Innovation is what’s needed to make pro-growth spending and austerity work hand-in-hand

The crisis requires an agenda – including investments – for the next months.

To react to the crisis of 2008, Europe prepared a plan with investments in energy infrastructure and some initiatives of industrial innovation with part of the EU budget and European Investment Bank (EIB) loans. Among these, the car, manufacturing and green construction were included. Some key industrial sectors on which to channel public and private resources were also identified, such as renewable energy, energy efficiency, networks and smart cities.

Europe needs to accelerate now and use the forces in place as a way to get out of the crisis.

The recipes are: more EU funds for industrial innovation, access to credit and venture capital, infrastructure and competitiveness – with research more oriented to businesses and the market, even with demonstration and pilot projects close to commercial purposes and concrete applicability.

We need to devote a particular attention to SMEs, which must have the adequate means in order to adapt to change.

The Commission proposals for the new EU budget in part reflect these priorities, with Horizon 2020 which provides €80 billion for industrial research and innovation, and COSME [Competitiveness of Enterprises and SMEs, a proposed €2.5 billion programme due to run from 2014 -2020] with more funds for access to credit and risk capital for growth and expansion enterprises, €50 billion for network infrastructures, out of which €10 billion for Project bonds and regional funds targeted to resource efficiency, innovation and SMEs.

Investment is essential

Increasing these investments should not be considered as making the debt or deficit higher, as they are essential to generate more wealth and competitiveness. One the contrary, they would contribute to a better balance sheet by providing rapid returns. I envisage, for example, a plan for more sustainable and safe construction, or more in general for the partial reconversion of our industry towards improved resource-efficiency.

Part of them could also come from a €310 billion saving, equal to 2.5 per cent of the European GDP, which we spend every year to import over 75 per cent of the gas and 85 per cent of the oil we consume. Part of the funds paid by industry for CO2 auctions under the emission trading system, which will start in January 2013 should be re-used to help businesses to convert their production towards greater efficiency.

Essential also is an improved role for the EIB, which should be refinanced to support industrial innovation projects and [provide] more access to credit. With the agreement we reached at last Wednesday’s informal European summit about a €10 billion recapitalisation of the EIB, which [will underpin] a leverage effect of more than €180 billion, credit and industrial innovation could be enhanced, especially in the weakest countries.

But we can go further by using part of the unspent EU funds for further recapitalisation.

Access to credit and late payments

Every week thousands of companies go out of [business]. This is because one third of SMEs do not manage [access] the credit they applied for. In this respect the latest report by the European Central Bank and the European Commission highlights the risk of further worsening. Access to credit has a key role in letting enterprises invest in quality, innovation and human resources. Even healthy businesses run the risk of closing down.

The Commission is undertaking the strategy which was presented in last December providing for more EU funds in guarantees to ease the credit situation, a more active role of the EIB, an integrated market for risk capital, Basel III adapted to the needs of SMEs.

Unlocking €180 billion

In such a troubled situation in which governments ask citizens and enterprises for sacrifices and for fiscal loyalty, I believe it is a moral duty, and not only a legal obligation, that public administration be timely in paying their debts towards companies. For this reason, the immediate implementation of the Directive on Late Payments is necessary without waiting for March 2013. This directive would unlock €180 billion for enterprises. Thousands of companies’ going bankrupt could then be avoided without further loss of jobs and with a positive impact on public finance itself.

An innovation-friendly public administration

Among the biggest obstacles to innovation investment sustainability and infrastructures [are] the additional costs caused by administrative burden. In the current crisis, bureaucracy should not be an obstacle but an ally for companies. Systems to speed up and simplify practices should be assessed, also at EU level, by introducing where possible, a tacit consent on reasonable times, as envisaged for certain infrastructures or for renewable energy. Derogations should also be considered for SMEs for whom procedures are four times more expensive than those for large businesses.

The Commission is undertaking a plan to reduce red tape by 25 per cent with savings estimated in the range of tens of billions. We also introduced a competitiveness test for assessing the impact of new legislation on companies.

Furthermore our SME envoys are committed every day to promoting and defending a more business friendly context.

