Toespraak EU-President Van Rompuy over concurrentiekracht Frankrijk en Europa (en)

EUROPEAN COUNCIL THE PRESIDT

Paris, 13 March 2012 EUCO 48/2/12 REV 2 PRESSE 109 PR PCE 40

"Growth and employment in Europe and in France: towards a competitive continent" speech by President Herman Van Rompuy i at the conference organised by the AFEP and Le Monde "The challenges of competitiveness" - Carrousel du Louvre, Paris

Speaking in Paris on "The challenges of competitiveness" at a colloquium organised by employers organisation AFEP and Le Monde, the President of the European Council, Herman Van Rompuy, urged Europe to move towards being the "continent of quality"

"Competitiveness is no longer merely a national concern; but has become a European concern. (...) Purely arithmetically, we cannot all be net exporting countries in the European Union... just as we cannot all be top of the class in all subjects. However, compared with the rest of the world it's a different story. Together: we can have the best performance in the world! (...)

We cannot overlook the link between the development of prices and salary costs, on the one hand, and productivity trends on the other. But let's be clear: in the face of international competition, if salvation were only to be found in reducing labour costs, Europe could "close shop ". There is no doubt about it. Our major strengths lie in our "non-price competitiveness", our capacity to produce unrivalled quality and to adapt to the needs of rapidly growing markets. Our efforts should be focused on this. While adapting to today's world, we should remain true to ourselves and confirm our role as the "continent of quality"! The quality label of a certain way of life, of taste and style, of open social relations, environmental protection, a sense of progress. We absolutely must channel our innovative ambitions in that direction (....).

And we can do it, we just have to take the lead; not only in preservation, but above all in innovation. "All by industry, and all for industry!", was what Saint-Simon said two centuries ago. Today he would say "All by innovation, and all for innovation!"

Dirk De Backer - Spokesperson of the President - 8 +32 (0)2 281 9768 - +32 (0)497 59 99 19 Jesus Carmona - Deputy Spokesperson of the President - 8 +32 (0)2 281 9548 / 5150 - +32 (0)475 65 32 15 press.president@consilium.europa.eu http://www.consilium.europa.eu/

PRES

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Original version in French

We are gathered here as Europe has reached a special, paradoxical time in its history - a period of anxiety against a background of unparalleled success. Success, because our continent - let's not be afraid to say it - is the most prosperous, the freest and the most stable region in the world

Of course, I've read Candide, and all is not for the best in the best of worlds. But the fact that in Europe half a billion men and women are living in peace, in a Union of 27 countries at peace with each other, is a unique success in the history of mankind, one the whole world envies

With 7 % of the global population, we nonetheless produce 20 % of global wealth, which is more than the United States and as much as China and India together. In terms of per capita revenue, the figures are even more telling - on average the inhabitants of Europe earn four times more than those of China, and almost ten times more than those of India. It is sometimes useful to recall some basic truths

And yet. And yet many Europeans are worried, worried about their jobs and their children's jobs, and about the future of our society in a changing world. It is true that this period of crisis in the eurozone - even if we reached a turning-point in the last few weeks - has tarnished our image in the world. The image of the sun setting here and the sun rising elsewhere is on everybody's mind

The very words 'China', 'India' and 'Brazil' sum up the challenge in terms of economic growth. Shock figures of 8, 9, 10 % growth elsewhere and far more modest figures of 3, 2, 1 % here. And even if you have to put the figures in context, since developed economies like ours clearly cannot grow as rapidly, per capita, as emerging economies, the differences still provide food for thought... Hence the worries about the future of our economies, our jobs and our competitiveness

In particular, I'm thinking about the growing feeling that our children's lives will not necessarily be better than ours. Have we reached the peak? It would be a turning-point, because progress, growth, the idea that every year will bring "a bit better, a bit more" has shaped Western societies and individual expectations for a long time

In this sense, the difference, which economically speaking is marginal, between 0 % growth and +1 % growth, actually means more: a certain loss of direction, of meaning. A move from quantitative to qualitative terms. For the unemployed, especially young people, this lack of prospects is clearly both more concrete and more existential. Take the indignados, the "indignant youth". Theirs is a cry of despair, completely different from the "crisis of civilisation" of May '68, in the middle of the "Trente Glorieuses", the three decades of economic expansion of the war... The subject of your conference, "the challenges of competitiveness", is therefore not just about the economy: it is about everyone's faith in the future. A highly political subject

