Economic Policy and Infrastructure

Europe

The European manufacturing sector’s competitiveness needs strengthening

EU policies

The European Union has still not returned to calm waters after the heavy storm of the global financial and economic crisis. On the contrary: in addition to the smoldering euro crisis, other tough tests of endurance have arisen for the EU in the form of the immense influx of refugees and the British vote to exit the EU. At the same time, the economic conditions in many EU countries remain difficult: despite economic recovery, the effects of the crisis are still pervasive in many regions. The unemployment rate in nearly all EU countries is above the comparable value from 2008, and in Greece and Spain it even exceeds 20 percent. Especially in southern European countries, additional painful consolidation steps are needed – toward flexible labor markets, leaner government agencies and sound social insurance systems. 

Initial successes of reforms were already measurable, especially in Portugal and Spain. However, just as in Greece, the governments that stood for reforms were voted out here. In their place, left-populist parties that advocate ending reforms and raising state expenditures gained traction. This means that standstill or even setbacks are threatened for consolidation, especially in countries whose problems are structural in nature. Most EU countries, however, do not have the money for state economic stimulus programs: 16 of 28 EU states had sovereign debts in 2015 in excess of the Maastricht limit of 60 percent of GDP. 

Fragile political conditions, paired with inflexible basic conditions, are an enormous stumbling block for private investment. As a result, virtually no progress is evident toward the goal of increasing the industrial proportion of added value in Europe to 20 percent. 

Increases in European competitiveness should therefore be at the top of the agenda in Brussels. In the face of political trouble spots, however, Europe’s unsolved economic problems have moved into the background. Instead the wave of immigrants is becoming a tough trial for the European Community. On one hand, Germany and a few other countries cannot bear the load alone. The ability of the economy and industry to integrate is also limited. On the other hand, numerous states feel that their national security is being threatened and react with restrictive asylum and immigration policies. This due in no little part to increasing Islamist terror attacks. In eastern and southern European countries, Russia’s aggression against the Ukraine is also perceived as a new threat. In this situation, right-wing populist parties are gaining support in a majority of EU member states, further reducing the ability of their governments to take action.

The voices in the United Kingdom that are critical of the EU are louder than ever. The decision of the majority of voters in favor of Brexit is critically important. The departure of the United Kingdom from the EU will have serious consequences, including for the German automotive industry. Around one-fifth of all passenger car exports from Germany go to the United Kingdom. In 2015, there were 810,000 vehicles. Measured by export value, the United Kingdom is Germany’s second most important trading partner after the USA. It is important now to find ways for the EU and the UK to remain closely linked, both politically and economically. 

As a whole, the centrifugal forces acting on the EU have increased significantly. The large number of hot spots has bound up the capacity of European institutions. Tight finances and diverging national viewpoints significantly reduce latitude for action. As a result, sustained development toward a political union has stalled and economic policy is receiving insufficient attention. Growth and jobs without new debt – this remains the stated theme of the EU Commission. The core project is the European investment plan with the European Fund for Strategic Investments (EFSI), which plans to push a total investment volume of 315 billion euros in upcoming years. Based on initial experience, however, the windfall gains are high. To date it is not evident that any truly new projects have actually been initiated using fund financing. 

The EU Commission also expects important growth stimulation from further consolidation of the domestic market – for goods, services, energy, capital and digitalization. Uniform European rules are expected to reduce costs. Of particular importance to the German automotive industry is the creation of a digital domestic market. It is absolutely necessary that modern legal frameworks and standards be developed in order to advance the potential of automated and networked driving in Europe. If Europe tackles this challenge decisively, it can capture the title of innovation leadership.

The German automotive industry is taking an active part in this voting process. The round table that the EU Commissioner for Digital Economy and Society, Günther Oettinger, initiated is already bearing its first fruits, such as focused cooperation with the European telecommunications industry. One thing is clear: the internal market is a central component of European integration. Given the serious debate on political integration, a new project – such as the digital internal market – could be a great opportunity for generating momentum and a positive mood in the EU. 

At the Paris climate conference in December 2015, in an ambitious, global climate protection accord, 195 countries agreed to the goal of limiting the warming of the Earth to much less than 2 degrees Celsius. So far, however, Europe is the only continent where CO2 emissions are falling. These successes in Europe are cancelled out by rising emissions in other regions. Effective climate protection can therefore succeed only if all countries pursue ambitious goals. Above all, the large emitters in Asia and America must increase their efforts decisively in order to achieve tangible progress. 

Europe should also continue to earn its role as an international example. The EU must not, however, distance itself further from the other countries by going it alone. Successful climate protection policy must also preserve industry’s power of innovation and investment. The EU Commission is currently working on CO2 regulations for the period after 2020. Coordination by the vice president of the EU Commission will hopefully help to bring climate protection and economic progress into better balance. 

One important initiative for the automotive industry comes from EU Internal Market Commissioner Elżbieta Bieńkowska. As a follow-up project to the “CARS 2020” initiative, she has created the new high-level group “GEAR 2030,” which is intended to strengthen the competitiveness of the European automotive industry. Core topics for the committee are adapting value chains to global challenges, a roadmap for automated and networked driving, and international harmonization.

Eckehart Rotter
Eckehart Rotter Head of Department Press

Tel: +49 30 897842-120 Fax: +49 30 897842-603
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