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Europe 2020 Ruth Paserman DG Enterprise and Industry

Europe 2020 Ruth Paserman DG Enterprise and Industry Head of Unit Europe 2020 and National Competitiveness Policies Alpeuregio summer school 2013 19 June 2013. In 2010, Europe faced a choice. 2010-2020: a decade of sluggish growth?. Output level.

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Europe 2020 Ruth Paserman DG Enterprise and Industry

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  1. Europe 2020 Ruth Paserman DG Enterprise and Industry Head of Unit Europe 2020 and National Competitiveness Policies Alpeuregio summer school 2013 19 June 2013

  2. In 2010, Europe faced a choice 2010-2020: a decade of sluggish growth? Output level • « Strong recovery » : a full return to earlier growth path and a capacity to go beyond Pre-crisis growth path • « Sluggish recovery » : a permanent loss in wealth and stagnation on a lower growth path • « Lost  decade » : a permanent loss in wealth and an eroded potential for future growth years Source: presentation of President Barroso to the informal European Council of February 2010, “launching” Europe 2020

  3. Economic context Real GDP, EU Source: Commission Services • Economic situation has continued to deteriorate in early 2013, albeit at a decreasing pace and the social consequences are being severely felt • Unemployment is reaching new heights and the risks of poverty and social exclusion are rising • The challenge is to sustain improvements in financial markets and to restore confidence, whilst also carrying out structural reforms for the medium-term • Decisive policy measures have already been taken, but it will be crucial to maintain the pace of reforms, recognising the specific needs of each Member State Employment growth and unemployment rate in EU Source: Commission Services

  4. Tackling the « vicious circles » affecting Europe Europe 2020 Macro-imbalances procedure Euro Plus Pact Low competitiveness Low productivity Low growth Limited access to finance Higher taxes Low tax revenue Low demand Private and financial sector indebtedness Government debts Bank guarantees and recapitalisation Stability and Growth Pact Financial firewalls Treaty on stability, coordination and governance EU supervisory framework Macro-imbalances procedure Lower values of bonds

  5. Deficits are declining but decisive steps are needed Government deficit in % of GDP Euro area EU 27 Forecast* * Commission 2013 Spring Forecast. This forecast is based on a «no-policy-change scenario» and does not reflect announcements made since its publication. Source: European Commission

  6. There is a rebalancing of external positions Current account balance as a % of GDP Deficit countries Surplus countries *Commission 2013 Spring Forecast Source: European Commission

  7. Cost trajectories have been very diverse Real effective exchange rates* vis-à-vis the other Euro Area Member States (average 1999 = 100) Relative loss in competitiveness Relative gain in competitiveness *This indicator measures changes in cost competitiveness relative to other countries EE and SK missing due to high values: 154 and 173 respectively in 2014. Source: European Commission

  8. Why a European strategy? • The crisis showed that our economies are closely inter-linked • If we want to counter the crisis and weigh globally, we must act in a more coordinated way • In addition, the crisis in Greece has more than ever underlined the interdependences in the eurozone area • Only the EU gives us the critical mass to have impact: • Activate all policy areas and levers in an integrated way • Exchange of best practices

  9. The Europe 2020 Strategy • 1.) Smart growth: developing an economy based on knowledge and innovation • 2.) Sustainable growth: promoting a more efficient, greener and more competitive economy • 3.) Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion

  10. EU targets agreed for 2020 Proposed by the Commission and agreed by the European Council in March 2010: all Member States were invited to set national targets on this basis. EMPLOYMENT 75% of the population aged 20-64 should be employed INNOVATION 3% of the EU's GDP should be invested in R&D CLIMATE / ENERGY A reduction of greenhouse gas emissions by 20% A share of renewable energies up to 20% An increase in energy efficiency by 20% EDUCATION The share of early school leavers should be under 10% At least 40% of the younger generation should have a degree or diploma POVERTY Lifting at least 20 million people out of poverty

