Challenges and Opportunities for Europe

A new Swedish government has taken office. A new European Commission is about to. It seemed to me a good time to set out some thoughts on some of the big priorities facing the UK, Sweden and our EU partners over the coming months. Here’s a translation of the article I wrote for Saturday’s Dagens industry, Debatt: Så kan Löfven hjälpa oss , describing what I see as the shared priorities.

For all EU countries, modernising our economies to create high quality, high value employment for the future is a shared challenge. Britain has seen employment growing rapidly in the last few years, but other European countries, not least those in the Eurozone have struggled.

Over the next 15 years Europe’s share of global output is forecast to halve.  This is partly about the emerging markets growing. But it also reflects the lack of underlying competitiveness in Europe.

So the challenge is how to create a more competitive EU, which will deliver prosperity for its citizens.  For the UK, this means making more out of the EU’s Single Market, the heart of Europe’s success over the last thirty years, but whose potential is still not fully realised.

The single market remains incomplete in services, energy and digital – the very sectors that are the engines of a modern economy – it is only half the success it could be.

The UK’s priorities, where we want to work closely with Sweden,  are therefore to advance services liberalisation, to reform the digital single market, increase innovation, advance free trade, improve regulation, deepen the single market in financial services, develop a more integrated energy market and deliver on our climate change ambitions. Taking each in turn:

Services: we want the new Commission to prioritise advancing the single market in high-value services sectors, such as construction and professional business services, by breaking down the remaining barriers. The services sector accounts for 70% of EU GDP and over 90% of new jobs, but it makes up just over 20% of intra-EU trade. This has to change.  Existing legislation should be redesigned to accommodate and encourage new ways of doing business and new proposals should be future-proofed to retain the flexibility to respond to future technological changes. Completing the Digital Single Market could alone add 4% to EU GDP by 2020.

Innovation: is key to sustaining growth for developed economies. Our companies cannot compete with the rest of the world on price alone. This requires a pro-innovation mindset, including better regulation, competitive product markets, and access to finance. In 2011 more than 70% of the world’s knowledge creation was taking place outside the EU and only 17% of the world-leading innovators in ICT come from the EU, compared to 52% from the US alone.

Trade: as consumers we benefit from free trade within the Single Market.  We need to free up the EU’s external trade. Therefore we want the next Commission to pursue an ambitious trade agenda. We’re confident Cecilia Malmström will do that.  An ambitious TTIP could bring annual benefits to the EU economy of €119 billion, or an extra €545 for every family of four in the EU.

Regulation: getting the right balance on regulation, encouraging growth, while protecting consumers, is more crucial than ever. Cutting unnecessary bureaucratic burdens is vital to developing the competitiveness of our businesses. We need a regulatory framework that promotes innovation, skilled jobs and access to world markets. A 25% reduction in EU administrative burdens on businesses could lead to an increase of 1.4% in EU GDP.

Financial Services: over the last five years the EU has undertaken a comprehensive reform of this sector, but but further work is necessary to deepen and strengthen the internal market and to ensure the sector provides financing for jobs and growth in a stable environment. The Commission should take action to improve capital markets so companies have access to the funding necessary to invest and grow.

Energy and climate: Consumers and businesses require affordable, secure and sustainable energy. By completing the internal energy market we could unlock substantial benefits for the EU. A recent report estimates the value of an integrated EU market to be as much as €40 billion a year by 2030 in electricity, and in gas as much as €30 billion a year.  Europe needs to move towards greater energy security and independence.

Above all, it also needs to offer global leadership towards getting an international climate agreement: a greenhouse gas reduction target of at least 40% could also result in gas imports falling by almost 10% from 2010 levels by 2030. Good for Europe’s economy and a crucial contribution to tackling the greatest global challenge of all: uncontrolled climate change.