Europe 2020
Ruth Paserman
Alpeuregio summer school 2012
4 July 2012
In 2010, Europe faced a choice
2010-2020: a decade of sluggish growth?
Output level
•« Strong recovery » :
a full return to earlier growth path
and a capacity to go beyond
Pre-crisis growth path
•« Sluggish recovery » :
a permanent loss in wealth and
stagnation on a lower growth path
•« Lost decade » :
a permanent loss in wealth and an
eroded potential for future growth
years
Source: presentation of President Barroso to the informal
European Council of February 2010, “launching” Europe 2020
1
We have lost a lot
Actual growth compared to « crisis-free » growth
(EU GDP level, € billion)
actual
if growth had been sustained
We have « lost » about € 2 000 billion between 2007-2010 due to the crisis,
compared to a scenario where we would have kept our average growth rate
over 1995-2007. This corresponds to the GDP of France or to 11% of Europe’s
cumulative debt.
2
Tackling the « vicious circles » affecting Europe
Europe 2020
Macro-imbalances procedure
Euro Plus Pact
Low competitiveness
Low productivity
Low growth
Higher
taxes
Low tax
revenue
Low
demand
Limited
access to
finance
Government
Private and
debts
financial sector
indebtedness
Bank guarantees
and recapitalisation
Stability and Growth Pact
Financial firewalls
Treaty on stability,
coordination and governance
Lower values
of bonds
EU supervisory framework
Macro-imbalances procedure
3
Deficits are declining but decisive steps are needed
Government deficit in % of GDP
Euro area
EU 27
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
-1
-2
-3
-4
-5
-6
-7
-8
Forecast*
* Commission 2012 Spring Forecast. This forecast is based on a «no-policychange scenario» and does not reflect announcements made since its publication.
Source: European Commission
4
There is a rebalancing of external positions
Current account balance as a % of GDP
Deficit countries
Surplus countries
8
6
4
2
0
-2
-4
-6
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12*
13*
*Commission 2012 Spring Forecast
Source: European Commission
5
Cost trajectories have been very diverse
Real effective exchange rates*
vis-à-vis the Euro area average (Euro area = 100)
130
BE
ES
IT
PT
CY
125
DE
FR
NL
FI
SI
EL
IE
AT
MT
LU
Forecast
120
115
Relative loss in
competitiveness
110
105
100
95
Relative gain in
competitiveness
90
85
80
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
* This indicator measures changes in price competitiveness relative to other countries.
EE and SK missing due to high values: 145 and 183 respectively in 2011.
Source: European Commission
6
Why a European strategy?
 The crisis showed that our economies are closely inter-linked
 If we want to counter the crisis and weigh globally, we must act in a
more coordinated way
 In addition, the crisis in Greece has more than ever underlined the
interdependences in the eurozone area
 Only the EU gives us the critical mass to have impact:
 Activate all policy areas and levers in an integrated way
 Exchange of best practices
7
Europe 2020: delivering reforms
 3 thematic priorities
 5 EU headline targets – translated into national ones
 7 flagship initiatives – EU & national action
 Mobilising existing EU instruments:
Single market
External dimension
Stability and Growth Pact (SGP)
EU and national Budgets & new financing instruments
8
Europe 2020: the EU’s growth strategy
Strengthened EU economic governance
Macro-economic &
fiscal surveillance
Regulation of
financial services
Targets and guidance
for structural reforms
Flagships for smart, sustainable and inclusive growth
Digital
Agenda
New
Industrial Policy
Youth
on the Move
New Skills
and new Jobs
Innovation
Union
Platform against
Poverty
Resource
Efficiency
Modernised EU levers for growth and jobs
Single Market Act
Trade and
external policies
Structural Funds
and future EU budget
9
EU targets agreed for 2020
Proposed by the Commission and agreed by the European Council in
March 2010: all Member States were invited to set national targets on this basis.
