EU: Irish-Belgian Relations

Charlie McCREEVY

European Commissioner for Internal Market and Services

The Barroso Commission – Getting down to business

Irish-Belgian Business Association

I am delighted to be here this evening - it is important for those of us working in the European institutions to be reminded that there is life beyond the Berlaymont.

We all too easily forget that, in addition to working at the heart of the Union, we are also living in a fellow Member State - one which has excellent bilateral relations with Ireland.

Outside our doors there are a great many people working and doing business every day of the week. All the evidence suggests they are also doing it very well. Thanks in no small part to many of the people in this room, Irish-Belgian trade is absolutely thriving. Recent years have seen remarkable growth in business between the two countries – in 1995 Irish exports to Belgium and Luxembourg were worth over €1.5bn, in 2003 exports to Belgium alone were worth €10.3bn. A more than six-fold increase. The same period saw Belgian exports to Ireland also steaming ahead.

Somebody somewhere is clearly doing something right and great credit is due to the Irish-Belgian Business Association for its excellent work in building this relationship.

The Barosso Commission is now in office for a little over three months. At the end of our term in office, we expect to be judged by the role we have played in boosting Europe’s economic performance.

In the past, the Union has come together to tackle great projects – creating the Single Market, introducing the euro.

More recently, it has undergone the biggest enlargement in its history and has reached agreement on the new Constitution, successfully concluding the first major negotiation conducted with 25 around the table.

It has seen its policies develop and expand in areas of increasing importance to its citizens – justice and foreign policy in particular.

On each occasion, despite differences or difficulties that have arisen, we have worked hard to find an agreed way forward and we have always succeeded when it mattered.

The focus of the next few years will be different.

The time ahead of us will be every bit as challenging and rewarding, but it does not call for new great projects. We need to consolidate what has been achieved – bedding enlargement down, ratifying the Constitution – and to apply ourselves to the bread and butter work of making the Union deliver for its citizens.

In this, we will need to call upon the same determination to pull together.

The European Union has been an undoubted success. It has offered the people of Europe and period of peace and prosperity unrivalled in the history of the continent.

But the period of remarkable growth we knew in the second half of the twentieth century is well and truly over. Europe’s economic engine hasn’t stalled entirely, but it has certainly slowed down and it is finding it very difficult to get back up to speed.

This is a challenge for all of us – in public life, in business and as citizens.

In post-War Europe, while we may have differed on the details, we have shared a broad consensus on how society should be organised. We have struck a balance between the economic and the social dimension. We have encouraged growth and prosperity not simply as an end, but as a means to providing a better life for all of our people.

We have not expected people to go through life without a safety net. We have invested in health and education. We have sought to offer our people dignity in old age. This has been good for everyone.

But our ability to sustain this unique model is under increasing and, some argue, unsustainable, pressure.

Growth has been continued to disappoint – since 2000 GDP growth across the Union has averaged less than 2%. This at a time when competitors in China and India are forging ahead.

For many Member States unemployment figures remain worryingly high. Germany – still the motor of the European economy – recently reported a jobless total of 5 million - the highest for 73 years. Far too many people in Europe want to contribute, but find themselves unable to do so.

Our population is an aging one - the average ratio of persons in retirement compared to those of working age in Europe is expected double from 24% today to almost 50% in 2050 -placing increasing burdens on pension and healthcare spending.

Competition for trade at global level is increasing and will continue to become tougher. Productivity growth within the Union has slowed down markedly. The EU is investing less in R&D than its competitors – significantly less than the US, for example.

This simply cannot continue.

Everybody knows that the simplest household budget cannot be made to balance if the money coming in does not match the money going out. Certainly no business would last for long on that basis. Equally, everybody knows that if there are major spending commitments looming, steps must be taken now to meet them when they arise.

Europe is facing tough choices. But this should be cause for action, not for despair.

The Union can take the lead, but it can only do so with the wholehearted support of the Member States. And, if it is to be credible – and without credibility it will not be able to carry people with it - Europe needs to convey to citizens a real sense that we understand the challenges; that we have credible answers; that we have the right analysis, the right policies, the right strategies; and, perhaps most importantly, that we have the determination to see it through.

