The EU's 2020 strategy to build a sustainable future beyond the current economic crisis is too short-termist and fails to address the fundamental problems of the current growth model, Philippe Herzog, founder of the Confrontations Europe think-tank, told EURACTIV in an interview.
Philippe Herzog is a former French MEP and the founder of the think-tank Confrontations Europe, which in December 2009 hosted a two-day conference in Brussels exploring 'investment in human capital and long-term financing'.
He was speaking to Olof Gill.
The idea of sustainable recovery emerged in many of the presentations at the Confrontations Europe conference. What different messages did you take from the conference on this theme? What will this look like in the years to come?
The EU is not quite ready for a sustainable recovery, because this year has been devoted to waiting for the Irish referendum, the new Commission is not in place – we have missed a year, effectively.
I hope we'll be speedy in 2010, because there's much to be done. The notion of sustainable recovery refers first and foremost to the fact that we have to build a new type of growth. In the past, growth was linked to financial bubbles and the immoderate use of leverage – it was very short-termist.
In the future, we will need a growth model based on long-term investment, be it in education, infrastructure, or the so-called 'green economy', which will entail deep changes in the way we produce and consume.
So it's a whole new type of growth, and people need to be prepared for this, which is not the case at the moment.
There is another factor, which is the problem of the structures of the economy. The public sector has been a good stabiliser during the crisis, but its capacity to multiply the growth potential for investment is not there, and the private sector is likewise not ready, because it's still very sick.
These are the two problems we need to face in order to do away with short-termism and look towards long-term investment: restructuring the public sector and having incentives and different types of finance in the private sector.
Have the measures outlined by the EU so far been the right ones – for example, the EU 2020 strategy? Is this the right type of framework to achieve the goals discussed at the Brussels conference?
I think the EU acted properly in 2008, otherwise we'd be in a much deeper recession today, but it was short-termist and Keynesian economics of the simplest type – i.e. sustaining the global demand.
Now the challenge is to change our strategy for growth, and this will require a fundamental change from the current Lisbon Strategy. I think the way the Commission is preparing the new strategy is very problematic.
First of all, the public consultation period is far too short, it's almost non-sensical to try to consult people over the holiday period, between the end of November and early January. It should have started much earlier.
Secondly, I'm not very satisfied with the 'EU 2020' ideas. We would need scenarios of the future, and it's very clear – and all the economists present at our conference agree – that the next years will be very problematic.
I hope there won't be another dip in the Western economy, because the situation is already difficult as regards sovereign bonds, the markets are patchy, there are new bubbles arising, but no renewal of investment.
So the next year will be very sensitive, and we would have liked a more long-term view as regards investment.
Also, we expect the short-term agenda – i.e. 2010 to 2014-15 – to be a dramatic period, with questions like industrial restructuring and the social problems that will arise as a result, and we feel there should have been much more focus on this.
As for the next decade, the way that long-term investment could be built to revive finance is not properly tackled. These are the two worries we have regarding the way the new strategy is being built.
Do you feel the policy attitudes vis-a-vis restructuring and long-term sustainable investment are missing entirely from the current strategy, or is it simply too short-termist?
When you read the Commission's communication on EU 2020, the first point is on training and education, but it's in rather vague, general terms. Concretely, you don't see any policy prescriptions for restructuring in the next two or three years.
People can't stay indefinitely in partial work arrangements. The first thing we need is a complete review of productivity in the EU. What shall we defend and what are the parts of the productive sector that should be sustained?
This policy choice is not present. We have to anticipate this positive restructuring, which means going through the EU economy sector-by-sector and mobilising industrial and services projects so that we can prepare this sustainable recovery.
At the same time, there should be a huge retraining operation. It was very evident at our conference that we not only lack skills at a very high level in Europe – entrepreneurs and engineers of a very high quality – but we also face a huge lack of technicians. So we'd like to have massive funds devoted to the requalification and upskilling of workers, and this isn't present on the 2020 agenda as yet.
Should these technological deficiencies be approached from a 'green tech' perspective?
When you speak of the 'green economy', of course it's one of the main drivers of the future, but this needs to be built: at the moment we don't have the skills, the infrastructure, and this is what we need.
For instance, energy, transport, buildings (not only private lodgings but public buildings): these different areas require new skills and therefore investment funds devoted to their creation.
I think this will be done in the future, but it's taking far too long.
If you take as an example the restructuring of the car industry, it's not merely the development of clean or electric cars – you need infrastructure, new methods of electricity delivery, and so on. I call these types of devices 'industrial policy', and at the moment, the EU is not yet bringing together the different people required to devote themselves to the problems.
If you take the car industry, everyone knows that the restructurings will be very difficult, but you don't see any public organisation pushing for these changes, and they certainly won't be implemented by the carmakers alone.
At the moment, the automakers are engaged in consolidation, building new alliances, certainly not preparing for the new types of investment they need. So we are losing time.
How did the question of the European social model arise at the conference? How does it need evolve in tandem with these new forms of investment?
This is the moment when the social question has to be addressed for a new type of economy. In the past we've focused on harmonising social systems, trying to improve the health and well-being of EU citizens, and making public services more protected.
This needs to continue, but we don't see it as the first 'avenue' for a more social Europe. At the moment, we need some sort of social investment within the recovery. For instance, an enhancement of the social dialogue in the direction of industrial relations – sharing power with stakeholders.
Take the car industry as an example again. We need to build a sectoral social dialogue so people can be consulted as regards restructuring, secondly the transition should be made with proper training and social protection as workers 'upskill'.
At the moment, we don't have the tools to achieve this, the sector is too weak and the funds for training aren't there.
To this end, the EU Globalisation Adjustment Fund should be transformed into a fund for restructuring the industries that will be hardest hit by the crisis. These types of funds should have governance wherein the social partners, and especially the trade unions, have a say.
A second aspect in this social dimension is about education and training, within the goal of building a European system of 'flexicurity'. To achieve this, we need a co-operation to be built between schools and enterprises, and also improved cross-border co-operation.
For example, at the moment there is no co-operation between national unemployment services, every country has its own.
To build this flexicurity system of the future, there must be co-operation between public service infrastructures, so that people will be led to new skills and accompanied into new jobs by adequate social protection.
At the moment, the EU slogan of 'new skills for new jobs' is only a study, and nothing more.
How can funding for all these initiatives be found while the EU is still in recession?
The social dimension of these questions is a major worry – it's not a secondary problem.
We can't wait for economic recovery before building these structural devices. In my opinion, you have to look to the medium and long-term first, and base positive short-term action on these long-term goals.
Otherwise, you will have many public funds devoted to stabilising the problems, for example support for the unemployed, or pressure on older workers to retire younger, and all these previous devices to tackle unemployment will be reused, meaning that the EU workforce won't be prepared for the future and you'll also have people quitting the labour market altogether.
In fact, what is needed is more people in jobs, and higher quality and skills. Older people – particularly those with management and engineering skills – should not be encouraged to leave but to stay, and train the younger workers who need upskilling.
So if you don't take the medium and long-term into account, you will have social devices of the past. At the moment, in my opinion, public authorities do not see this properly, which is a great shame.