Why do our economies have to be competitive? Here too, it's useful to recall some basic truths. Competitiveness is not an end in itself. It's about creating growth and jobs, maintaining and improving our way of life, safeguarding the European social model, albeit the reformed model

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Since the economy is a forum for exchange, choices and preferences, it's clear that we're dealing with relative, not absolute values. We are competitive compared with someone else - a product, a service, an industry, a country, a continent. This means that each of us - each person, each economy - has to make best use of their skills to persuade others to acquire what we are producing or offering

For the countries of the European Union, a distinction has to be made between external competitiveness, in other words competitiveness vis-a-vis the rest of the world, and internal competitiveness, between ourselves, especially between the eurozone members, where the differences in competitiveness, when flagrant and ongoing, can undermine the stability of the eurozone as a whole

The Greek crisis has shown us (painfully) how a country's loss of competitiveness can undermine the confidence of the markets in other European countries. The Greek crisis brought to light problems in Portugal and beyond, putting at risk the financial stability of the entire system. No political leader would wish to look into the same abyss once again. That is why competitiveness is no longer merely a national concern, but has become a European concern. (In this respect, the Greek crisis provided one more example of the Europeanisation of national policies, when only recently it was feared that European policies were being nationalised once again.)

External competitiveness is just as important.. In fact, between us, purely arithmetically, we cannot all be net exporting countries in the European Union... just as we cannot all be top of the class in all subjects

However, compared with the rest of the world, it's a different story. In Europe we have to increase our average, to have upward convergence, so that the 27 are more competitive externally. Together: we can have the best performance in the world! And it's essential. So that Europe can continue to play its role in the world: as a prosperous, stable and free continent, as a magnet for the countries around us, as a force ready to defend and promote its interests and values in the world

And we can do it! Let's not remain on the defensive, but tackle challenges head on . Not only preserve, but above all innovate. If you don't go forward, you go backward. The European countries have extraordinary assets, as well as challenges. Let's take these starting from another well-known distinction; the difference between price competitiveness and non-price competitiveness

First of all, "price competitiveness": even if it's not everything, it shouldn't be overlooked! Here the link between the development of prices and salary costs on the one hand, and productivity trends on the other, is crucial. It's true for the private sector and the public sector

We have seen several examples of European countries which had major salary increases in the last dozen or so years. Those increases were tied to speculative trends, in the property sector for example, rather than to a genuine increase in productivity, and they proved unsustainable. Rather a development which is slow and modest, but linked to productivity and therefore sustainable, than extravagant salary rises followed by painful adjustments. Efficient mechanisms for negotiating salaries, appropriate for the situation of each company, each sector and each country have a key role to play in this

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But let us be clear: faced with international competition, if salvation were to be found only in reducing labour costs, Europe could "close shop". There's no doubt about it. Our major strengths lie in our "non-price competitiveness", and that is where our efforts should be channelled. What is more - and this has been confirmed in a recent report by the World Economic Forum - competitiveness and quality of life are not mutually exclusive: the most prosperous and, some believe, the happiest and certainly the most egalitarian nations such as Denmark, Sweden or Norway are also the most competitive! (It is true that they have learned the lessons of the financial and economic crisis they suffered 20 years ago...)

So, what should we understand by "non-price competitiveness", and how can we enhance it? We are not talking about costs here, but about quality in all its various shapes and guises: novelty, reliability, image, design, experience, durability..

To preserve or increase our market share in international trade, it is our ability to produce this quality and to adapt to the needs of high-growth markets that will get results

Europe, and still less France, will not emerge from the crisis by denying their true selves. More than ever before, our continent must be synonymous with quality! Our brand is one of a certain way of life, of taste and style, of open social relations, of environmental protection, of a sense of progress. This "European treasure trove" can constitute a handicap in some respects, if one sticks to a strictly productivist logic, which demands ever greater uniformity and speed... But it is, first and foremost, an asset. And this is the tune to which our innovative ambitions must march

A country such as Denmark, which excels by the clearness of its design, is very well able to capitalise on a certain self-image; so is Germany, with its reliable industrial products, which are in demand in emerging economies

Thus in each of our countries, while adapting to today's world, we must remain true to ourselves. And France has a vital part to play in this evolution, which must be accomplished throughout Europe. And you do promote your country's qualities - be it great engineers such as Peugeot or Dassault, luxury goods companies such as LVMH or Hermès, or products that evoke both tradition and design such as knives produced by the Forge de Laguiole