  11. Europe 2020: the EU’s growth strategy Strengthened EU economic governance Macro-economic & fiscal surveillance Regulation of financial services Targets and guidance for structural reforms Flagships for smart, sustainable and inclusive growth Digital Agenda Youth on the Move Innovation Union New Industrial Policy New Skills and new Jobs Platform against Poverty Resource Efficiency Modernised EU levers for growth and jobs Structural Funds and future EU budget Single Market Act Trade and external policies

  12. Current economic governance framework • More effective prevention of gross policy errors • Focus on structural balances • Expenditure benchmark Focus on debt developments Debt reduction benchmark • Crisis resolution instruments • EFSM/EFSF: temporary • ESM permanent • OMT Sound fiscal policy More effective supervision and regulation of the financial system ESAs – ESRB – CRD IV Banking Union: SSM; direct recaps by ESM Prevention and correction of macro imbalances 6-pack; MIP procedure and sanctions • Better enforcement • Of SGP rules • Sanctions • Two-pack: ex ante submission of draft budgets, monitoring • National layer: Directive on fiscal frameworks, Fiscal Compact Balanced growth Structural reform strategy (Europe 2020) Growth Compact (EIB, Structural funds, Projects bonds) European Semester for economic policy coordination

  13. Integrated country surveillance Structural reforms to raise growth potential SGP: fiscal policy Competitiveness and imbalances Competitiveness and imbalances • Labour market reforms • Product market reforms • Reforms of social protection systems • Budgetary balances • Public debt • Long-term sustainability of public finances • Budgetary rules and institutions • Elements of quality of public finance • Wages and price competitiveness • External imbalances • Internal imbalances (housing, credit) • Wages and price competitiveness • External imbalances • Internal imbalances (housing, credit) 12

  14. The 2013 AGS priorities

  15. EU recommendations for national action in 2013/14 For Cyprus, Ireland, Greece and Portugal the only recommendation is to implement commitments under EU/IMF financial assistance programmes.

  16. Implementation • Implementation of reforms is a shared responsibility: • EU level • National level • Regional and local levels • Social partners and civil society • In labour market reforms and wider social policies the social partners have a key role to play • The Commission consulted with social partners prior to the adoption of the AGS and encourages Member States and the Economic and Social Committee to continue this dialogue • Regional and local administrations are often heavily involved with implementation, often playing a key role

  17. Gaps in the EMUarchitecture exposed by the crisis • Excessive risk-accumulation in quiet/good times in both the public and private sectors • Failingmarket discipline • Insufficent monitoring and enforcementtools Need to improve risk prevention • Risks of financial instability within the single currency : • Contagion between fragile sovereigns • Feedback loops between weak fiscal and financial sectors • Financial fragmentation across the euro area, even threatening the integrity of the euro area Need to improve crisis resolution

  18. Towards a genuine EMU

  19. Europe 2020 targets

  20. Are we likely to meet our targets for 2020? EMPLOYMENT 75% of the population aged 20-64 should be employed INNOVATION 3% of the EU's GDP should be invested in R&D CLIMATE / ENERGY A reduction of CO2 emissions by 20% A share of renewable energies up to 20% 20% energy efficiency (EU primary and final energy consumption of 1474 and 1078 Mtoe in 2020, resp.) EDUCATION The share of early school leavers should be under 10% At least 40% of the younger generation should have a degree or diploma POVERTY 20 million fewer people should be at risk of poverty ?

