This article is part of our special report Europe’s Industry : Halting the Decline.
SPECIAL REPORT / European industries are unanimous in saying that future growth prospects lie in research and innovation. They have thrown their weight behind the European Commission and Parliament to secure the proposed €80 billion 'Horizon 2020' research programme which is under fire as cash-strapped national governments seek cutbacks to the EU budget.
EU Research Commissioner Máire Geoghegan-Quinn appealed to the European Parliament in Strasbourg to stop member states' attempt at cutting the proposed €80 billion Horizon 2020 research programme for 2014-2020.
“In general the individual member states are very supportive of Horizon 2020 and innovation and R&D as being where growth and jobs come from,” Geoghegan-Quinn told MEPs on 16 January.
But she claimed that the problem for research funding starts as soon as member states come around “the collective table”.
The EU’s net contributing countries – including Britain, Germany and the Netherlands – want to bring down their contribution to the overall EU budget for 2014-2020.
>> Read: EU countries' budget red lines
Parliament joins with Commission
MEPs on the Research, Industry and Energy Committee (ITRE) broadly back the Commission’s Horizon 2020 programme, which earmarks €80 billion of EU funding, €30 billion more than its predecessor, the Seventh Framework Programme.
Rapporteur Teresa Riera Madurell, told the Parliamentary session that ITRE’s vision for Horizon 2020 “is not very far from that of the Commission.” But she said it "needs proper investment to make it work.”
A deal to finance Horizon will not be finalised until member states agree on the EU's budget, or multi-annual financial framework (MFF).
Heads of state meeting in November for a special budget summit made provisional cuts that would slice into the Horizon 2020 funds if finally accepted later this year. Another summit to discuss the MFF is earmarked for 7-8 February.
“There is a real concern the original €100 billion [earliest proposal] budget foreseen for Horizon 2020 could be slashed in half,” said Belgian Green MEP Philippe Lamberts.
He added: “It is cynical in the extreme to talk about future spending and growth, whilst cutting the budgets for research and innovation, at the same time as other countries like China are increasing spending in these areas.”
Industrial support for innovation
Lamberts' criticism of member state egotism when it comes to research is echoed by industrialists, who are big supporters of mutualising Europe's patchwork of national research programmes.
“To compete in the global arena, Europe needs to invest more in innovative products and sustainable processes,” said a joint statement issued by the Italian and German employer’s groups Confindustria and the Federation of German Industries (BDI) last summer.
“EU funding for research and innovation should be raised to 8% of the EU budget and member states should strive to invest 3% of GDP in research,” they said.
Geoffrey Shuman, vice president of European affairs at Airbus, agreed: “It would be catastrophic for Europe to cut the research budget. It’s our future," he said. “Research is Europe’s lifeblood. We are the world leaders in aerospace, automobile and pharmaceuticals, and if you cut research budgets, you can forget that.”
Gordon Moffat, director general of steel association Eurofer, said Europe and Japan are "technical leaders in the industry worldwide" and are likely to remain so. "If you're doing high-level engineering applications where you need specific steels, specific types of products, you go to Europe or Japan, you don't go to China," he told EURACTIV in an interview.
But he said Europe needs "massive support for research and development" in order to make the transition to a low-carbon economy. "Technologies will have to be developed to meet the challenge of climate targets. But these technologies have to be economically viable. We cannot apply new technologies which would make our production uncompetitive."
Fabian Zuleeg, chief economist at the European Policy Centre’s (EPC), a think tank, said: “Encouraging innovation is a key element of Industrial Policy, not least to ensure that European firms gain long-term competitiveness. Having cuts in the research budget are not the way forward and it also gives a signal that the EU does not focus on forward-looking policies.”
Competitiveness is a key issue for industry, since even in sectors where Europe has traditionally dominated, pressures abound. “Aerospace is a very global industry. Europe is a leader but there are established champions in the US and other emerging nations are making rapid progress. It is difficult to develop a civil aeroplane that is safe, reliable and economical but the Chinese have set a priority to break into the industry,” said Airbus' Shuman.
There is recognition that research is bound to suffer in the current economic climate, however, and the EPC's Zuleeg says it is also important to recognise that proposed funding by the Commission was a substantial increase on the current period, and does not therefore represent a real-terms cut.
Controversy on the Horizon
“In addition, the bulk of research funding is spent by member states. So even if there are cuts, there is still a lot of scope to boost innovation through other routes,” Zuleeg added.
Nevertheless industrial groups are disappointed at the development. “It’s hard to find the money for anything at the moment, it’s true, but research cuts are a false economy If you do not invest you are going down the tubes,” said Shuman.
The content of Horizon is also controversial, and industrial groups remain divided over reforms to the structure of funding schemes.
Under the previous research framework programme, sectors such as transport received targeted funds for large-scale consortiums which benefited smaller businesses.
The latest drafts of the Horizon 2020 programme proposed by the Parliament’s ITRE committee would see a 20% cut to the transport budget with the money transferred directly to funding programmes for small enterprises.
“This will place important and successful programmes such as Clean Sky at risk,” said one anonymous aerospace analyst.
The analyst said that in the aerospace sector, small and medium enterprises generally work better if they are involved in research as part of a supply chain. “Under the existing programmes such as the Clean Sky Joint Technology initiative, 40% of companies involved were SMEs,” he said, saying that the Horizon programme would needlessly offer money to non-commercial ventures.