EMPLOYMENT
75% of the population aged 20-64 should be employed
INNOVATION
3% of the EU's GDP should be invested in R&D
CLIMATE / ENERGY A reduction of greenhouse gas emissions by 20%
A share of renewable energies up to 20%
An increase in energy efficiency by 20%
EDUCATION
The share of early school leavers should be under 10%
At least 40% of the younger generation should
have a degree or diploma
POVERTY
Lifting at least 20 million people out of poverty
10
A new architecture for policy coordination
11
11
The Euro Plus Pact
Agreed in Spring 2011 by the 17 Member States of the Euro area,
joined by Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania.
FOSTER COMPETITIVENESS
Monitor wages and productivity trends
Measures to increase productivity
FOSTER EMPLOYMENT
Labour market reforms (‘flexicurity’)
Life-long learning
Tax reforms to raise labour participation
ENHANCE THE SUSTAINABILITY
OF PUBLIC FINANCES
Pensions, health care and social benefits
REINFORCE FINANCIAL
STABILITY
National legislation for banking resolution
Regular bank stress tests
National fiscal rules
STRUCTURED DISCUSSION ON TAX POLICY ISSUES
12
The European Semester timeline
January
European
Commission
February
March
Annual Growth
Survey and
other reports
Debate &
orientations
European
Parliament
Debate &
orientations
Member
States
May
June
July
Proposals for
country-specific
recommendations
Council of
Ministers
European
Council
April
Discussion
in Council
formations
Autumn:
Monitoring and
peer review
at European level
Endorsement of
country-specific
recommendations
Spring EU summit:
overall guidance
on EU priorities
Adoption of National
Reform Programmes
(NRPs) & Stability
and Convergence
Programmes (SCPs)
Autumn:
Implementation at
national level
13
EU recommendations for national action in 2011/12
Public finances
Fiscal
consolidation
Long-term
Sustainability
Fiscal
framework
Labour market
Taxation
Wage
Setting
Active
Labour
Market
Policy
Labour
Market
participation
Structural policies
Education
Network
industries
Energy
efficiency
Service
sector
Business
environment
and
SMEs
Financial stability
R&D
and
innovation
Public
services
and
cohesion
policy
Banking
Housing
market
AT
BE
BG
CY
CZ
DE
DK
EE
ES
FI
FR
HU
IT
LT
LU
MT
NL
PL
SE
SI
SK
UK
Note: Recommendations adopted by the EU in July 2011 for 2011-2012. For IE, LV, EL, PT and RO, the only recommendation is to implement existing
commitments under EU/IMF financial assistance programmes. More information at: http://ec.europa.eu/europe2020/index_en.htm
14
Roadmap to stability and growth
Put forward by the Commission on 12 October 2011 to map out
next steps in Europe’s comprehensive response to the crisis.
Five elements
Key recent actions / initiatives
1. Give a decisive response
to the problems of Greece
 A new financing plan
 Extended maturities and lower interest rate
 Negotiations on private sector involvement
2. Enhance the Euro area's
backstops against the crisis
 EFSF leverage
 Earlier start of ESM
 IMF contributions
3. Strengthen the banking system,
namely through recapitalisation
 New solvency requirements and rules
 Banks “stress tests” coordinated by the EBA
 ECB liquidity support
4. Frontload stability and growth
enhancing policies
 Recommendations & actions at national level
 Annual Growth Survey 2012
 Fast-tracking at EU level of key growth items
5. Build a more robust and
integrated economic governance




European Semester 2012
“Six-Pack” entry into force
“Two-pack” proposals to complement
Treaty on stability and coordination in EMU
15
Annual Growth Survey 2012
Put forward by the Commission on 23 November 2011 to map out the EU’s
growth and jobs priorities in 2012 and launch a new European Semester.