The Barosso Commission stands ready. It has made getting Europe back on track its number one priority. In has identified two key goals - higher growth and more and better jobs. And it has called for a partnership with the Member States to deliver them.

The European model was built on strong economic performance and dynamic growth. It will only be sustained on that basis. We need to mobilise all of the resources at our disposal.

Five years ago, the European Council agreed to an ambitious programme of reform aimed at making Europe more competitive. It set itself a target date of 2010. Half way through, the results of this programme – the so-called Lisbon agenda – have been mixed.

Some progress has been made in certain areas – the markets in telecommunications and energy are more open; important legislation has been passed in the financial services arena; the ‘single European sky’ has become a reality.

But we must be honest. The fact is that progress has been patchy at best. The global economic backdrop has not been a promising one, but even within those areas over which we have direct control delivery has been disappointing.

Reforms in Member States have made headway, but nowhere near enough. Good proposals have been brought forward, only to languish on the table in Parliament or in the Council. Measures have been adopted, but haven’t always been implemented.

We have failed to create the momentum and the political buy-in necessary if we are to achieve real results.

In making its submission to the meeting of the European Council later this month, the the Barroso Commission has called for a renewed coalition to drive forward progress and change.

We have identified key areas for action - extending and deepening the internal market; improving European and national regulation; ensuring open and competitive markets; and expanding and improving European infrastructure.

We know that Europe cannot compete at the bottom - we need to be a truly knowledge-based economy. Therefore, we also need to increase and improve investment in research and development; to facilitate innovation and the uptake of ICT; and to contribute to a strong European industrial base.

Finally, we need to attract more people into employment, including through modernising social protection systems; improving the adaptability of worker and enterprises and the flexibility of labour markets; and investing more in human capital through better education and skills.

This is not an easy recipe – it will take real guts and political courage to implement.

In saying this I am conscious of the particular importance of the SME sector in which many of the members of this Association operate. SMEs represent 99% of Europe’s business and two-thirds of employment. It is also the sector most disproportionately affected by administrative overload.

Every day of the week I have businesses like your knocking on my door. They tell me that it is still to difficult to get a business up and running. There are too many obstacles and the burden of red tape is too high. I am on your side.

The Commission has committed itself to driving forward regulatory reform. I am fully on board for this. Choking business with paperwork wastes time and damages competitiveness.

Nobody is suggesting that we do away with all regulation – such a situation is neither feasible nor desirable. But we do need to become smarter in what we do.

We need to give real teeth to the principles of subsidiarity – doing things at the lowest possible level – and proportionality – doing no more than is necessary to achieve the desired outcome.

We have to be sure that the laws we propose will not bring with them unforeseen or unwanted consequences – including imposing too high a burden on business.

Impact assessment is becoming an increasingly important part of how the Commission legislates. But it is a developing area. I am therefore pleased that the Commission will shortly bring forward a major initiative on better regulation, and that one of the questions it will look at carefully is how to draw on outside expertise and advice to ensure the quality and methodology of our impact assessments.

Within my own area of responsibility, I will be taking a clear line. I will ensure that there is meaningful consultation and genuine impact assessment before I put pen to paper. I will set the bar high when it comes to agreeing that legislation is needed at all – and I can assure you that I will take some convincing.

I will not be proposing at Union level what is better done nationally, and I will be using the lightest possible instrument to achieve the necessary results.

I am not just looking ahead. I also want to take a look at what is already on the books. Where laws have multiplied or where they have become outdated or redundant I will take steps to consolidate, reduce and, where necessary, to scrap them.

I take very seriously indeed the need to create a more business friendly environment.

Of course the problem does not all lie in Brussels – although we do make our contribution. Too often what is blamed on the EU is actually a difficulty with how Member States transpose Union law. This must be done properly and I will work in a spirit of partnership to improve performance in this area.

Member States must be held to account for implementing what they have agreed. Too many Member States are simply taking too long to do what is required of them.

This is not a matter of abstract academic interest. Transposition of legislation is a legal obligation under the Treaties. Measures in the Internal Market are designed to remove barriers to cross-border trade. The higher the obstacles, the less likely it is that business will take be able to reap the rewards of a market of 500 million consumers. Business loses out. Consumers lose out – they do not receive the benefits of increased competition and lower prices. There can be no more foot-dragging.

