The Lisbon Agenda: how will the New Europe score vis à vis the Old Europe ?

Here are my notes and they are not comprehensive of course.

We had a great panel today:

Augusto Lopez-Carlos, Chief Economist and Director, Global Competitiveness Programme, World Economic Forum
Laurens Jan Brinkhorst, Minister of Economic Affairs of the Netherlands
Leszek Balcerowicz, Governor of the National Bank of Poland
Elizabeth Padmore, Partner and Director, Policy and Corporate Affairs, Accenture
Leif Pagrotsky, Minister for Trade and Industry of Sweden

"The Lisbon agenda: make Europe the most competitive and dynamic economy in the world by 2010"

When the Lisbon agenda was launched, the agenda was very ambitious but what could not have been foreseen is that global economy was about to enter a global recession so fiscal problems, instability in growth became the short term agenda.

In 2004, we are bringing in a set of countries that have delivered incredible results in the last 15 years. Could Estonia and the other accessing countries play a major role in European growth ?

Laurens Jan Brinkhorst, Minister of Economic Affairs of the Netherlands

Can Europe regain competitiveness ?

-It has to be taken into account that inside Europe there is enormous amount of diversity in the 15 and in the 10, these countries are very different. The Nordic region is leading the way in terms of economic results, Sweden is higher than the USA itself in many aspects. You just can't import the US model in Europe even though that is what the americans often tell us, "just do like we did".
-Ireland had incredible results
-the biggest problem is Germany and France with their unemployment and poor growth rates.
-Italy slides backwards in unemployment

How to get the group as a whole going ?
Some of the new countries do extremely better than Old Europe in many aspects. The dynamism of these countries with the young population can help us. They have younger political leaders and a highest percentage of entrepreneurs willing to change the situation, they are used to change.

Leszek Balcerowicz, Governor of the National Bank of Poland

How can we pretend to have a knowledge based Economy without high University budgets ?

Elizabeth Padmore, Partner and Director, Policy and Corporate Affairs, Accenture

Estonia is by far ahead of all countries in e-government.

The countries joining the EU are hugely vibrant and innovative and entrepreneurial, they may act as a wake up call. They will issue a challenge to the old members.

We do not invest enough in education in all European countries, (Educational budgets represent 2% of GDP in the EU versus 3% in the US). 400 000 researchers trained in Europe have chosen to go to the US at this exact moment and this is a very important issue, brain drain.

Leif Pagrotsky, Minister for Trade and Industry of Sweden

New members will contribute a lot.

-the ten new members are used to change, imagine the pace of change in the last 15 years they have been through and compare it to the change in our Countries.
The ability to live through change is a major sign of creativity and dynamism.
-the new Countries have younger politicians and business managers, they are more likely to be early adopters of new ways of thinking and doing things
-the level of education is very high and knowledge is the key currency or even the single currency of the world

For the first time we have a group of countries with a level of education far above economic development. In many developing Countries outside of the EU, these countries have to make the educational basis first -here they do not have to- which gives them an incredible advantage and that is the reason they can change so fast. The good news is that this high level of education can also be maintained easily.

We must avoid having rigid universities and have competition between universities and research. I have always been in favor of competition. I don't see the new members as competitors but as people who will bring more competitivy and growth in the future. We should see enlargment as a vitamin injection to our EU affairs.

Leszek Balcerowicz, Governor of the National Bank of Poland

How can we improve the entrepreneurial spirit in Europe ? It is absolutely key to the success of Europe. We should make the process of creating a company very easy and fast. In italy for example, it takes a lot of time and efforts to create a company. Entrepreneurial spirit is absolutely key to Europe's success.

Elizabeth Padmore, Partner and Director, Policy and Corporate Affairs, Accenture, on Entrepreneurship.

Do we reward intelligent failure ? Elizabeth Padmore took the example of an entrepreneur failing a company and explained that a failure can be excellent in an entrepreneur profile: "if somebody has not failed then he has not tried hard enough". Then Elizabeth Padmore explained how her thirteen years old kid tried to start a company directly on the Internet by opening a resellers account in an Internet site, without telling her. "Kids are entrepreneurs but we beat them out, we push them against boundaries, they lose their entrepreneurial spirit as they grow up".

Let me talk about a survey we made amongst 500 leaders around the world. One incredible result is that when you ask all these leaders what country is leading the World in terms of entrepreneurship the huge majority of them answer the USA. Almost all Europeans answered "the USA" but what is even more interesting is that all Americans answered USA too. They have confidence and awareness about their leadership. People don't follow pessimists, would you invest in a CEO that has no confidence in himself ? We should restore optimism in European leaders and Entrepreneurs minds.

Leif Pagrotsky, Minister for Trade and Industry of Sweden was asked if the Swedish model was exportable.

Augusto Lopez-Carlos asked how can they have such high tax rates ?

Leif Pagrotsky answered that Nordic countries are a group of their own.

Everybody focus on the disadvantages of high tax rates. Growth means change. In every country and individual there is resistance to change. If you create a level of security and education (like give people the possibility of preparing for a year for a new job for example), people will actually be ready to take risks and be ready for change. Do secure people dare more ?

We have the financial ressources to have an ambitious education. Give access to computers to everybody and that keeps productivity high. We do not experience any resistance for modernization from the trade unions even if modernization means often jobs disappearing, the trade unions understand other jobs are created in the sectors of the future. Every body is in favor of these changes.

There are several ways to achieve flexibility. Our nordic model works for us but it may not work for other Countries.

About the high taxes now. We are the first ones accountable for how we spend the public money. As long as people feel we spend it right, people accept to pay it. The public money should go to innovation and education. Some Countries are spending it too much on protecting people.