Five priorities
Key areas for action
1. Pursuing differentiated
growth-friendly fiscal
consolidation
 Pursue country-specific strategies to fit
national fiscal and macro-financial situation
 Adopt right mix of expenditure and tax shifts
to maximise positive impact on growth
2. Restoring normal lending
to the economy
 Strengthen capital positions of key banks
 Facilitate more direct access to financing
3. Promoting growth
and competitiveness
 Tap into existing sources: digital single
market, internal market for services, trade
 Mobilise EU funds in support of growth
 Fast-track key EU initiatives (cf. AGS annex)
4. Tackling unemployment and
the social consequences of the
crisis
 Pursue reforms for a growth-rich recovery
 Supporting employment, notably through
a Youth Opportunities Initiative
 Protecting the vulnerable
5. Modernising public
administration
 Improve business environment
 Facilitate absorption of EU funds
16
EU recommendations for national action in 2012/13
Note: Recommendations proposed by the Commission in May 2012 for 2012-2013. For IE, EL, PT and RO, the only recommendation is to implement existing
commitments under EU/IMF financial assistance programmes. More information at: http://ec.europa.eu/europe2020/index_en.htm
17
Europe 2020 targets
Are we likely to meet our targets for 2020?
EMPLOYMENT
75% of the population aged 20-64 should be employed
INNOVATION
3% of the EU's GDP should be invested in R&D
CLIMATE / ENERGY A reduction of CO2 emissions by 20%
A share of renewable energies up to 20%
An increase in energy efficiency by 20%
EDUCATION
The share of early school leavers should be under 10%
At least 40% of the younger generation should
have a degree or diploma
POVERTY
20 million fewer people should be at risk of poverty
19
Smart, sustainable
and inclusive growth
i) 75% of the population aged 20-64 should be employed
20
Progress with employment rates are stalling
•EU employment rate: past trends and scenario for 2020
(share of people employed in the 20-64 age group)
Business as usual*
If national targets are met**
77
EU target
75
≈ 74%
73
%
≈ 71%
71
69
67
65
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
On the basis of current commitments, the Europe 2020 target of a 75% employment
rate will not be met. The EU would need around 17 million new jobs to meet its target.
* Estimated values based on Commission 2012 Spring Forecast for 2012-2013, assuming an employment growth
to the levels of 2003-2010, taking into account a 1.2% reduction of the active population during the decade
** No target set by the UK: the projection for the EU assumes 75% for the UK in 2020
Source: European Commission 21
Employment performances vary markedly
•Employment rates in the EU
(share of people employed in the 20-64 age group)
2011 performance
2020 national target
80
75
EU target
70
%
65
60
55
SE NL DE DK AT FI CY UK CZ EE LU FR PT SI EU BE LV LT SK PL IE BG RO ES MT IT HU EL
No target set for UK. For SE the target is well above 80 %.
Source: European Commission 22
Smart, sustainable
and inclusive growth
ii) 3% of the EU’s GDP should be invested in R&D
23
The EU is lagging behind its R&D target
•EU investment in R&D as a % of GDP
in 2000, 2010 and 2020
Business as usual*
If national targets are met**
EU target***
3.1
2.9
2.7
%
≈ 2.7%
2.5
2.3
≈ 2.2%
2.1
1.9
1.7
1.5
1.3
1.1
2000
2010
2020
On the basis of current commitments, the Europe 2020 target will not be met.
* Scenario based on the continuation of on-going reforms and financial efforts.
** No targets set by CZ, EL and the UK: 2020 figures were estimated by Commission services.
*** The EU target includes R&D expenditure by intergovernmental research infrastructures
which is not included in the R&D expenditure of the Member States.
Source: European Commission 24
Levels of ambitions for R&D vary a lot
•R&D investments in the EU as a % of GDP
2010 performance*
2020 national target**
4.5
4.0
3.5
3.0
%
EU target
2.5
2.0
1.5
1.0
0.5
0.0
FI SE DK DE AT FR SI EU BE NL IE UK LU EE PT CZ ES IT HU LT PL SK MT LV EL BG CY RO
* EL: 2007; AT, FI: 2010.
