europe 2020 ruth paserman dg enterprise and industry head of unit europe 2020 and national...

Europe 2020

Ruth PasermanDG Enterprise and IndustryHead of Unit Europe 2020 and National Competitiveness Policies Alpeuregio summer school 2013

19 June 2013

2

•« Strong recovery » : a full return to earlier growth path

and a capacity to go beyond

•« 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

Pre-crisis growth path

Output level

years

2010-2020: a decade of sluggish growth?

Source: presentation of President Barroso to the informal European Council of February 2010, “launching” Europe 2020

In 2010, Europe faced a choice

3

Economic context

• 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

Real GDP, EUSource: Commission Services

Employment growth and unemployment rate in EUSource: Commission Services

90

95

100

-3

-2

-1

0

1

2

3

4

5

07 08 09 10 11 12 13 14

GDP growth rate (lhs)GDP (quarterly), index (rhs)GDP (annual), index (rhs)

forecast

q-o-q% index, 2007=100

3.2 0.3

-4.3

1.6 -0.3 -0.1

Figures above horizontal bars are annual growth rates.

1.4

2.1

6

7

8

9

10

11

12

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Employment (q-o-q%, lhs), forecast (y-o-y%, lhs)Unemployment rate (rhs), forecast (rhs)

% % of the labour force

forecast

Forecast figures are annual data.

4

Tackling the « vicious circles » affecting Europe

Low competitiveness

Low productivity

Low growth

Private and

financial sector

indebtedness

Government

debts

Low demand

Limitedaccess tofinance

Low taxrevenue

Higher taxes

Bank guarantees and recapitalisation

Lower values of bonds

Europe 2020Macro-imbalances procedure

Euro Plus Pact

Europe 2020Macro-imbalances procedure

Euro Plus Pact

EU supervisory frameworkMacro-imbalances procedureEU supervisory framework

Macro-imbalances procedure

Stability and Growth PactFinancial firewalls Treaty on stability,

coordination and governance

Stability and Growth PactFinancial firewalls Treaty on stability,

coordination and governance

5

Deficits are declining but decisive steps are needed

* Commission 2013 Spring Forecast. This forecast is based on a «no-policy-change scenario» and does not reflect announcements made since its publication.

Government deficit in % of GDP

EU 27 Euro area

Forecast*

Source: European Commission

6

There is a rebalancing of external positions

*Commission 2013 Spring Forecast

Current account balance as a % of GDP


Surplus countries Deficit countries

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Relative loss in competitiveness

Relative gain in competitiveness

*This indicator measures changes in cost competitiveness relative to other countriesEE and SK missing due to high values: 154 and 173 respectively in 2014.

Cost trajectories have been very diverse

Real effective exchange rates* vis-à-vis the other Euro Area Member States (average 1999 = 100)


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

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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

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EU targets agreed 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 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

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.

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Europe 2020: the EU’s growth strategy

Single Market Act Trade and

external policiesStructural Funds

and future EU budget

Modernised EU levers for growth and jobs

Flagships for smart, sustainable and inclusive growth

Strengthened EU economic governance

Macro-economic & fiscal

surveillance

Regulation of financial services

Targets and guidance for structural reforms

Innovation Union

New Skills and new Jobs

Digital Agenda

Youth on the Move

New Industrial Policy

Platform against Poverty

ResourceEfficiency

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Better enforcement Of SGP rules

-Sanctions-Two-pack: ex ante submission of draft budgets, monitoring-National layer: Directive on fiscal frameworks, Fiscal Compact

More effective prevention of gross

policy errors

-Focus on structural balances-Expenditure benchmark

Crisis resolution instruments -EFSM/EFSF: temporary-ESM permanent-OMT

Focus on debt developments

Debt reduction benchmark

Structural reform strategy

(Europe 2020)

Prevention and correction of

macro imbalances

6-pack; MIP procedure and sanctions

Sound fiscal policy More effective

supervision and regulation of the financial system

ESAs – ESRB – CRD IVBanking Union: SSM; direct

recaps by ESM

Growth Compact(EIB, Structural funds,

Projects bonds)

Balanced growth

European Semester for economic policy coordination

Current economic governance framework

1313

Integrated country surveillance

SGP: fiscal policy

Competitiveness and imbalances

• Budgetary balances

• Public debt

• Long-term sustainability of public finances

• Budgetary rules and institutions

• Elements of quality of public finance

Structural reforms to raise growth

potential

• Wages and price competitiveness

• External imbalances

• Internal imbalances (housing, credit)

• Labour market reforms

• Product market reforms

• Reforms of social protection systems

Competitiveness and imbalances

• Wages and price competitiveness

• External imbalances

• Internal imbalances (housing, credit)

15

The 2013 AGS priorities

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EU recommendations for national action in 2013/14

Employment and social policies

Sound public f inances

Pension and healthcare systems

Fiscal framew ork

TaxationBanking and access to f inance

Housing market

Netw ork industries

Competition in service

sector

Public administration

and smart regulation

R&D and innovation

Resource eff iciency

Labour market

participation

Active labourmarketpolicy

Wage setting mechanisms

Labour market

segmentationEducation

Poverty and social

inclusion

ATBEBGCZDEDK EEESFIFRHUITLTLULVMTNLPLROSESISKUK

Public finances Structural reformsFinancial sector

For Cyprus, Ireland, Greece and Portugal the only recommendation is to implement commitments under EU/IMF financial assistance programmes.

