Žiga Turk is Slovenia's Minister for Growth.
The latest reports on the EU's progress towards its goal of boosting growth and jobs – the so-called Lisbon Agenda – have been surprisingly positive after years of gloom. Could the EU target of becoming the world's most competitive economy by 2010 by reached after all?
The European economy has had some very good years recently – 2006, 2007 in particular. We have seen very good growth in all countries and in the new member states in particular.
Whether Europe will be the most competitive economy in the world by 2010 is difficult to say as it is difficult to measure. Definitely, there are areas where Europe is doing fairly well and others where it is still behind the United States.
Could you list those areas?
Europe definitely stands out as a global model of development in the sense that it combines intrinsic values, such as caring for people and the environment, with its economic growth, prosperity and technological development.
Europe is however not particularly successful when it comes to translating innovation and knowledge into economic activity. To put it specifically, we are fairly successful in transferring money into knowledge – we have very good research institutes and European universities are fairly good – but when it comes to reversing the process and turning knowledge into money, there are a whole lot of obstacles in the way.
The economic conditions for small and medium-sized enterprises are also not as favourable as, for example, in the United States. This is why we are very keen, when it comes to the Spring Summit conclusions, to send a strong message about the Small Business Act and about the access of SMEs to the main leverages of growth and development. These include venture capital and equity financing in particular (not bank financing), but also better access to research infrastructure and to the knowledge economy on which the Lisbon strategy is betting so heavily.
Do you expect concrete advances in those areas at the Spring Summit?
We hope to send a very strong message that Europe must continue with modernisation and reforms. In some of the new member states, the changes undertaken over the past 20 years were so huge that they should be an example to some of the older member states. Changes are in fact possible and are not necessarily painful. On the contrary, they can sustain the quality of life of which Europe is so proud.
We have the best process in place – the consensus of the 27 member states – so let's continue to make use of it. The engine is in place, it is not broken. So let's keep on with the modernisation and reforms that can make Europe a much more competitive player in the world.
So the Summit will be more about confirming the Lisbon goals rather than making big changes or achieving breakthrough on some issues? You were mentioning the Small Business Act…
The Small Business Act, support for SMEs, deepening the internal market, notably as regards services – all these items have been on the European agenda for some time and they need to stay there until they are resolved. This is not something to which Europe can say 'no, we are happy with the current situation'.
Europe has a gap in small innovative companies. And indeed it also has a gap in very large global market leaders – although this receives little political exposure.
This is a problem because both these types of players bring in high profits. Big companies are important to SMEs as well because many small companies feed into the medium and large enterprises. And the internal market is essential within Europe for these companies to grow strong and take global leadership.
Which areas of the internal market do you think need to be strengthened as priorities? You mentioned services and ongoing negotiations over a Community patent for example…
The European knowledge area is definitely something that could be strengthened. We have a shortage of high quality people and we have strong migration of top scientists and engineers to the United States. So we must make sure that we create good conditions for them to stay in Europe.
An open knowledge space also means common mechanisms to protect our knowledge. The Community patent has been on the agenda for a long time and it is high time to move forward on this one. But the obstacles that have slowed progress are still more or less in place and a country like Slovenia is not in a position to lead on this because it is not responsible for the blockage.
As current holder of the EU Presidency, have you put forward any compromise proposals on the Community patent and are you hopeful of making any progress on issues such as language use and translation costs for example?
We were more hopeful in the past. But I would not like to make any predictions as it is a very demanding and tough subject.
I think it is important for the member states to show some maturity in this area. The benefits of having a European patent are much bigger than any potential benefits related to languages and translation.
Moving on to climate change - another big topic for the Spring Summit: There are growing calls across Europe to protect energy-intensive industries from competition from China and India where CO2 emissions are not regulated. How do you think the EU should address this problem?
First of all I think one should be very cautious and not invest too much hope into any form of protectionism. In the short term, of course it may seem nice to protect something in order to survive. But, in the long run, you are hurting your economy if you are not exposing it to the harshest environment possible.
Let me make a comparison with biology – the most advanced animal species developed in the competitive environment of the African savannah and not on some island where everything is protected. Obviously though, while open markets and less protectionism clearly offer long term advantages by clearing the economy of uncompetitive parts and promoting growth in those that can compete, it also creates a whole lot of short term problems.
The problem for politicians is how to sell this open market idea to the general public. Because, for a citizen, it's his job that will be on the line at some point and what we have to do is make sure that his next job will be a better paid one.
