europe’s influence in those world regions (e.g. the BRIC countries) that are experiencing high economic growth. This important external dimension should receive much more attention in the Lisbon strategy.
5. Energy security
The delivery problems concerning gas in the beginning of this year have clearly demonstrated that Europe should become less dependent on foreign fossil fuel supplies. Improving energy efficiency, investing in renewable and nuclear energy and adjusting Europe’s energy infrastructure are all part of the solution. What can Europe do in order to ensure that the sense of urgency will not be lost with currently low fossil fuel prices.
6. Climate change
By accepting ambitious cuts in greenhouse gas emissions by 2020, Europe has been taken the lead in the international fight against climate change. On the other hand, Europe should also continue to defend its interests by stressing that an international level playing should be guaranteed. What further actions does Europe need to take in order to both create a comparative advantage in the eco-business and not jeopardize the international competitiveness of its energy-intensive industry?
7. Labor market
With increasing globalization and continuous technological change, Europe can only continue to create growth and jobs if its labor market becomes much more adaptive. That is why in the coming years, flexicurity should continue to increase in importance. Which role can Europe in this matter play?
8. Internal market
The current crisis puts pressure on the working of the internal market. What can Europe do in order to limit the rise of protectionism in the Member States and outside Europe.Author : EBS