Inspired by the Draghi report, Europe’s three largest business federations have called for Europe to “catch up” with the US in several ways—an approach that may prove more difficult than it sounds.
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Germany’s BDI, France’s Medef and Italy’s Confindustria met in Paris on Thursday and Friday (21-22 November), where they adopted a joint statement calling for Europe to catch up with the US economy.
“It is always good practice to compare yourself with others,” Medef’s president Patrick Martin told journalists on Friday.
Inspired by Mario Draghi’s report on European competitiveness, the three associations noted that Europe has lower growth rates, less innovation, higher energy prices, fewer scale-ups, more than double the number of new laws since 2014, and less spending on research and development (R&D) – all compared to the United States.
The three groups are therefore calling for a catch-up test: Within a year, the key policy results of the EU should be compared with those of the US, with policies adjusted “as necessary”.
In some policy areas, however, the groups already know what is required, urging the new Commission and governments to “adopt a technology-neutral approach across all initiatives, review all relevant regulations, raising R&D budgets to 3% of GDP, and start to unlock €800 billion—all within one year.”
The latter is to be achieved primarily by—you guessed it—integrating capital markets. “We should implement a real capital markets union (CMU) in the next year,” said Martin at the conference.
The four-page statement, however, lacks any detail on how to get there, which, as ECB President Christine Lagarde pointed out 478 kilometres away—at the European Banking Congress in Frankfurt—is the key reason for the CMU’s slow implementation.
“Lack of progress comes down, in large part, to the loose definition of CMU and the piecemeal legislative approach this creates,” she told the congress on Friday, adding that this, “allows the project to suffer a ‘death by a thousand cuts’ as vested interests oppose or dilute each piece of legislation.”
Earlier this week, Jan Ceyssens of the European Commission’s financial services department (DG FISMA) admitted that European capital markets integration is currently “on the back burner” or even “in regression”.
Knowing is not enough
Quoting Leonardo da Vinci, Lagarde said that “knowing is not enough; we must apply. Being willing is not enough; we must do.”
Indeed, while discussions about the CMU often get bogged down in very technical issues such as capital markets’ supervision, insolvency law, and securitisation, others raise much more fundamental doubts about the approach of making Europe more like the US.
“Certain people in Europe are morbidly obsessed with the European capital markets matching the US capital markets,” said Richard Gardenier, head of EU policy at the World Benchmarking Alliance, a group of industry, NGOs and academics working on sustainability reporting, talking to Euractiv ahead of the business groups’ meeting.
“One reason the US capital markets are so much bigger is that they have a tech industry, which we are never going to replicate,” he said, adding, “Secondly, everyone invests in the market over there because there is no government social system.”
“So to chase after the US is just a folly,” he said, because “the whole nature of their economy is ‘high risk, high reward’ whereas, in Europe, it is more like the nanny state — which is fine because that is what we have collectively agreed,” he said.
Referring to the lobbying efforts of business groups, Gardenier concluded that “when they are saying ‘we need to get more money’, they are actually challenging the very system that we have in a very fundamental way.”
Instead, “what we need is an assessment of what the EU market fundamentally is and [should] not automatically morph it into the US model,” he said.
Martin, however, said there were “European values that we do not question.”
But “we cannot preserve European values if we do not have an underlying economic performance,” he added.
Confindustria’s president Emanuele Orsini, meanwhile said that “benchmarking with the US helps us to understand why EU companies want to go to the US—and how they can stay in Europe.”
The German BDI, however, did not seem to agree fully. “The Germans [BDI] have asked that we stop comparing ourselves to the US,” a Medef official told Euractiv.
