by Stefano Mallia*
As EU leaders look towards economic recovery in the wake of the pandemic, they need to give businesses the environment needed to thrive, writes Stefano Mallia.
In her State of the Union speech, European Commission President Ursula Von der Leyen defended the achievements of her executive in delivering life-saving COVID vaccines for over 70% of the EU population and provide the resources from NextGenerationEU for a historic recovery plan.
This is indeed an undeniable success, but as she herself said, we can be proud of what we have achieved, but not complacent, reminding ourselves of the lessons from the financial crisis as a cautionary tale. “At that time, Europe declared victory too soon and we paid the price for that,” she said.
And we should indeed not repeat the same mistake.
The EU economy is showing signs of a solid economic recovery, with GDP figures released last week which were above expectations; in fact, the EU economy is by now reaching its pre-pandemic levels and growth in the euro area outpaced both the US and China in the last quarter of last year.
And yet we are all but out of the woods.
Many businesses are still suffering and struggle to regain confidence. In August 2021, the Economic Sentiment Indicator was down -1.5 points. That was largely motivated by managers’ assessments of the current level of overall order books and the scarcity of stocks of finished products.
Now that most of the countries have their RRF plans approved, it is time to act. The engagement of actors on the ground is essential to translate them into meaningful projects in practice.
Public authorities need to work with civil society and social partners in implementing the plans to ensure that the necessary reforms are implemented and companies and particularly SMEs benefit rapidly.
Central to the recovery is also restoring, safeguarding and further completing our internal market. The Single Market remains incomplete, and we need to address the barriers which were already present before the crisis.
This is why von der Leyen’s proposal to present a new European Chips Act to address the shortage of semi-conductors is more than welcome. “We need to link together our world-class research, design and testing capacities. We need to coordinate EU and national investment along the value chain,” she said.
Indeed, as the pandemic comes under control, we have an opportunity to transform and relaunch the global agenda with renewed global governance and leadership. This willingness to coordinate action on critical raw materials and semi-conductors to promote diversified sources that will bring about more resilient global supply chains is a step in the right direction.
It is imperative that supply-chain resilience and technology standards are set in such a way that democracies are aligned and support each other. It is in this spirit that we can develop new partnerships to build back a better and fairer world.
Industry’s efforts to secure access to critical raw materials and reduce its demand (through efficiency, prolongation of product lifetimes and circular economy) require a clear long-term strategy. This is a point on which employers will never insist too much and we know that we can count on the Commission’s efforts, particularly those of Commissioner Breton.
This is why it is of paramount importance that when new trade agreements are negotiated, increased attention is being paid to secure supplies of key raw materials and intermediate products for EU production as well as to facilitate trade for environmental goods and services and as well as new technologies (e.g. environmental technologies). That’s defending Europe.
As employers, we see this new Trade and Technology Council between the EU and the US as a positive sign for future transatlantic cooperation and look forward to seeing what this body can deliver for our companies and citizens on both sides of the Atlantic.
Von der Leyen also touched on fair taxation.
We decisively support the agreement to reshape international taxation rules to ensure a consensual system fit for the 21st century across the world.
However, the EESC Employers’ Group urges everyone to respect the tax sovereignty of smaller countries, as it is in everyone’s interest to achieve a sustainable, ambitious, and equitable agreement on the international tax architecture.
The international agreement will transfer tax revenues to countries with large consumer markets. These countries tend to have high corporate tax rates.
Since the G-7 comprise the very largest economies, an agreement would also need to take account of the situation of smaller economies, given the need to comply with the EU Treaty when an agreement is transposed into EU Law. Most EU countries do not have a large consumer market and their need to collect taxes for their social objectives must be respected.
President Von der Leyen did not touch upon the fiscal policy response. Europe’s response to the pandemic was successful also because of the level of fiscal support. We are conscious that it cannot last forever, but any premature withdrawal should be avoided as many companies and sectors are still struggling to get back to their pre-crisis levels.
The Commission should also consider an extension of the Temporary State aid framework by the end of 2022, thus allowing member states to continue to support the economy while respecting the competition rules, in order to avoid distortions of the single market.
While many companies are still striving to survive, businesses are facing the challenge of transforming themselves in order to deliver on the EU’s digital and green goals.
The green transition must be managed in a way that maintains competitive value chains, jobs and companies, which must be supported not only with financial instruments but also by enabling new sustainable business models.
This is why good regulations are a cost-efficient way of supporting the recovery. Better regulation and competitiveness checks should be guaranteed when introducing any new policy measure.
If on der Leyen quoted Robert Schuman saying that ‘Europe needs a soul, an ideal and the political will to serve that ideal,” I would like to quote another founding father, Jean Monnet, who said that the unification of Europe was necessary for the peace and prosperity of Europeans and the whole world.
That view remains true and is even more important today in a very volatile geopolitical world.
**president of the Employers’ Group in the European Economic and Social Committee
**first published in: www.euractiv.com
By: N. Peter Kramer