  21. Smart, sustainable and inclusive growth i) 75% of the population aged 20-64 should be employed

  22. Progress with employment rates is stalling • EU employment rate: past trends and scenario for 2020(share of people employed in the 20-64 age group) On the basis of current commitments, the Europe 2020 target of a 75% employment rate will not be met. The EU would need around 20 million new jobs to meet its target. * Estimated values based on Commission 2013 Spring Forecast for 2013-2014, assuming an employment growth to the levels of 2014, taking into account a 1.2% reduction of the active population during the decade ** No target set by the UK: the projection for the EU assumes 75% for the UK in 2020 Source: European Commission

  23. Employment performances vary markedly • Employment rates in the EU(share of people employed in the 20-64 age group) * No target set for UK. For SE the target is well above 80 %. Source: European Commission

  24. Smart, sustainable and inclusive growth ii) 3% of the EU’s GDP should be invested in R&D

  25. The EU is lagging behind its R&D target On the basis of current commitments, the Europe 2020 target will not be met. * Scenario based on the continuation of on-goingreforms and financial efforts. ** No targets set by CZ and the UK: 2020 figures wereestimated by Commission services.*** The EU targetincludes R&D expenditure by intergovernmentalresearch infrastructures whichis not included in the R&D expenditure of the Member States. Source: European Commission

  26. Levels of ambitions for R&D vary a lot * EL: 2007**No targets set by CZ and the UK. For CZ: a target (of 1%) is available only for the public sector. For IE: the target is 2.5% of GNP which is estimated to be equivalent to 2.0% of GDP. For LU: the target is between 2.30% and 2.60% (2.45% was assumed). Source: European Commission

  27. Smart, sustainable and inclusive growth iii) a reduction of CO2 emissions by 20%, a share of renewable energies up to 20%, an increase in energy efficiency by 20%

  28. Progress towards climate/energy 20-20-20 goals Reduce greenhousegas levels by 20% Increase share of renewables to 20% Reduce energyconsumption by 20% 100% Current trend to 2020 2011 emissions: -17% ~16-20% Target: -20% Current trend to 2020 -20% ?

  29. Greenhouse gas emissions are being reduced • Total greenhouse gas emissions from 1990 until 2011 and 2013-2020 annual targets -17% -20% The EU is well on track for meeting its 2020 greenhouse gas emission reduction target of -20% Source: European Commission In kTCO2-eq for EU 27, scope of the climate and energy package

  30. But not all countries make sufficient effort Current projections show that EU would meet its 2020 target. However, for 13 Member States, the existing policies would not be sufficient to reach their national target Note: Non-ETS emissions only. Negative and positive values indicate, respectively overdelivery and shortfall compared to target. Gap based on the most recent submission by Member States. No historic or projected non-ETS emissions available for Croatia. Source: EEA

  31. The share of renewables is increasing • Renewable energy share trajectories (2010-2020) The EU is currently on track to reach the 2020 targets, however, as the trajectory grows steeper towards the end, more efforts will be needed from Member States in order to reach the 2020 targets * Commission projections based on Green-X model Source: European Commission

  32. All countries are contributing • Share of renewable energy (% of total energy use) 2011 performance 2020 national target EU target % 2011 figures indicate that the EU as a whole is on its trajectory towards the 2020 targets with a renewable energy share of 13%. All but six Member States (BE, FR, LV, MT, NL and UK) already reached their 2011/2012 interim targets set in the Directive. Source: European Commission

  33. More encouraging trends for the EU's energy efficiency target Trends in primary energy consumption compared to EU target in 2020 (1474 Mtoe) Encouraging recent developments - more results in Commission's '2014 report' on the progress towards the EU target (due June 2014) * Gross inland consumption minus non-energy uses Source: European Commission

  34. Smart, sustainable and inclusive growth iv) the share of early school leavers should be under 10% and at least 40% of the younger generation should have a degree or diploma

  35. One in seven young leaves school early Share of early school leavers* Past performance If national targets are met EU target ≈ 10.3-10.5% On the basis of current commitments (national targets), the Europe 2020 target will be missed by approx. 0.5 %. * Proportion of the population aged 18-24 with only lower secondary education or less and no longer in education or training. Source: European Commission

  36. There are big differences between countries Share of early school leavers* Performance in 2012 National target for 2020 EU target * aged 18-24 Source: European Commission