**No targets set by CZ, EL and the UK. For CZ: a target (of 1%) is available only for the public sector.
For IE: the target is 2.5% of GNP which is estimated to be equivalent to 2.0% of GDP.
For LU: the target is between 2.30% and 2.60% (2.45% was assumed).
Source: European Commission 25
Smart, sustainable
and inclusive growth
iii) a reduction of CO2 emissions by 20%, a share of renewable
energies up to 20%, an increase in energy efficiency by 20%
26
Progress towards climate/energy 20-20-20 goals
Reduce greenhouse
gas levels by 20%
Increase share of
renewables to 20%
Reduce energy
consumption by 20%
100%
Current
trend to
2020
-20%
Current
trend to
2020
Current
trend to
2020
-10%
-20%
27
Greenhouse gas emissions are being reduced
•Greenhouse gas emissions in 2000, 2010 and 2020
historic data
business as usual
if national targets are met and with
reductions through the EU ETS
5.400
historic data
5.200
business as usua
5.000
4.800
if national targets
and with reductio
the EU ETS
4.600
EU target =-20%
4.400
4.200
EU target = -20
4.000
3.800
2000
2010
2020
If the legal binding national targets are reached and with the binding reductions through the
EU Emission Trading System (ETS), the Europe 2020 target will be met.
Source: European Commission 28
But not all countries make sufficient effort
•Greenhouse gas emissions - current performance
and 2020 projections
2020 projections
2020 national target
40
40%
30
30%
20
20%
10%
10
%
0
0%
-10%
-10
-20%
-20
-30%
-30
HU UK NL SE PT FR DE FI ES EU DK CZ AT PO BG IT IE BE EE EL CY LU RO LV SI SK LT MT
Current projections show the EU would meet its 2020 target. However, for 13 Member
States, the existing policies would not be sufficient to reach their national target.
Source: European Commission 29
The share of renewables is increasing
•Renewable energy share trajectories (2005-2020)
Business as usual*
If national targets are met
Share of energy consumption
EU target = 20%
Renewable energy are expected to grow faster in the years up to 2020 than in the past and
its share in energy consumption will exceed the 20% target by 2020.
* Commission projections based on Green-X model
Source: European Commission 30
All countries are contributing
•Share of renewable energy
(% of total energy use)
2009 performance
2020 national target
50
45
40
35
%
30
25
20
EU target
15
10
5
0
SE LV FI AT PT EE RO DK LT SI ES FR EU BG SK DE PL IT CZ EL HU IE BE CY NL UK LU MT
Source: European Commission 31
The EU is far from its energy efficiency target
Trends in primary energy consumption
compared to EU target in 2020 (1474 Mtoe)
Primary energy consumption*, Mtoe
Projections from 2007
Projections from 2009
20% energy saving objective
1900
1850
1842 Mtoe
Business as usual
2007 projection
1676 Mtoe
Most recent projection
- 166 Mtoe
1800
1750
1700
1650
1600
1550
1500
1450
1400
2005
- 20% by 2020 objective
- 368 Mtoe
1474 Mtoe
2010
2015
2020
In spite of progress, significant additional efforts are needed to achieve the - 20% energy
consumption target. Most recent projections show that with current policies we will only
achieve a 10% cut.
* Gross inland consumption minus non-energy uses
Source: European Commission 32
All countries will need to contribute…
Primary energy consumption in 2010
compared to EU target in 2020 (1474 Mtoe)
BE
BG
CZ
DK
DE
EE
IE
GR
ES
FR
IT
CY
LV
LU
HU
MT
NL
AT
PL
PT
RO
SI
SK
FI
SE
UK
LT
1800
1600
1474
1400
EU target
1200
1000
800
600
400
200
0
2010
2010
2020
The Commission has proposed in the new Energy Efficiency Directive that from 2013,
all Member States should set energy efficiency targets for 2020.