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Implementation

• 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

EU level National level Regional and local levels Social partners and civil society

• Implementation of reforms is a shared responsibility:

• Regional and local administrations are often heavily involved with implementation, often playing a key role

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Gaps in the EMUarchitecture exposed by the crisis

Excessive risk-accumulation in quiet/good times in both the public and private sectors Failing market discipline Insufficent monitoring and enforcement tools

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

19

Stage 1Completed end 2012-3

Stage 2Start 2013 – completed 2014

Stage 3Post 2014

Objectives Ensuring fiscal sustainability; breaking link between banks and sovereigns

Completing integrated financial framework; promoting sound structural policies

Establishing EMU country-specific shock absorption function

Integrated financial framework

SSM and Single Rulebook Harmonised national Single Resolution Mechanismresolution and deposit (SRM) with backstopsguarantee frameworks ESM bank recapitalisation

Integrated budgetary framework

Six pack, Two pack, TSCG Financial incentives linked to Country-specific contractual arrangements shock absorption

Integrated economic framework

Contractual arrangements integrated in European Semester

Framework for ex-ante coordination of economic policy reforms

Political accountability Commensurate process on democratic legitimacy and accountability

Towards a genuine EMU

Europe 2020 targets

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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

?

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i) 75% of the population aged 20-64 should be employed

Smart, sustainable and inclusive growth

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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


24

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 %.


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ii) 3% of the EU’s GDP should be invested in R&D

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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-going reforms and financial efforts.

** No targets set by CZ and the UK: 2020 figures were estimated by Commission services.*** The EU target includes R&D expenditure by intergovernmental research infrastructures

which is not included in the R&D expenditure of the Member States.


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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).

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iii) a reduction of CO2 emissions by 20%, a share of renewable energies up to 20%, an increase in energy efficiency by 20%

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Progress towards climate/energy 20-20-20 goals

Reduce greenhousegas levels by 20%

Increase share of renewables to 20%

100%

Reduce energyconsumption by 20%

~16-20%Target:

-20%

2011 emissions: -17%

-20%

Current trend to

2020

Current trend to

2020

?

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Greenhouse gas emissions are being reduced

•Total greenhouse gas emissions from 1990 until 2011 and 2013-2020 annual targets

Source: European CommissionIn kTCO2-eq for EU 27, scope of the climate and energy package

The EU is well on track for meeting its 2020 greenhouse gas emission reduction target of -20%

-20%-17%

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But not all countries make sufficient effort

Source: EEA

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.

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

32

The share of renewables is increasing

* Commission projections based on Green-X model

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

•Renewable energy share trajectories (2010-2020)


33

All countries are contributing

•Share of renewable energy (% of total energy use)

2020 national target2011 performance

%

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.

34

More encouraging trends for the EU's energy efficiency target

* Gross inland consumption minus non-energy uses

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)

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iv) the share of early school leavers should be under 10% and atleast 40% of the younger generation should have a degree or diploma

36

One in seven young leaves school early

EU target

If national targets are met

≈ 10.3-10.5%

Past performance

* Proportion of the population aged 18-24 with only lower secondary education or less and no longer in education or training.


On the basis of current commitments (national targets), the Europe 2020 target will be missed by approx. 0.5 %.

Share of early school leavers*

37

There are big differences between countries

National target for 2020

Performance in 2012

EU target

Share of early school leavers*


* aged 18-24

38

Tertiary Attainment: National targets will not suffice to deliver

EU target

≈ 37.5-38%

If national targets are metPast performance

Positive trend, but based on the basis of current commitments, the Europe 2020 target will not be met.


* aged 30-34

Share of young people with tertiary attainment*

39

Starting points are very different

EU target

National target for 2020Performance in 2012

Share of young people with tertiary attainment*


* aged 30-34

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.

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v) 20 million fewer people should be at risk of poverty

4141

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

Severely materially deprived

43 Mio

Jobless households

38 Mio

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The situation is very different across Member States

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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.


Business environment & quality of public

administration

44

The quality of public administration matters

•Global Government effectiveness ranking*• (2011)

* 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

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.

45

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.


46

Reducing red tape is a priority (2)

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.

Average payment duration of bills by public administrations to business, including delays

(2013, number of days)

Source: European Payment Index 2013

47

Slow licensing delays business start-ups

•Time to get a license*(2010, average time in days)

*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)

Licensing procedures can be particularly slow and burdensome. On the average they take 67 days, with Spain, Malta and Cyprus faring particularly badly.

48

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

49

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.

50

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)

* 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

Survey among firms shows that the frequency of irregular payments differs substantially among Member States. This is a particular issue for some countries.

europe 2020 ruth paserman dg enterprise and industry head of unit europe 2020 and national...

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decade of sluggish growth

earlier growth path

lower growth pathlost

european strategy

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