  37. Tertiary Attainment: National targets will not suffice to deliver Share of young people with tertiary attainment* If national targets are met Past performance EU target ≈ 37.5-38% Positive trend, but based on the basis of current commitments, the Europe 2020 target will not be met. * aged 30-34 Source: European Commission

  38. Starting points are very different Share of young people with tertiary attainment* Performance in 2012 National target for 2020 EU target The definition of the national target for AT, DE, FI and FR is different from the one used for the EU target. The UK has set no national target. * aged 30-34 Source: European Commission

  39. Smart, sustainable and inclusive growth v) 20 million fewer people should be at risk of poverty

  40. 120 million - or 24.2% - of Europeans were living at risk of poverty or social exclusion in 2011 Population at risk of poverty or social exclusion, 2011 EU goal by 2020 « To reduce the number of people at risk of poverty and social exclusion by 20 million » At risk of poverty 84 Mio Jobless households 38 Mio Severely materially deprived 43 Mio 40 Source: European Commission

  41. The situation is very different across Member States People living in poverty or social exclusion (in %) Population at risk of poverty or social exlusion* in 2011 2020 target** * People at risk of poverty or social exclusion are at least in one of the following three conditions: living with less than 60% of the national median income (“at-risk-of-poverty” threshold), severely material deprivation or living in a jobless household. ** Some Member States have no marked national 2020 target on this graph because they have chosen to use a different monitoring indicator which does not directly translate into a comparable indicator at EU level. 41 Source: European Commission

  42. Business environment & quality of public administration

  43. The quality of public administration matters • Global Government effectiveness ranking* • (2011) Efficient governments are key to create competitive business environments, stimulate growth and innovation. Moreover, well-performing administrations are essential to ensure that citizens and businesses can benefit fully from the advantages of EU membership. * Government effectiveness captures perceptions of the quality of the public service, its degree of independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies Source: World Bank Governance Indicators 2011

  44. Reducing red tape is a priority (1) • Time to start a business (2012, calendar days) In 2012, it took 5.4 days to start a business in Europe, at a cost of € 372, on average. By end 2012, time and cost should have been reduced to 3 days and less than € 100. Source: European Commission

  45. Reducing red tape is a priority (2) Average payment duration of bills by public administrations to business, including delays (2013, number of days) Late payments, including delays, are a major obstacle for firms to manage cash flows. Payments take several months in some countries, and large differences exist across the EU. The Late Payments Directive will help to tackle this problem. Source: European Payment Index 2013

  46. Slow licensing delays business start-ups • Time to get a license* • (2010, average time in days) Licensing procedures can be particularly slow and burdensome. On the average they take 67 days, with Spain, Malta and Cyprus faring particularly badly. *Indicator based on aggregated data on licences required to open five different activities (manufacture of steel products, manufacture of small IT devices, a hotel with a restaurant, a plumbing company, wholesale distribution and retail distribution Source: Study on ‘Business dynamics: Start-ups, business transfers and bankruptcy’ (2010)

  47. E-government could become the norm for citizens • Electronic interaction by citizens with public authorities*(2012) The use of e-government services is increasing across the EU, but very large differences persist. There is ample scope for improvements in many countries. *Citizens concerned are those aged between 25 and 54 Source: European Commission

  48. Firms would also benefit from e-government • Electronic interaction by small enterprises with public authorities(2012) Low levels of usage by enterprises very often suggest that services should be more adapted to the needs of companies. Source: European Commission

  49. Corruption costs 1% of EU annual GDP on average • Irregular payments and bribes* • (2011-2012 survey among firms, ranging from 1 = very common to 7 = never occurs) Survey among firms shows that the frequency of irregular payments differs substantially among Member States. This is a particular issue for some countries. * The indicator is based on the weighted average score across five components of an Executive Opinion Source: World Economic Forum, Global Competitiveness Report 2012-2013

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