Exploiting emerging markets

EU companies must better exploit the chances provided by emerging markets. I could myself notice during the growth missions undertaken in Brazil, US, Mexico and Colombia with representatives of EU industry and SMEs how much our technology and quality is appreciated in the world. It represents a real asset in our external relations. My intention is to continue with these missions and visit North Africa, Russia, China and Vietnam between the second half of 2012 and the beginning of 2013.

What we need is also a less naive commercial policy, aimed at creating a real access to the markets for our enterprises. Reciprocity should be the key condition in our trade relationships with strategic areas such as for example the American and North African markets.

Industrial innovation and European governance

Some structural reforms, such as the shift of the tax base from labour to revenues and consumption, or to discourage the waste of resources are extremely helpful for competitiveness. The push for industrial innovation as an engine of growth and competitiveness should become a central element of the European semester and of the new economic governance.

Commission on the front line

The exit strategy from the crisis, therefore, passes through more attention to the real economy, SMEs, the innovative and creative power of our industry. Without a strong industrial basis we do not create work and we will not count in tomorrow’s global world. In total, 37 million jobs in Europe depend directly on the manufacturing sector. This figure rises to 76 million if we include manufacturing-related services. By losing capacity in the manufacturing sector, we will lose jobs and fail to innovate.

Only by boosting the entrepreneurial spirit, the ability to create and do business to drive our future can we provide concrete responses and prospects for new generations. Entrepreneurs, by their nature, tend to innovate, are enthusiastic about ideas they want to realise. We must accompany this force, by removing obstacles, opening up certain prospects and using public stimulus, when necessary.

The Commission should be at the front line in supporting European leadership in the unfolding industrial revolution. In addition to the European partnership on raw materials launched on 29 February and on the strategies on Key Enabling Technologies and on cars to be presented in June, by this summer we aim at adopting a communication on the construction sector.

Today the Commission will launch a consultation open to all parties interested in a new industrial strategy, which I will present in September and which could enable European companies become protagonists in the global challenging scenario.

Young people first

With innovation being the new energy in the machine of our economic systems, we need to be aware that most of it will come from the thinking and efforts of 20 or 30 year olds.

Through young people, governments may understand how to give space to the entrepreneurial and innovative spirit of emerging business people. Not only young people have the right to sit at the table of the discussion, but without them, an essential vision of how to address the future will be missing.

New generations must be educated to the culture of risk. If we wasted their talent and potential it would mean that we learnt no lesson from this crisis.

By September, the Commission will present a European plan for entrepreneurship which will strengthen instruments for access to credit, venture capital (also for start-ups) and exchange programmes like the Erasmus for young entrepreneurs. We have to be more inclined to accept that new forms of entrepreneurship bear more risk of failure, without putting a stigma on them.

Betting on growth

Last Wednesday’s informal summit tackled the most urgent issues at stake for the EU economy. Among these, the Eurobonds could help in reducing the debts and putting a brake to the financial speculation. Also, a European guarantee scheme on bank deposits would provide more stability to our banking systems and ease access to credit.

I also hope that a real discussion about the role of the ECB and about the rate of the Euro compared to rival currencies would now take place.

In general, the summit highlighted that there is a growing awareness of the fact that fiscal discipline is not enough to restore public finances. From this point of view, some progress has been made in paving the way for a real Pact for Growth which should be twinned with the fiscal one, the latter being necessary but not sufficient. Here, I can think about boosting measures in line with the so-called Golden Rule, with some investment in research or infrastructure, or the paying back of debts to enterprises. These might not be accrued in the calculation of the public debt or deficit. Or even further, the use of the unspent regional funds to support credit, capitalise the EIB or the promotion of Project Bonds.

The seriousness of the crisis and the real risks of loss of some achievements we had in sixty years of integration, including euro and the internal market, require exceptional measures also in the short term. And some of them necessarily have to be taken at European level to really have an impact on growth.

This is an edited version of a speech by Antonio Tajani. Vice-President of the European Commission responsible for Industry and Entrepreneurship to the "Mission Growth: Europe at the Lead of the New Industrial Revolution" conference Brussels, 29th May 2012.