But we must win back the market shares we have lost over recent decades. We must not let our success stories blind us to the fact that we - all of us in Europe - have important work to do. How can the European Union help us rise to the challenges of competitiveness? I would say there are three key components

Firstly, Europe is not a panacea, nor is it a straightjacket. Europe is first and foremost a treasure trove of experiences we can share. When we meet at summits, I often ask colleagues to share with us how their country managed to achieve a given reform. We did this again at the European Council on 1 and 2 March

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Take Austria for example, a country with the lowest youth unemployment in Europe, in particular thanks to its highly original apprenticeship system. Finland, for its part, has greatly developed the computerisation of its public services for communication between authorities, the general public and companies; this advantage hugely reduces the administrative burden for companies

As for structural reforms for enhancing competitiveness, a recent OECD report shows that for five years now it has been countries in difficulty, and especially Greece, Ireland and Portugal, which have made the most progress! Even if their situation is still difficult... in terms of progress, they are up there with the best!

The second key component is that Europe is also an internal market, the largest in the world, which contributes to creating growth and jobs. Nevertheless, as the company leaders among you perhaps experience every day, there are still significant barriers which sometimes generate high costs, thus adversely affecting competitiveness, and in turn, employment. This is true of the services sector - 70 % of GDP - and the digital sector. Why can't a Belgian resident buy cheaper car insurance offered by a French company based in France? In the 21st century, with our technological potential, we must admit that this is baffling. Twenty years after 1992, the famous year of the single market, there is still much to be done! Hence our resolve, reiterated in the European Council on 1 and 2 March, to exploit the full potential of our vast market

The internal market is also a persuasive force vis-a-vis the rest of the world. When we, 27 European countries, agree on an industrial standard, our collective weight quickly leads our world partners to sign up to it. This gives our industries an important advantage, for instance in the field of green technologies and energy

Our collective weight also benefits us in our trade negotiations with other countries. It is vital that the world trade system continues to function. Once again, we do not need to turn in on ourselves, but we do need confidence in ourselves and in the quality of the products and services we have to offer

This takes me to the third key component: innovation. A few statistics will throw light on the challenge here. In Europe, only one in three people in the 25-34 age group have completed university education, compared to over 40 % in the United States or Australia, and over 50 % in Japan. Three Europeans in five have weak or non-existent numerical skills. What is more, the number of information technology graduates is stagnating, to such an extent that in 2015 we may be 700 000 IT engineers short! This is all about human capital, which is a vital factor

Young American companies created since 1975 have been investing over twice as much of their income in research as their European counterparts. Europe has far fewer young, innovative companies than the United States. Well-known companies in Europe are often over 40 years old, while those in the United States are often only 15, 10 or even 5 years old. The German company Siemens, for instance, was founded in 1847, the American company Google in 1998. Of course, it remains to be seen whether Google will still be around in the 22nd century!

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Europe has many small enterprises; this is particularly the case in France. It can be an asset. Yet small companies, if they stay too small, are less productive and thus less capable of investing in market expansion and innovation. Perhaps they are being suffocated by bureaucracy or taxes? Perhaps they lack funding, or venture capital? We must help them cross the threshold to the export market. We also need large European companies in key technological sectors, like those we have in the aeronautics sector: our "European champions"!

The idea of industrial policy at European level is important. It is also controversial; everyone has his or her own understanding of what it means. I can nevertheless say that there is a link between the extent of industrialisation and the rate of innovation and growth. We must therefore support industries of the future and green growth. China is now ahead of us in terms of patents for renewable energies. European action can help. For instance, we are working flat out on establishing a European patent, which will soon be operational after years of negotiation, and on creating a European venture-capital fund

"All by industry and all for industry!", Saint-Simon said two centuries ago. Nowadays Saint-Simon would say "All by innovation and all for innovation!". Our youth must rediscover a taste for enterprise. Preferably in the real world, far-removed from the world of speculation and easy but dangerous money. What is needed is a genuine cultural transformation

The challenges are major. But Europe, this continent we love, the continent of quality, is up to the task. Europeans, and most certainly the French among them, will find within themselves all the strength they need to rise to the challenges. Granted, it is a matter of economic conditions - you have spoken of them today - but it is also a matter of that little extra something, that force of spirit, that intangible feeling that is confidence. We Europeans have a long history behind us. If we put our minds to it, we will succeed again. We have a great future ahead of us!

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