Services directive 'disappointment' for EU growth

Brussels, 17 Mar 2006

EU Commissioner for Science and Research Janez Potocnik, together with former Finnish Prime Minister Esko Aho, have referred to the recent services directive as a 'disappointment' for EU-growth, and appealed to the business world to support their calls to increase investment in research and development as a means to draw the EU out of economic decline 'before it's too late'. The two men were speaking at a session entitled 'Building a knowledge-based economy' at the European Business Summit in Brussels on 16 March.

'I am confident that the business world will send a strong and constructive message to the political world,' said Commissioner Potocnik, a week ahead of the EU Spring Summit.

The Commissioner gave three reasons why the three per cent of GDP level of research and development investment is so important. Firstly, competition: 'The times are gone when we could think of China and India as out low cost/low value competitors. Under a business-as-usual scenario, China would invest by 2010 as much of its wealth in research as Europe. It is up to us whether these economies develop as an opportunity or a threat for us.'

Secondly, momentum: 'If all Member States realise all measures they propose, the EU will be investing 2.7 per cent of its GDP in research in 2010. That would be substantially better than the 1.9 per cent in 2004,' he said. Finally, the three per cent is an indicator of the 'Progress of our economy', rather than an end unto itself - the money has to be invested rather than spent.

'It is obvious that this goes beyond the remit of the Research Commissioner. As a matter of fact, research and innovation are too important to leave them only in the hands of a Research Commissioner,' he said.

Mr Potocnik finished by underlining the need for lead markets, which are key to completing the cycle started by research and development. 'This is not a fantasy. It has been done for GSM. And it lies at the heart of the single market.'

Mr Aho picked up the baton from Commissioner Potocnik, setting out in greater detail why lead markets are of such importance. 'There is a balance between supply and demand efforts - we love looking at supply, for example the three per cent, and securing resources. But demand is more important in the EU today. Creating markets is crucial to the EU.

'The EU was created from a market perspective, and we have been poor in that sector. The fate of the services directive is a bigger disappointment than we are willing to agree,' he said.

Mr Aho outlined the four approaches he believes are essential to building a more competitive Europe: Market creation; increased R&D public and private investment; mobility of resources and finally, an entrepreneurship culture. 'R&D investment at stable levels is not working. We need more movement from knowledge to resources. Risk-taking needs to be broadly adopted. Innovation is risk-taking. Always.

'Some Member States depend on global trade. If the EU is not a strong area, those member countries will apply alternative measures. How do you get politicians to persevere?' asked Mr Aho in his summing-up, adding wryly, 'All politicians will eventually lose elections, so it is better to have good policies and devote time to that rather than trying to win elections.'

Arthur van der Poel, chairman of the EUREKA cluster MEDEA+, examined the reasons why it is necessary to push towards developing the 'Knowledge economy' now, by presenting his checklist for things that need to be completed first. 'We need to create political awareness. Done. We need to define strategies and research agendas. Done. We need industry commitment. Done - we have loud support from the industry. We need to define the public-private pact for innovation. This is mostly done. What now? Debate? Argue? Fight? Let's do it. If there are too many false starts, you are out of the race,' he said.

Roch Doliveux, CEO of the Belgian UCB group underlined the power of 'cornerstone' industries such as biopharmaceuticals, which have large research and development spends as being essential for EU growth. Tomas Hruda, CEO of CzechInvest outlined how a small country such as the Czech Republic has managed to achieve so much growth in a short space of time, by investing not just in research and development, but in entrepreneurship and a culture that nurtures enterprise and continued innovation.

Dr Jens Rostrup-Nielsen from the European Research Council (ERC) Scientific Council compared the EU situation to methods used in the US. 'The Framework Programme has not been so successful so far. In the US, they make fast decisions, and groups working in parallel tackle the same problems. Some groups may be large companies, others small, but they solve the problems they set out to solve. In the EU we tend to support people, and by 'pay and spray', where we create large groups, where the winner takes all.'

The question and answer session displayed a change in direction, with questions about the value for money of the research programme, the impact of the services directive and targets for growth directed to the speakers.

Commissioner Potocnik made an impassioned reply, to applause from the 800-strong audience. He began by referring to the recent services directive, and why is has been, according to Mr Aho, a 'disappointment'.

'Services represent more than 60 per cent of EU GDP. There are four freedoms to the common market, and two are not working - movement of services and workers. If we cannot start an internal market functioning, we must make it function. This is essential for the working of the EU and economic activity. If you have three per cent invested in research and development, this does not guarantee success, but it has to be done properly. China, Japan and the US function as one - we operate as 25. EU interest should be national interest. Nobody can guarantee that if we increased R&D we would find solutions, but not to invest is a guarantee of failure.

'Inside the EU, the research budget is the only truly competitive budget. We have to be fair about value added on the EU-level. We have the potential to work miracles. For FP7 [the Seventh Framework Programme], our philosophy was to shift more towards industry, to the lead of scientists. The ERC is the first time the EU has had a 'champions league', where EU scientists can compete. That is FP7. We are doing all that we can do on this. Our attention goes in the FP direction.

Further information

Further information

CORDIS RTD-NEWS/© European Communities, 2005