We could probably help do this if we were able to "trickle up" the economy by basically exporting the lower paid jobs to third world economies, such as Brazil, Russia, India and China, rather than the high-skilled ones.
So what is the answer? Is it all about education, then?
The answer is a competitive economy in which you give people and companies the opportunities to grow. Companies can help people grow through continued education and the higher education system in Europe can also be improved. As I said, we have fairly good or average universities in most European countries, but what we are lacking, in comparison with the rest of the world, is excellent universities. Excellence is not created under the current system for higher education in Europe.
Good skills – and comparable skill levels – are also extremely important if you want to have a flexible labour force that can move from one country to another.
You mentioned energy and climate change. Again, this is one of the issues that create short term problems and long term benefits. And again a tough act for politicians to sell.
But the economy today is such that the challenge is now to invent products and services that people are willing to buy and that investors are willing to invest in. Upgrading our housing stock, and indeed our whole economy, to become more energy-efficient is cause for a lot of investment.
About getting consumers involved, the Commission has launched a discussion on encouraging the take-up of 'greener' products through preferential taxation schemes. However, any such scheme would require unanimous approval from the Council of Ministers. Do you see any appetite from the member states to come to an agreement on this?
I am not sure that you need taxation to force people into doing something. Just providing information on a product can make a difference. If I see two products roughly the same price and one is class B ecologically, and the other one is class A, I might go for class A if it means greater environmental benefits.
I think Europeans will increasingly build into their purchasing habits values that are very much European and that are not so materialistic – bigger, better, faster and so on – anymore. If you look at what differentiates Europe from other continents, we are much more sensitive to environment, we are trying to do things more peacefully, we care more about human beings. We are more empathetic towards things surrounding us and so more open to ideas like doing things for the environment, etc.
Also, what is important is for Europe to find measures that encourage investment in new technologies. Taking cars as an example: If somebody proposes a measure that will kill off the German car industry, I am very much against it because then somebody else will be making luxury cars. But if you can provide a very clear message to industry that in the future, it needs to be more energy efficient then, in a couple of years or in a decade, it will produce a new generation of cars that is more energy efficient and will definitely have very good potential on global markets, in China, India and the US.
So you mean without regulation?
We must be very careful with regulation, so that it stimulates innovation and doesn't stifle sales. It has to be realistic in what it can achieve.
Frankly, what is really lacking to achieve a breakthrough in the way people think about cars is luxury brands that are ecological – hybrids, hydrogen and so on. It is these brands that people look up to as an example or role model for a new generation of cars.
Anything to add in view of the summit?
The message is that things can change. I think this is the message that is coming now from the East to the European mainland. In the East, we are somehow used to changes by now; we are used to things moving forward.
Slovenia is a country that proves that you can quickly achieve some economic benefits if you pass reforms and try to change. Economic growth in Slovenia is the highest of the euro zone. Our unemployment rate is also almost half that of the eurozone. We have created thousands of new jobs, net salaries have gone up – so it not just GDP figures, it is also the money that people have in their pockets. We have lowered our tax rates and, at the same time, reduced budget deficits. We have all the right figures across the board, with the exception of inflation, which you now see creeping up in the European economy as a whole.
The other issue which will likely appear at the Summit as a message for the Lisbon Strategy, is this whole concept of creativity and open innovation.
What brings economic growth? The Lisbon strategy has been betting on knowledge, R&D, scientific innovation and so on, and of course this is part of the story. But China and India also are also starting to produce very good engineers and scientists.
So what Europe can do to compete globally is actually rely on its cultural heritage – we like beautiful things, we have excellent designers and architects, etc. So we should probably include the term "creative economy" in our concept of knowledge economy.
The creative industries in Europe are stronger than the car industry. And it is the creative industry that makes the difference between a coffee cup worth €0.05 and a coffee cup worth €5, even when manufacturing costs, somewhere in China, are almost the same for both of them.
So I think this is one of the messages that we also want to send around. And, with it, goes stronger intellectual property protection: protection of brands, designs, of all the digital content that is around.
Another strong message will also relate to the need for Europe to continue developing world-class IT infrastructure.
The economy is increasingly digital and we must think in terms of pipes and broadband access. So we will be calling on member states to come up with plans to make sure that their citizens can benefit from this information revolution. In particular, we think it is imperative that all schools in Europe have broadband connection because learning is so different nowadays with internet, with data available at the touch of a button, than when you had to go to the library to get a book for each piece of information.
With this connectivity, with masses of people online, all Europeans can become part of the innovative and creative processes taking place in Europe.