Which way out?

Romania’s former Foreign Minister, Andrei Plesu, commented yesterday on the tough economic conditions facing Romania and quoted Caragiale “From this dilemma we have no way out”. Certainly the economic outlook looks a bit like Bucharest’s roads did last week, blocked at every junction and with more snow on the way. Growth forecasts are being revised down, credit is scarce and costly, budgets get tighter and the externals for Romania’s economy – the situation in the Euro zone – continues to have a negative impact.

Virtually every country in Europe faces a similar dilemma – how to get the economy growing again while cutting spending and stocks of debt. At the European Council meeting in Brussels yesterday, the British Prime Minister, David Cameron, made the case for a new effort by Europe’s leaders to get the engines of growth in Europe back into action again.

Of course this means meeting the immediate challenges of the single currency, recapitalising banks, implementing the package agreed last October for Greece and putting a sufficiently big firewall around other economies in the Euro Zone. But it also means tackling the structural issues which undermine competitiveness in Europe and, put simply, creating more jobs.

Where do new jobs come from? There are three main sources – new ideas, new investments and new markets. We need to go after all three.

Europe has been the source of the world’s great new inventions for most of the last two centuries- the jet engine, the World Wide Web, even the iPad are the products of European minds trained at Europe’s great universities. Britain has led the way with over 127 Nobel laureates from Oxford and Cambridge alone. If Europe can continue to generate these ideas – but also capture them, patent them and manufacture them, it will remain a leading force in the global economy for decades to come.

New investments can be big but most are small. It is the small and medium sized enterprises that will be the source of most new jobs in Europe in the coming decade. They need to be given every chance, and that requires access to credit and freedom from needless bureaucracy, inspections and rules that can weigh them down and prevent them getting off the ground. It also needs flexibility in labour markets so that hiring people is easy, not costly and as many people can be employed as possible. That’s the kind of competitive environment that will attract the large foreign investors too.

Finally, we need new markets. That means negotiating new agreements to give European companies free access to the dynamic emerging economies of Asia and Latin America. But it also means completing our own single market – with half a billion consumers – so that no countries are discriminated against. For example, we don’t yet have a single market on line. Romanian businesses large and small – should be able to sell their products and services over the internet to any customer in Europe. This can transform the way we do business – when the distance to market is only the distance between your fingers and the keyboard. There are endless possibilities for generating new products, services and efficiencies and creating new jobs – including in rural areas where the internet can vastly expand the options for employment.

The debate over the euro crisis has been about northern and southern Europe. But we should not neglect central and eastern Europe. As Britain’s Trade Minister Lord Green said in Warsaw last November, this region is “Emerging Europe” – the emerging economy within the Single Market. It is a region that already has lower taxes and more flexible labour markets than in many western European Countries. It can be an engine for Europe’s growth in the future.