Source: European Commission 33
… and every country is likely to benefit
Annual cost savings* of the energy efficiency
Directive over the 2011-2020 period (bn Euro)
6
5
4
3
2
1
0
AT BE BG CY CZ DK EE FI FR DE HE HU IE IT LV LT LU MT NL PL PT RO SK SI ES SE UK
* Comparison of the PRIMES reference scenario used in the Energy Roadmap 2050 (which leads to a primary energy
reduction of 9.2% and contains energy efficiency policies up to March 2010) and the 20% energy efficiency scenario
used for the impact assessment for the Energy Efficiency Directive, both updated to 2010 energy price forecast.
Source: European Commission 34
Smart, sustainable
and inclusive growth
iv) the share of early school leavers should be under 10% and at
least 40% of the younger generation should have a degree or diploma
35
One in seven young leaves school early
•Share of early school leavers*:
•trends since 2000 and scenario for 2020
Past performance
If national targets are met
18%
18
16%
16
14%
14
12%
12
%10%
10
EU target
≈ 10.3-10.5%
8%
8
6%6
4%4
2%2
0%0
2000
2000
2010
2010
2020
2020
On the basis of current commitments, the Europe 2020 target will not be met.
* Percentage of young people aged 18-24 leaving education and training before
completing upper secondary education or equivalents in vocational education and training
Source: European Commission 36
There are big differences between countries
•Share of early school leavers (age 18-24)
performance in 2010
national target for 2020
40
35
30
25
20
15
10
EU target
5
0
SK CZ SI PL LU LT AT SE NL FI
IE HU DK EE BE DE CY FR LV EL BG EU UK RO IT ES PT MT
Source: European Commission 37
National targets will not suffice to deliver
•Share of young people (age 30-34) with tertiary
attainment in 2000, 2010 and 2020
Past performance
If national targets are met
EU target
40
40%
38
38%
≈ 37.5-38%
36
36%
34
34%
32%
32
%
30
30%
28
28%
26
26%
24
24%
22
22%
20
20%
2000
2000
2010
2010
2020
2020
On the basis of current commitments, the Europe 2020 target will not be met.
Source: European Commission 38
Starting points are very different
•Share of young people (age 30-34)
with tertiary attainment
Performance in 2010
National target for 2020
70
60
50
%
40
EU target
30
20
10
0
IE DK LU SE FI CY BE LT FR UK NL DE ES EE AT PL SI EU LV EL BG HU PT SK MT CZ IT RO
Source: European Commission 39
Smart, sustainable
and inclusive growth
v) 20 million fewer people should be at risk of poverty
40
116 million - or 23.5% - of Europeans were living
at risk of poverty or social exclusion in 2010
Population at risk of poverty
or social exclusion, 2010
Severely materially
deprived
At risk of poverty
81 mio
40 mio
EU goal by 2020
« To reduce the number
of people at risk of poverty
and social exclusion
by 20 million »
Jobless households
38 mio
Source: European Commission 41
The situation is very different across Member States
People living in poverty or social exclusion (in %)
Population at risk of poverty or social exlusion* in 2010
2020 target**
45
40
35
30
25
20
15
10
5
0
CZ SE NL AT
FI
LU DK
SI
FR DE MT SK BE EE UK EU CY
IT
PT ES EL PL
IE HU LT LV RO BG
* People at risk of poverty or social exclusion are at least in one of the following three conditions:
living with less than 60% of the national median income (“at-risk-of-poverty” threshold),
severely material deprivation or living in a jobless household.
** Some Member States have no marked national 2020 target on this graph because they have chosen to use
a different monitoring indicator which does not directly translate into a comparable indicator at EU level.
