Recovery plan must be a kick-start for entrepreneurship and innovation

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

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The European Commission has tabled a much-needed financial solution for the economic restart. A strong signal of European solidarity was urgent, and it was necessary to provide an encouraging outlook for a sustainable economic boost. It was also appropriate to put the European budget at centre-stage. It is under democratic scrutiny and provides a wide range of proven instruments for cohesion and support. Linking the recovery plan to long-term policy objectives such as digitalisation, climate change and resilience lends the plan a vision beyond short-term aid.

The plan also acknowledges the EU single market as a key asset in the struggle for economic recovery. The more volatile the international environment and the more difficult it is to access other markets, the more important it is to have a functioning, open and non-discriminatory domestic market. The initiatives targeting barriers in the single market point in the right direction. Overall, the recovery plan proposes the reassuring safety net and repair strategy which is needed in the most difficult stages of this crisis.

Setting Europe’s forces free

However, public money and protection will not be enough to stimulate the growth and innovation needed in future. To replace the jobs and enterprises we are losing in the crisis, and to successfully master the green transition, we need long-term economic growth, innovative ideas and entrepreneurship. Advanced materials, manufacturing and engineering technologies are essential to both increase productivity and to master the green transition. Europe must free its economic, technological and societal forces and become a place where investments are made and business can flourish. From this perspective, the recovery plan takes too narrow a view and needs to be complemented with more economic ambition.

In particular, it lacks a strategy to improve the framework conditions for companies of all sizes in Europe.

Resilience needs open markets for diversified supply chains

First, it is important to ensure access to markets. As in other sectors, the EU’s mechanical engineering sector largely comprises medium-sized businesses, and so is highly dependent on open markets. More than ever, the EU needs free trade agreements with its main trading partners. Growth and prosperity will only be possible with healthy international trade relationships. Resilience cannot be achieved by local production alone. It is based upon diversification and the intelligent management of global value chains.

Now it is really time to tackle the 3% R&I target

Second, to create the technological building blocks and the knowledge we need for the future, Europe needs strong investment in research, innovation and education. The recovery plan should be taken as an opportunity to finally achieve the 3% target for research and innovation expenditure in Europe. R&I also plays an essential role in strengthening the European innovation networks which bring together the best brains, technologies and expertise which we will desperately need to repair our value chains, resolve other problems and find new, sustainable ways to do business.

Mobilising entrepreneurship for a sustainable future

Third, this is the moment to deliver a boost for entrepreneurship through a bold initiative for better framework conditions while easing the administrative burden, in particular for SMEs and start-ups. A systematic screening of restrictive and onerous measures should be part of the Green Deal and the recovery plan, to free capacities and allow new solutions. Regulation must be internationally compatible, technology neutral and consistent. How about an initiative which goes beyond one-in-one-out and tries to replace two regulations with one? Or an entrepreneurship-check for all new regulation?

That does not mean questioning the objectives of the Green Deal. On the contrary, to achieve a self-sustaining economic transition, we need the full power of a market economy which identifies the best and most efficient solutions and encourages lasting green business models. Europe must stimulate the change in a way that is market-based and technologically neutral, rather than prescriptive and state-driven. Investment should be steered by “green” return-on-investments, not through detailed regulating of products or access to finance. Every hour freed from red tape can be invested in the future.

What Europe needs now is a strategy that unleashes its economic forces and creates the conditions for a competitive, vibrant, excellence-based economy, using the best technologies with the most skilled people, and capable of sustainable economic growth with more and better jobs.

About the author/organisation:

The VDMA represents around 3300 German and European companies in the mechanical engineering industry. The industry represents innovation, export orientation, and medium-sized companies. The sector employs around four million people in Europe, more than one million of them in Germany.

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