Economic News Roundup
The goal to reduce corporate reporting obligations by 25%, as announced by the European Commission, will not be possible without touching the “essence” of regulation, lobbyism-watchdog Corporate Europe Observatory warned. Overall, Corporate Europe Observatory has identified 16 initiatives of the new Commission that could lead to “deregulation”, according to an analysis of Ursula von der Leyen’s political guidelines and the “mission letters” to her fellow Commissioners. “The door has been opened to roll back some of the regulation adopted in the EU in the past years,” Kenneth Haar, researcher and campaigner at the organisation, told Euractiv, pointing in particular to key sustainability regulation adopted during the last term. “Seen from the perspective of a company owner, there’s simply no Christmas gift that can beat this,” he added. Read more.
Donald Trump will probably implement “broad and aggressive” measures targeting the European Union’s trade surplus with Washington during his second term in the White House, according to a former senior US trade official. Greta Peisch, former General Counsel of the Office of the United States Trade Representative (USTR), told Euractiv that Trump’s policies will probably be of a similar “level of ambition” to the 60% tariffs on Chinese goods and 10-20% duties on all other US imports proposed during his re-election campaign. “I think Trump is going to take broad and aggressive action on trade,” she said. Peisch, who stepped down from her position at the USTR in January and currently works for Wiley, a DC-based law firm, said that one of the incoming Trump administration’s main priorities will be to address Washington’s considerable trade deficit with the rest of the world – including the EU. “We are importing autos from the EU. We are not exporting any. We are importing steel from the EU. We are not exporting any […] There is a perception that there is something unfair about this trade relationship that should be corrected,” she said. Read more.
The integration of Europe’s capital markets has largely failed to advance and may even be in “regression”, says a top European Commission official. “Integration… actually is maybe even a bit on the back burner [or] in regression,” said Jan Ceyssens, head of the capital markets unit at the European Commission’s Directorate‑General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA). Ceyssens was speaking on Tuesday (19 November) at an event in Brussels marking the release of the Association for Financial Markets in Europe’s (AFME) annual report on the EU’s Capital Markets Union (CMU). The report states that “widening” fragmentation is posing critical risks to the EU’s financial stability, is an accurate, if largely negative, depiction of the current backdrop for capital,” Ceyssens said. AFME and the Commission’s warnings come amid growing efforts by EU officials to boost Europe’s capital markets contribution to the EU’s massive investment needs—which some estimate to be the region of €800 billion per year. Read more.
Germany’s focus on reducing building energy consumption has failed, representatives of corporate and public landlords said at an event in Berlin on Tuesday (19 November) as ministers turn against each other in the upcoming election campaign. “Climate protection in existing buildings, as we are currently doing it, is a ‘mission impossible’,” Axel Gedaschko, president of the German Association of Housing and Property Companies (GdW), said at an industry event on Tuesday, which he said was due to “a dogmatic, almost creed-like focus on absolute energy savings in individual buildings” slowing down decarbonisation and increasing costs. Social Democratic construction and housing minister Klara Geywitz, a close ally of incumbent chancellor Olaf Scholz, blamed the Economy Ministry led by Scholz-contender Robert Habeck (Greens). During her term in office, “the fundamental conflict was between the economy ministry’s focus on energy efficiency and the affordability of construction,” she said. Read more.
The majority of EU member states have missed a deadline to enact a directive aimed at boosting the minimum wages of citizens—with some actively pursuing a watering down of national standards, Europe’s largest trade union organisation says. The European Trade Union Confederation (ETUC) said in a report published on Monday (18 November) that a “lack of political will” has led many countries, including France, Poland, and the Netherlands, to miss last Friday’s (15 November) deadline for transposing the EU minimum wage directive into national law. Only eight member states had officially ratified the directive as of last week: Belgium, Czechia, Denmark, Germany, Hungary, Lithuania, Romania, and Sweden, the report said. Conversely, others—including Latvia, Luxembourg, and Czechia—have actively engaged in efforts to lower workers’ salaries or their ability to negotiate collective agreements, it said. “National governments need to work with trade unions to fully deliver on the promises of the directive,” said ETUC Confederal Secretary Tea Jarc. “If they continue failing to do so, the Commission should enforce it.” Read more.
[Edited by Rajnish Singh]
