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Europe 2020 Ruth Paserman Alpeuregio summer school 2012 4 July 2012

Europe 2020 Ruth Paserman Alpeuregio summer school 2012 4 July 2012. 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.

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Europe 2020 Ruth Paserman Alpeuregio summer school 2012 4 July 2012

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  1. Europe 2020 Ruth Paserman Alpeuregio summer school 2012 4 July 2012

  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. We have lost a lot Actual growth compared to « crisis-free » growth (EU GDP level, € billion) actual if growth had been sustained We have « lost » about € 2 000 billion between 2007-2010 due to the crisis, compared to a scenario where we would have kept our average growth rate over 1995-2007. This corresponds to the GDP of France or to 11% of Europe’s cumulative debt.

  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 2012 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 2012 Spring Forecast Source: European Commission

  7. Cost trajectories have been very diverse Real effective exchange rates* vis-à-vis the Euro area average (Euro area = 100) Forecast Relative loss in competitiveness Relative gain in competitiveness * This indicator measures changes in price competitiveness relative to other countries.EE and SK missing due to high values: 145 and 183 respectively in 2011. 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. Europe 2020: delivering reforms • 3 thematic priorities • 5 EU headline targets – translated into national ones • 7 flagship initiatives – EU & national action • Mobilising existing EU instruments: • Single market • External dimension • Stability and Growth Pact (SGP) • EU and national Budgets & new financing instruments

  10. 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

  11. 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

  12. A new architecture for policy coordination

  13. The Euro Plus Pact Agreed in Spring 2011 by the 17 Member States of the Euro area, joined by Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania. • Monitor wages and productivity trends • Measures to increase productivity • Labour market reforms (‘flexicurity’) • Life-long learning • Tax reforms to raise labour participation • Pensions, health care and social benefits • National fiscal rules • National legislation for banking resolution • Regular bank stress tests FOSTER COMPETITIVENESS FOSTER EMPLOYMENT ENHANCE THE SUSTAINABILITY OF PUBLIC FINANCES REINFORCE FINANCIAL STABILITY STRUCTURED DISCUSSION ON TAX POLICY ISSUES

  14. The European Semester timeline January February March April May June July Annual Growth Survey and other reports Proposals for country-specific recommendations European Commission Debate & orientations Discussion in Council formations Council of Ministers Autumn: Monitoring and peer review at European level Debate & orientations European Parliament Spring EU summit: overall guidance on EU priorities Endorsement of country-specific recommendations European Council Autumn: Implementation at national level Adoption of National Reform Programmes (NRPs) & Stability and Convergence Programmes (SCPs) Member States

  15. EU recommendations for national action in 2011/12 Note: Recommendations adopted by the EU in July 2011 for 2011-2012. For IE, LV, EL, PT and RO, the only recommendation is to implement existing commitments under EU/IMF financial assistance programmes. More information at: http://ec.europa.eu/europe2020/index_en.htm

  16. Roadmap to stability and growth Put forward by the Commission on 12 October 2011 to map out next steps in Europe’s comprehensive response to the crisis. Key recent actions / initiatives Five elements • Give a decisive response to the problems of Greece • Enhance the Euro area's backstops against the crisis • Strengthen the banking system, namely through recapitalisation • Frontload stability and growth enhancing policies • Build a more robust and integrated economic governance • A new financing plan • Extended maturities and lower interest rate • Negotiations on private sector involvement • EFSF leverage • Earlier start of ESM • IMF contributions • New solvency requirements and rules • Banks “stress tests” coordinated by the EBA • ECB liquidity support • Recommendations & actions at national level • Annual Growth Survey 2012 • Fast-tracking at EU level of key growth items • European Semester 2012 • “Six-Pack” entry into force • “Two-pack” proposals to complement • Treaty on stability and coordination in EMU

  17. Annual Growth Survey 2012 Put forward by the Commission on 23 November 2011 to map out the EU’s growth and jobs priorities in 2012 and launch a new European Semester. Key areas for action Five priorities • Pursue country-specific strategies to fit national fiscal and macro-financial situation • Adopt right mix of expenditure and tax shifts to maximise positive impact on growth • Strengthen capital positions of key banks • Facilitate more direct access to financing • Tap into existing sources: digital single market, internal market for services, trade • Mobilise EU funds in support of growth • Fast-track key EU initiatives (cf. AGS annex) • Pursue reforms for a growth-rich recovery • Supporting employment, notably through a Youth Opportunities Initiative • Protecting the vulnerable • Improve business environment • Facilitate absorption of EU funds • Pursuing differentiated growth-friendly fiscal consolidation • Restoring normal lending to the economy • Promoting growth and competitiveness • Tackling unemployment and the social consequences of the crisis • Modernising public administration

  18. EU recommendations for national action in 2012/13 Note: Recommendations proposed by the Commission in May 2012 for 2012-2013. For IE, EL, PT and RO, the only recommendation is to implement existing commitments under EU/IMF financial assistance programmes. More information at: http://ec.europa.eu/europe2020/index_en.htm