In the most recent report on the operation of the internal market, only two Member States out of 25 – Spain and Lithuania - achieved the 98.5% transposition rate they set as a target for themselves. Frankly, that is not good enough.

We also need to close the remaining gaps in the internal market, particularly in the area of services. A healthy and open services sector is increasingly crucial to jobs and growth in the European economy .The services sector has been responsible for almost all the new jobs create in the EU in recent years. Services now account for over two-thirds of EU GDP. A recent study shows that a net gain of 600,000 jobs could be achieved if we open the market up.

Removing barriers will create new opportunities for market entrants. The resulting competition will spur investment and innovation.

My predecessor brought forward a draft Directive aimed at opening up trade in services. If we are to be able to deliver in this area, we need to build support and consensus on a Directive which can make a real impact.

There are difficult and sensitive issues involved, but I am working actively and closely with the Parliament and the Council and with other stakeholders to find a balanced way forward. I am confident that we will succeed.

I hope that organisations such as yours – people who already know about the benefits of working across borders - will also be able to lend support. It’s time to start spreading the message.

But creating the right climate for business is not simply about the removal of obstacles, it is also about encouraging and supporting entrepreneurial initiative.

We need to strike the right balance between risk and reward. In part, this is about adjusting attitudes – failure in business should not carry the stigma it does – certainly our cousins across the Atlantic take a very different view in that regard. But we also need to ensure a more open and positive approach to the investment of capital in start-up enterprises.

Europe also needs businesses prepared to invest in innovation and research. It is clear that we cannot compete at the bottom. Our future must be knowledge driven. A gap has opened up – Europe invests a third less than the US, for example, in R&D. 80% of this gap results from under-investment by private industry.

Europe has set itself the target of spending 3% of GDP on research - that means increasing our current spend, which has remained stubbornly low - by 50%.

In its submission to the European Council, the Commission has made some suggestions on how we might start moving in the right direction. The levers are largely in the hands of Member States. We want them to identify the steps they are prepared to take. It is clear to us that improving the tax environment for R&D would be an important contribution towards encouraging business to spend more – this is of particular importance for SMEs at the more high-tech end of the market.

We have also promised that the forthcoming revision of the State Aid framework will look at rules regarding R&D with the aim of facilitating access to finance and risk capital as well as public financing of research and innovation

At EU level, the 7th Research Framework Programme will aim to boost competitiveness in key technology areas by pooling and strengthening efforts across the EU and by leveraging private sector investment.

The other key plank is creating more jobs and getting more people into them. Again, this is an area where Member States must take the lead. The challenge is to attract and keep more people in the labour market through active policies and attractive incentives. Women, young people, older workers – these are the real target areas.

Moving people back into employment and keeping them longer in the workforce requires the modernisation of social protection systems. I know that this is an area in which some Member States are making a real effort for which they are to be commended.

We also need to see greater flexibility in the workplace. A high degree of adaptability is vital to improving productivity and to facilitating job creation in rapidly expanding sectors, including in SMEs. We need employers and workers that can anticipate, trigger and adapt to change.

We need to work to remove obstacles to worker mobility – including at Union level. We also need to encourage investment in education, with an emphasis on training and lifelong learning.

Looking at our underperformance since targets were set at Lisbon, it would be easy to be sceptical now. Why should we do any better in the period ahead?

It’s a good question.

In reply I would have to say that without the necessary political will, we won’t. I have often said that people do not see the need for radical change until their backs are to the wall. Certainly, that was the case in Ireland.

However, many have come to see that it is crunch time for Europe. The case for change and reform has never been more widely appreciated. Leaders across the Union are making the effort, despite the political difficulties it brings.

People can see that the diagnosis the Commission has offered is the right one. They can also see that there is no credible alternative to the remedy we have proposed – a clear focus on growth and jobs.

I am convinced that when it meets later this month the European Council will endorse our approach. That will just mark the start. We need a real partnership. The Commission, Member States, the social partners. Business, the trades unions, citizens. We need to mobilise and to energise at all levels, top to bottom.

As I said at the start, when the European Union has put its mind to it, it has moved mountains. From the ruins of the second world war it has built an unmatched period of peace and prosperity.

This task – revitalising our economy and passing a brighter future to our children - is the challenge for our generation.

It’s time to show the world we mean business.

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