EU companies pledge to shift retrenching investment

Frans Timmermans. Invest in Europe conference, 26 March. [European Commission]

Europe is losing ground globally, as the 28-country bloc seems unable to reverse the trend of declining investment and stalling economic recovery. But EU businesses pledged to be ready to push policymakers to act swiftly, and boost competitiveness and growth.

“We must act now. Our global competitors are not waiting for us,” BusinessEurope President Emma Marcegaglia, said in an interview with EURACTIV at the Invest in Europe conference on Thursday (26 March).

Private investment in Europe fell by 11% from its peak in 2007. The US also experienced a similar decline during the crisis. However, it is recovering at a much faster pace. Meanhwile, Europe is experiencing the lowest level of investment in 20 years.

Asked whether Europe had reached the bottom, Mercegaglia conceded there was hope for reversing the downward course.

“The Juncker plan is a first step to create a better climate for investment. We need to go back to where we were before the crisis,” she insisted, noting the biggest chunk of money should come from the private sector.

“But national governments should activate themselves. The Commission and national governments have to make a strong effort,” she said, adding that companies were ready to play their part and find more synergies between public and private capital to boost growth and employment. “We can’t wait ten years for new infrastructures to be built.”

A range of obstacles have to be removed. High energy prices and security of supply, uncompetitive tax regimes and rigidity of labour markets and skills mismatch top the list.

Difficulty accessing finance, and regulatory uncertainty and administrative burdens also hampers investment. As Ulrick Grillo put it: Europe needs “competitive regulations”. The president of the German employers’ organisation BDI argued that better regulation per sé can become an empty concept if it is not tied to the goal of increasing competitiveness across Europe.

Besides mainstreaming competitiveness across the policy board, businesses are determined to “avoid legislation with disproportionate effects on competitiveness”.

Timmermans pleads for support

During the conference, European Commission First Vice-President Frans Timmermans pleaded for help to make Europe fit to win the global economic race.

“Europe will not win the race with lower wages, but we are smarter and fit to compete,” he said trying to fight back critics.

The man tasked by Jean-Claude Junker to deliver “better regulation” has been criticised for ditching the Circular Economy package of waste, recycling and incineration laws, despite the objections of MEPs and EU environment ministers.

Timmermans has promised the executive will resubmit a “more ambitious” proposal to replace the bill proposed by the outgoing Barroso Commission. 

>> Read: Circular Economy package to be ditched and re-tabled

Critics were suspicious of the motivation behind its withdrawal, as it was on a hit list of laws that BusinessEurope wanted killed off by the executive.

>> Read: Gender equality and environment laws on business lobby hit list

Speaking to businessmen, he said his benchmark for better regulation will be SMEs. “They have become disenchanted with the EU project. Confidence is low and risk too high for them. They are bogged down by rules,” he said.

Young entrepreneurs are leaving Europe because they find it difficult to set up new businesses whether it is because of red tape or access to finance.

“This we desperately need to change,” he said insisting on restoring self-confidence in the future of our economies to attract new investment.

The horse and the camel

Timmermans reiterated the need to have a better impact assessment. “The Commission comes up with the horse and what comes out is a camel,” he said alluding to the sometime cumbersome process of tight negotiations with Parliament and the Council before legislation is agreed on.

The Commission First Vice-President argued in favour of an independent impact assessment body mandated by the institutions that would give science-based, independent advice.

“This is the only logical way to look at this issue,” he said. “Right now the compromise reached [by the institutions] becomes even more important than the content of the compromise,” he added, complaining that at the end what comes out of the process is a piece of legislation that in some cases is difficult to implement.

Common sense should prevail, he insisted. As example, he mentioned a unique VAT form, which would help cross-border trade for SMEs, or the expiration days on some products that don’t need it, like coffee.

“The EU is driven not by the principle of trust, but by distrust,” he continued. “If you don’t trust your partner you want to put everything in writing and checked by lawyers,” and that has to change.

EU output remains 0.2% lower than its pre-crisis peak, while the US economy is already 8% higher than in 2008.

During the same period, China has grown by 64% and the Indian economy by 48%. 

In the last 6 years, 5 million jobs have been lost in the EU, compared to around 1 million jobs created in the US. The EU’s share of worldwide Foreign Direct Investment in flows fell to 17% in 2013 compared to over 40% in 2000

Released on 18 March 2015, BusinessEurope Reform Barometer Spring 2015 shows that only 22% of the European Commission’s recommended national-level reforms have been followed by satisfactory implementation, compared with 23% in 2014.

With less than a quarter of reforms being progressed, the EU continues to lag behind major economies in terms of competitiveness, meanwhile other economies continue to press ahead. 

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