  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% 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 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 are stalling • EU employment rate: past trends and scenario for 2020(share of people employed in the 20-64 age group) Business as usual* If national targets are met** EU target ≈ 74% ≈ 71% % On the basis of current commitments, the Europe 2020 target of a 75% employment rate will not be met. The EU would need around 17 million new jobs to meet its target. * Estimated values based on Commission 2012 Spring Forecast for 2012-2013, assuming an employment growth to the levels of 2003-2010, 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) 2011 performance 2020 national target EU target % 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 • EU investment in R&D as a % of GDP in 2000, 2010 and 2020 Business as usual* If national targets are met** EU target*** ≈ 2.7% % ≈ 2.2% 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, EL 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 • R&D investments in the EU as a % of GDP 2010 performance* 2020 national target** EU target % * EL: 2007; AT, FI: 2010.**No targets set by CZ, EL 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 Current trend to 2020 -20% -10% Current trend to 2020 -20%

  29. Greenhouse gas emissions are being reduced • Greenhouse gas emissions in 2000, 2010 and 2020 historic data business as usual if national targets are met and with reductions through the EU ETS EU target =-20% If the legal binding national targets are reached and with the binding reductions through the EU Emission Trading System (ETS), the Europe 2020 target will be met. Source: European Commission

  30. But not all countries make sufficient effort • Greenhouse gas emissions - current performance and 2020 projections 2020 projections 2020 national target 40 30 20 10 % 0 -10 -20 -30 Current projections show the EU would meet its 2020 target. However, for 13 Member States, the existing policies would not be sufficient to reach their national target. Source: European Commission

  31. The share of renewables is increasing • Renewable energy share trajectories (2005-2020) Business as usual* If national targets are met EU target = 20% Share of energy consumption Renewable energy are expected to grow faster in the years up to 2020 than in the past and its share in energy consumption will exceed the 20% target by 2020. * Commission projections based on Green-X model Source: European Commission

  32. All countries are contributing • Share of renewable energy (% of total energy use) 2009 performance 2020 national target % EU target Source: European Commission

  33. Projections from 2009 Projections from 2007 1900 1842 Mtoe 1850 1800 Business as usual 2007 projection 1750 1676 Mtoe 1700 1650 Most recent projection - 166 Mtoe 1600 1550 1500 1474 Mtoe 1450 - 20% by 2020 objective - 368 Mtoe 1400 2005 2010 2015 2020 The EU is far from its energy efficiency target Trends in primary energy consumption compared to EU target in 2020 (1474 Mtoe) 20% energy saving objective Primary energy consumption*, Mtoe In spite of progress, significant additional efforts are needed to achieve the - 20% energy consumption target. Most recent projections show that with current policies we will only achieve a 10% cut. * Gross inland consumption minus non-energy uses Source: European Commission

  34. All countries will need to contribute… Primary energy consumption in 2010 compared to EU target in 2020 (1474 Mtoe) EU target 1474 2010 2020 The Commission has proposed in the new Energy Efficiency Directive that from 2013, all Member States should set energy efficiency targets for 2020. Source: European Commission

  35. … and every country is likely to benefit Annual cost savings* of the energy efficiency Directive over the 2011-2020 period (bn Euro) * Comparison of the PRIMES reference scenario used in the Energy Roadmap 2050 (which leads to a primary energy reduction of 9.2% and contains energy efficiency policies up to March 2010) and the 20% energy efficiency scenario used for the impact assessment for the Energy Efficiency Directive, both updated to 2010 energy price forecast. Source: European Commission

  36. 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

  37. One in seven young leaves school early • Share of early school leavers*: • trends since 2000 and scenario for 2020 Past performance If national targets are met 18 16 14 12 EU target % ≈ 10.3-10.5% 10 8 6 4 2 0 2010 2020 2000 On the basis of current commitments, the Europe 2020 target will not be met. * Percentage of young people aged 18-24 leaving education and training before completing upper secondary education or equivalents in vocational education and training Source: European Commission

  38. There are big differences between countries • Share of early school leavers (age 18-24) performance in 2010 national target for 2020 EU target Source: European Commission

  39. National targets will not suffice to deliver • Share of young people (age 30-34) with tertiary attainment in 2000, 2010 and 2020 If national targets are met Past performance EU target 40 38 36 ≈ 37.5-38% 34 32 % 30 28 26 24 22 20 • 2010 2020 On the basis of current commitments, the Europe 2020 target will not be met. Source: European Commission

  40. Starting points are very different • Share of young people (age 30-34) with tertiary attainment Performance in 2010 National target for 2020 EU target % Source: European Commission

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

  42. 116 million - or 23.5% - of Europeans were living at risk of poverty or social exclusion in 2010 Population at risk of poverty or social exclusion, 2010 EU goal by 2020 « To reduce the number of people at risk of poverty and social exclusion by 20 million » At risk of poverty 81 mio Severely materially deprived 40 mio Jobless households 38 mio 41 Source: European Commission

  43. 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 2010 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. 42 Source: European Commission

  44. Business environment & quality of public administration

  45. 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

  46. Reducing red tape is a priority (1) • Time to start a business (2011, calendar days) The Small Business Act for Europe has set the target of 3 days to start a business by 2012 In 2011, it took 6.5 days to start a business in Europe, at a cost of € 400, on average. By end 2012, the time and costs should be reduced to 3 days and less than € 100. Source: European Commission

  47. Reducing red tape is a priority (2) Average payment duration of bills by public administrations to business, including delays (2011, number of days) Duration in days Delays in days The Late Payment Directive foresees a maximum duration of 30 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 2011

  48. 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)

  49. E-government could become the norm for citizens • Electronic interaction by citizens with public authorities(2011) 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. Source: European Commission

  50. Firms would also benefit from e-government • Electronic interaction by SMEs with public authorities(2011) Low levels of usage by enterprises very often suggest that services should be more adapted to the needs of companies. Source: European Commission

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