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The Path to European Growth

13-06-2012 11:49:00

Growth was on the agenda when Nicolai Wammen hosted the informal meeting of ministers for European Affairs in Aarhus and Horsens on 10-11 June.

Photo: Bjarke Ørsted
Informal meeting of Ministers for General Affairs (GAC) 10-11 June

By Nicolai Wammen, Danish Minister for European Affairs

The Danish government is determined to create growth and jobs – both in Denmark and in Europe. Promoting growth initiatives is – and has been – a central priority for the Danish Presidency of the Council of the European Union. And we are well on our way. Together with Member States and the European institutions we have already agreed on many growth-promoting initiatives during our Presidency that will assist putting Europe back on track. Now the final sprint has begun and our task is important – for example, the unemployment rate in the EU is more than ten percent now, while youth unemployment is higher than 50 percent in some countries.

During the last few years all our focus has, understandably, been on crisis management and consolidation to confront the biggest crisis facing the EU since World War II. Despite the difficult conditions the EU has managed to show decisiveness. We have established a firewall to contain the effects of the debt crisis. With the Fiscal Compact we have laid the foundation for healthy and stable European economies in the future. Also, we have adopted stricter rules that will monitor the economies of Member States to ensure that these will not derail in the future.

During the Danish Presidency the European Union has taken another step to exit the crisis. We have contributed to outline a path where we ensure stable and responsible economies and budgets, promote and implement structural reforms and take steps that will stimulate growth and employment – all at the same time.

Many have tried to place growth and consolidation as opposites, and, in this process, has drawn a picture of the German Chancellor, Angela Merkel, as a representative of consolidation and the French president, Francois Hollande, as a representative of growth. This is a false contradiction. The one does not make sense without the other, which is why we must have both. The informal EU summit a few weeks ago confirmed very clearly that we should go ahead with this “dual approach”, and this has also been the approach of the Danish Presidency.

However, it is evident that the growth agenda has gained an increasing momentum during our Presidency, particularly following the French election. From the Presidency’s perspective we are very pleased that the growth agenda, which we have been pursuing from the beginning of our Presidency, has been given increased momentum. At the informal EU Summit in May, Denmark was asked, along with the President of the European Council, Herman Van Rompuy, to continue work on the growth agenda towards the summit in June that will mark the conclusion of our Presidency. It is my hope that the European Council will reach agreement on a growth package compromising a number of growth and job creation initiatives.

An important part of the preparation for the Summit was the first comprehensive discussion among EU ministers that we had at the informal GAC in Horsens, Denmark, on 11 June. Many ideas and proposals have been aired, also in the press. But now the time has come for countries to say clearly what they think the growth package should include. It is our task as the Presidency to work quickly with the many different inputs that we received.

A key element in the growth package is the reform of the Single Market. We have already created results, e.g. by ensuring lower roaming prices for European when using mobile services abroad and reducing administrative burdens for small and medium-sized enterprises. But we are working to get more results in this area, such as better access to capital in order to improve investment conditions for businesses and hence create jobs. Our work is based on the Single Market package from the Commission.

The potential in a reform of the Single Market is enormous. Since 1992 the Single Market has contributed with approximately 5 percent growth to the European GDP and created 2.8 million jobs. But there is another huge untapped potential that we must realize. Studies show that the establishment of a European Digital Single Market can increase the EU GDP by up to 4 percent in 2020.

If we truly want growth, it is also about time that we reach agreement on the European patent and energy efficiency directive, even though both issues are very difficult and tough negotiations lie ahead. A European patent will mean that European companies do not need to apply for patents in each and every EU country, but only need to apply one place. This can reduce costs to less than one tenth of the current costs. The energy efficiency directive can create up to 400,000 jobs, growth and improve Europe's competitiveness at the global stage.

We also need to open new markets for European products. A clear priority for the Danish Presidency has therefore been to promote trade agreements between the EU and a number of strategic partners, including Canada, India, the United States and Japan. We have worked to maintain a free-trade oriented European trade policy because the possible new free trade agreements being negotiated have the potential to increase the EU GDP by 2 percent and create more than two million jobs.

The European Union does not have a huge budget to stimulate growth. It “only” makes up about 1 percent of our collective GDP. But it is still a considerable amount of money; approximately € 1,000 billion that we need to agree on the distribution of once every seventh year. The Danish Presidency has been leading these negotiations during the last five months and we are close to reaching our ambitious goal of delivering a complete structure for a final agreement.

The discussion about how much money should be allocated to which policy areas will only commence after our Presidency. But an important priority is that the budget should be targeted as much as possible towards growth and employment. We simply need to get more "bang for the buck", as Eisenhower said. If we succeed in getting support for the Presidency’s proposal for a negotiating box, the Danish Presidency will have put a lasting mark on the EU policies for the future.

We also need to examine if we can better direct some of the current structural funds to support growth and combat unemployment. When reading the press one could get the impression that there is a dusted box of unused EU funds that we can use freely. But it is not quite that easy. The reality is that the Commission proposes that the non-programmed structural funds to a higher degree should focus on growth and employment, and the Presidency supports this very strongly.

An extra element in the growth package will be to improve the conditions for investments. The Danish Presidency has just reached agreement on a proposal to open for pilot project bonds that will provide better financing options for investment, e.g. in infrastructure that will create new jobs. In the budget negotiations possible funding through project bonds is also considered. And the European Investment Bank and the European Commission are working on a proposal to increase the lending possibilities for the European Investment Bank, e.g. by increasing the capital base or by using new innovative risk management instruments.

Finally, it is important for the Danish Presidency to emphasize that although we can do a lot at the European level, it is the responsibility of the individual Member State to ensure that national policies create growth and jobs. Therefore, structural reforms – like those the Danish government is working to implement in Denmark – are crucial.

This is the growth agenda that Denmark has been working on during the past five months of our Presidency. There are plenty of growth proposals on the table, also some not mentioned here, and it is our job to gather all the ideas, gear them as much as possible to generate growth and get the necessary proposals adopted. If there is no consensus among Member States and with the European Parliament we will not get growth or a single job from the many good suggestions. The Presidency therefore needs support for the growth agenda and support for reaching common solutions.

Throughout the Presidency this has been our working-premise, and we will work tirelessly in the coming last weeks of our Presidency to create even more results that will boost growth and employment in Europe. Tough negotiations await us, but millions of jobs are at stake and these are jobs that Europe simply cannot afford to let pass by.

This article was originally published in the Danish newspaper Jyllands-Posten on 12 June 2012.