Industrialists call on EU to halt the decline

Peugeot factory worker

This article is part of our special report Europe’s Industry : Halting the Decline.

SPECIAL REPORT / After a year of closures, sackings and cut-backs, arguments about how to turn European industry around will be to the fore this year as debate intensifies around the correct policy response, and doubts linger over the EU’s ability to deliver.

A fall in the demand for steel of 8% during 2012 saw permanent closures of furnaces across Northern Europe, whilst others were mothballed in an attempt to stave off further closures.

European steelmakers have written down major investments as the supply of steel and nonferrous metals products continues to outweigh demand, reflected in results for key steel-users such as the automobile sector.

French carmaker Renault’s decision on 15 January to cut 7,500 French jobs by 2016, followed similar announcements affecting the European operations of Fiat, Ford, General Motors, Opel and Peugeot.

Between 2008 and 2012, 6.8 million jobs in construction and industry were lost across the EU, according to BusinessEurope, the group representing the member states’ largest business federations.

“The severity of the crisis is producing a painful hangover,” said the group’s director-general, Markus Beyrer.

Antonio Tajani, European commissioner for industry, in October acknowledged “we've made mistakes in the past, we've let industry and SMEs fend for themselves for too long,” as he presented a review and re-launch of the Commission's ‘Integrated Industrial Policy for the Globalisation Era', first launched in 2010.

Commission response seeks pre-crisis industry levels

Tajani declared the aim to raise industrial activity to 20% of EU gross domestic product by 2020, compared to 16% today, taking it back up to pre-crisis levels.

The strategy sets out six priorities for short-term action: advanced manufacturing technologies, key enabling technologies, bio-based products, construction and raw materials, clean vehicles, and smart grids.

This approach was subsequently endorsed by the European Parliament and Council, responding in part to growing disquiet in the member states that the EU has paid a lot of attention to austerity, but made little effort to open markets to stimulate investment and growth.

Doubts remain, however, about the EU executive’s ability to deliver on the aim, but also about its underlying diagnosis.

“The picture is not as bleak as some of the stark figures suggest,” said the European Policy Centre’s (EPC) chief economist Fabian Zuleeg.

Zuleeg says that even in the automobile sector, where the headlines appear most bleak, there remain many high-technology automobile-related industries providing much in-demand industry in Europe.

“The plain problem is that there has been over-supply in that sector, and a re-modelling of the sector towards high-skilled factories – where the EU can compete – is necessary,” he adds.

Any move by the Commission to encourage protectionism, or to subsidise the industries that will not yield future competitive industry would be a mistake, Zuleeg says, claiming instead that conditions nimbler, more high-skilled industries need to be pushed.

By contrast, for Gordon Moffat, the director-general of Eurofer, the European Steel Association, the EU should revisit some of its existing policies across other sectors to bring down prices for industry and defend the interests of the continent more robustly.

A particular beef of big industry is that EU’s policies across climate and energy briefs have seen electricity suppliers pass on price increases to high energy consuming industries.

"Climate, in particular. Energy, as well," Moffatt told EURACTIV in an interview. "Since 1952 and the European Coal and Steel Cooperation Treaty, this is the first time ever that we're being told that we cannot increase capacity,” he said referring to the EU's emissions trading scheme for carbon dioxide.

"Now, steel is essential for the manufacturing value chains. If any part of that chain breaks, then our experience is that you will see large part of manufacturing lost,” Moffatt added.

“The high price of energy is also becoming a significant disadvantage for industry vis-à-vis its global competitors,” BusinessEurope’s Beyrer agreed. Energy prices rose 28% between 2003 and 2011.

Key issue is delivery

Whether advocating a roll-back in current policy, or more encouragement of high-tech industry, commentators share doubt over the ability of the Commission to push matters ahead effectively.

Such fears reflect residual disappointments with efforts made at national level. Last year, a high-profile attempt to marry two of the continent’s largest defence industry conglomerates, Franco-German EADS and the UK’s BAE Systems, was  called off. The move cast doubts on intentions to create a global champion.

The EPC’s Zuleeg points to the pivotal role that Commission President José Manuel Barroso must play.

“Much will depend on industrial policy not being sidelined amidst attempts to focus on the pressing agenda of banking union, and continuing to follow through with the economic agenda,” he said.

The success of industrial policy will also be intertwined with the controversial EU budget debate. A key element of the Commission's attempt to revive Europe's industrial might relies on increased funding for research, with an €80 billion funding boost for the proposed ‘Horizon 2020’ research and innovation fund and €2.5 billion for the Competitiveness of Enterprises and SMEs programme from 2014 to 2020.

“A future oriented Industrial Policy … has to be based on research and education, and industrial policy merges with innovation policy,” said Professor Karl Aiginger of the Austrian Institute of Economic Research.

But these future-oriented programmes are threatened by a reduction of up to 50% in the ongoing negotiations surrounding the EU’s future budget.

However, heavy industries like steel and chemicals say much can be achieved by adjusting existing policies on energy and climate which they claim has been destructive.

Eurofer's Gordon Moffatt said he is "not convinced yet that Barroso is on board" on Tajani’s industrial policy, and especially the modifications to other portfolios that he would like to see.

He said: “The proof of the pudding will be in the eating. How much support will he get from Barroso? This is the key point. And I’ve told him this bluntly in the various roundtables we’ve had already. It’s laudable that he’s looking at policies which from our perspective, are destructive, are badly constructed and have to be changed.”

“Now it is time to translate all good intentions into actions!” said BusinessEurope’s Markus Beyrer.

A Commission communication published in October 2012 builds on, and updates, the "Integrated Industrial Policy for the Globalisation Era" put forward in 2010 as part of the 'Europe 2020' Strategy.

It focused on strengthening industrial competitiveness to support economic recovery and to enable the transition to a low-carbon and resource-efficient economy.

The strategic approach proposed in 2010 remains fully valid for achieving our longer-term objectives and very good progress has been made in its implementation, according to the EU executive.

However, a harsh impact of the economic crisis on many member states, the subsequent economic stagnation in the EU and the deteriorating outlook for the global economy have gave new urgency to the mid-term review of the Industrial Policy.

A series of European Councils in 2011 and 2012 called for action in areas addressed by this Communication, as announced in Commission President Barroso's State of the Union speech on 12 September 2012.

The renewed industrial strategy was part of the response to these calls, in particular following the "Compact and Growth and Jobs" at the European Council of June 2012.

  • 2020: EU objective to raise industry's share of Europe's GDP from 16% to 20%

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