"Protecting the past is a higher priority than preparing the future" is my conclusion to all my years working with the EU. This is the chance of the new countries, they have young leaders in politics who understand they should work for the future, not the past, they only look forward. Many Old Europe countries politicians spend their time trying to fix past problems and forget about the future.

Now, some comments on my side.

I have been impressed by Leif Pagrotsky's speech about investing in the future. I would focus on one key result Sweden achieved, the Internet penetration in the Country shows how much people are educated with it and ready for this part of the future.

I also cannot help thinking how France is again totally out of these debates. Very few political Leaders were in Davos this year, non are at the European Economic Summit to my knowledge, very few French business Leaders are here. I feel bad about France for that reason, how can there be such a low interest in getting part in these talks ? I am listening carefully to other EU Countries leaders and must say I am very impressed.

I had several discussions with Participants about France and Germany pretending to be the core two players of the EU and what I feel more and more is that they are the Leaders of protecting the past when I hear results achieved by Sweden, Ireland, Estonia and the growth rate in the Accessing Countries as a whole. More important than that is the "hunger to succeed" we can feel in these countries.

What do you think about it ?

Comments

[Best Indoor Tanning Lotion]

The beauty of the Swedish model is that it shows socialism really does not work. Sweden has not had any new companies start up in over 20 years of any size.

[Olivier Travers]

One way to improve competitiveness is to ease the movement of individuals and small businesses (not just big companies who can throw a bunch of lawyers at any problem) within the EU . This can be done with the increased deployment of internet broadband and applications, and by removing petty administrative barriers.

Competitiveness is going to increase through very practical things that impact daily life, not through grand statements. The problem is that we are not pragmatic enough in Europe. We have higher language and cultural barriers than the Americans have, so let's make sure everything else is as smooth as possible. I'm glad I don't waste 30 minutes at the border between Portugal and Spain, and traveling to Seville is just like going to Porto, a local and very pleasant ride. But for a permanent relocation there's still too much hassle going on, which in turn hurts productivity and the willingness to move and invest around. Zero paperwork should be an aggressive goal, as this red tape doesn't produce any visible value and in fact hurts us.

To elaborate, let me give you my personal example, as I'm a self-employed French consultant who relocated to Portugal last year (more sun, less taxes, hurrah to intra-EU competition!). One thing that would have made the move easier would have been better web sites for things such as real estate. Unfortunately the Internet is not that developed in Portugal because of low broadband penetration which is itself due to the quasi-monopoly of the incumbent telco (PT), so I understand why real estate agents wouldn't invest much in up-to-date, easy-to-use web sites (that and high VAT makes PCs more expensive than in the US). We need real affordable broadband (10+Mbps, like what the Koreans and Japanese get) everywhere in Europe, instead of pretending our lousy ADSL services are high tech. Phone calls within Europe need to be much cheaper too, which is starting to happen with VOIP. Right now it's cheaper for me to call Los Angeles with my $15-a-month Vonage account, than it costs me to call France (at a tenth of the distance) with my PT land line!

Another aggravating thing is that the Portuguese administration is asking me to fill in a dozen different pieces of papers with offices located in different places (even though the Portuguese conveniently gather many admins in the same place, once customs are involved all hell breaks loose) just to have license plates for my car, or else they'll extort enormous "import" levies from me. Hello, what became of the free ability to move goods and people around? One year later I still have French license plates (I know expats from other EU countries who came to the same conclusion), which forces me to pay a higher insurance premium and renew a "temporary" contract every few months. The fact is I'm coming to this country and injecting money in its economy but yet they make it a hassle for me to have a normal life (against the spirit if not the letter of European agreements).

Someone moving from Boston, MA to Austin, TX (a distance larger than my own Bordeaux-Lisbon) would suffer none of that hassle. You go to realtor.com, have access to thousands of listings, and can easily prepare much of your relocation online, saving you time, money and stress (I know part of the problem is that in Europe we don't consolidate real estate listings in MLSs, which is another factor of our low competitiveness: too many industries are still amateurish and unconsolidated). And you won't have to go through administrative hell to avoid extraordinary taxation that you're not supposed to pay in the first place anyway. Yes you'll have to deal with the local State administration, but the burden won't be nearly as high as what a different European nation state is going to require from you. What happens in the end is that you ignore regulations as much as you can.

At least many people in Portugal speak some English, so language isn't too much of a hassle for daily life, but we need to be much more aggressive in teaching languages to children (when it's much easier). English is the de facto common standard, learning at least a second European language besides yours would also be nice (people from the UK would be forgiven not to learn a third language, if at least they made the effort to pronounce their language in a way that everyone else understands!). My 3-year old daughter is learning French, English and Portuguese, this 3-language course should be the standard as soon as kids start school.

[Billy McCormac]

Sorry, meant to address the previous post to Loïc.

The WEF blog is a great initiative, and a great way to bolster the organization's transparency.
Regards,
Billy McCormac
JKL Group

[eva biaudet]

Pagrotskys claim about the nordic countries beeing in a group of their own is true politically. In Finland people are amazingly positive towards our level of taxation, as long as they feel that society is giving something important back, good education, health care, childcare... But we are naturally not in an isolated economy and companies count carefully advantages and disadvantages when investing. The EU enlargement will bring neighbours who compete with substiantally lower production costs and somewhat lower taxation, but not as much as we all believe. Suprisingly finnish investing in Estonia is only 0,9 % and Sweden and EU countries are on top. So its a complicated picture. We like to think that good welfare services and high level education for all is a competitivness factor. But we are by no meens isolated and at this moment government is preparing proposals to lower company taxation and costs on labor.