Source: European Commission 42
Business environment
& quality of public
administration
The quality of public administration matters
•Global Government effectiveness ranking*
• (2011)
100
90
80
70
60
50
40
30
20
10
0
FI
DK SE AT NL LU BE UK DE CY FR
IE
EE MT PT
SI
CZ ES SK LT
PL LV HU EL
IT
BG RO
Efficient governments are key to create competitive business environments, stimulate growth
and innovation. Moreover, well-performing administrations are essential to ensure that
citizens and businesses can benefit fully from the advantages of EU membership.
* Government effectiveness captures perceptions of the quality of the public service, its degree
of independence from political pressures, the quality of policy formulation and implementation,
and the credibility of the government’s commitment to such policies
Source: World Bank Governance Indicators 2011
44
Reducing red tape is a priority (1)
Time to start a business
(2011, calendar days)
25
20
15
The Small Business Act for Europe
has set the target of 3 days
to start a business by 2012
10
5
0
DK IT
PT BE EE IE HU NL BG RO SI FR LV LT DE EL CY MT UK FI
AT SK LU CZ SE ES PL
In 2011, it took 6.5 days to start a business in Europe, at a cost of € 400, on average.
By end 2012, the time and costs should be reduced to 3 days and less than € 100.
Source: European Commission
45
Reducing red tape is a priority (2)
Average payment duration of bills by public
administrations to business, including delays
(2011, number of days)
Duration in days
Delays in days
200
180
160
140
120
100
80
The Late Payment Directive foresees
a maximum duration of 30 days
60
40
20
0
EE
FI
LV
DE
SE
DK
PL
CZ
NL
UK
AT
IE
SK
HU
LT
FR
BE
CY
PT
ES
EL
IT
Late payments, including delays, are a major obstacle for firms to manage cash flows.
Payments take several months in some countries, and large differences exist across the EU.
The Late Payments Directive will help to tackle this problem.
Source: European Payment Index 2011
46
Slow licensing delays business start-ups
•Time to get a license*
(2010, average time in days)
120
100
80
60
40
20
0
CZ UK IT LV FR BE FI SK HU NL EE PL LU EU AT SE SI
IE EL DE PT DK LT RO BG CY MT ES
Licensing procedures can be particularly slow and burdensome. On the average they take
67 days, with Spain, Malta and Cyprus faring particularly badly.
*Indicator based on aggregated data on licences required to open five different activities (manufacture of steel products,
manufacture of small IT devices, a hotel with a restaurant, a plumbing company, wholesale distribution and retail distribution
Source: Study on ‘Business dynamics: Start-ups, business transfers and bankruptcy’ (2010)
47
E-government could become the norm for citizens
•Electronic interaction by citizens with public authorities
(2011)
100
90
80
70
60
50
40
30
20
10
0
DK SE FI NL LU FR EE AT DE SI SK BE CZ IE LV EU HU ES UK PT MT LT PL CY EL BG IT RO
The use of e-government services is increasing across the EU, but very large differences
persist. There is ample scope for improvements in many countries.
Source: European Commission 48
Firms would also benefit from e-government
•Electronic interaction by SMEs with public authorities
(2011)
100
90
80
70
60
50
40
30
20
10
0
DK SE FI NL LU FR EE AT DE SI SK BE CZ IE LV EU HU ES UK PT MT LT PL CY EL BG IT RO
Low levels of usage by enterprises very often suggest that services should be more adapted
to the needs of companies.
Source: European Commission 49
Corruption costs 1% of EU annual GDP on average
•Irregular payments and bribes*
•(2010-2011 survey among firms, ranging from 1 = very common to 7 = never occurs)
7
6
5
4
3
2
1
0
DK SE FI LU NL IE DE UK AT BE FR EE EU PT CY ES PL SI MT LT HU LV IT RO CZ SK BG EL
Survey among firms shows that the frequency of irregular payments differs substantially
among Member States. This is a particular issue for some countries.
* The indicator is based on the weighted average score across five components of an Executive Opinion
Source: World Economic Forum, Global Competitiveness Report 2011-2012 50