Ilmub alates 1994.aastast. Vaala keskus, Lõõtspilli 2, Rakvere 44313 E-post: reklaam @ nadalaleht.eu toimetus @ nadalaleht.eu Nädalaleht levib kolmes maakonnas (Lääne- ja Ida-Virumaa, Jõgevamaa) ja Tartu linnas.
Eesti Panga konverentsilt: Joaquin Almunia kõne

Joaquin Almunia:

SecuringEuropean success in a global economy

Ladies and Gentlemen,

Allow me first of all to thank MrLipstok, Governor of the Eesti Pank, for inviting me to address you today.  It is an honour for me to be here in Tallinn to celebrate theanniversary of the Estonian kroon, and to discuss some of the issuessurrounding European competitiveness.  


As my colleague in the Commission,Siim Kallas, is the man widely considered to be the "father of theEstonian kroon", allow me to congratulate him for this impressiveachievement.

 

The kroon has established itself asa solid, stable and trustworthy currency. It is a precious asset for yourcountry and is no doubt a reflection of the impressive progress made by Estonia overthe last 15 years. This country's success in establishing a stable democracyand a well functioning market economy have aided its good integration with theEU and has meant that Estoniais a valuable partner for our Union.

 

Estonia's progress puts the country in a strong position toface the competitiveness challenges posed by a rapidly changing global economy.Globalisation presents an enormous opportunity for Europe,but also requires urgent policy responses if we are to overcome the weaknessesin our economies and capitalise on the immense possibilities available.

 

I will outline how the EuropeanUnion is taking a leading role in this respect, helping Member States to adjustto the demands of globalisation via three important pillars: first through astrong Economic and Monetary Union, second with the Lisbon Strategy's agendafor structural reform and finally by taking advantage of our enlarged InternalMarket.

 

 Globalisation: a call to action

 

Globalisation is not a new phenomenon. Other periodsof our history have also seen the pace of global exchanges increasesignificantly.  But there can be no doubtthat the integration of world economies has advanced at a striking rate sincethe 1990s. The economic emergence of China,India and Brazil aspowerhouses of production is having a dramatic impact on world trade.

This process brings with it multiple benefits. The economicdevelopment of Asian and other regions has lifted millions out of poverty whilealso providing a great motor for the world economy. For Europeans, thedevelopment of new foreign markets and trading partners supports the growth ofour economies.

For most EU Member States, globalisation has not causedmajor problems so far. On the opposite, globalisation has generally been asource of important gains.  20% of the improvementsin our living standards over the last 50 years can be attributed to the EU’sgrowing integration with the world economy, and another 10% can be attributedto growing trade between Member States. So, rather than seeking shelter fromglobal competition, Europe should make fulluse of the opportunities it offers, while minimising the inevitable adjustmentcosts.

Yet we shouldn't underestimate the scale of this task. For Europe, globalisation means facingfierce competition, both from low-cost economies like China and Indiaand from innovation-driven economies like the US.  

At the moment, the EU's production strengths lie in arange of medium-high technology sectors and in some areas of services such asfinancial services. However, the EU is not as strong as it should be in hightechnology sectors. Moreover, it has still a relatively high share of itsexports in labour-intensive goods, which will face increasing competition fromemerging economies, especially China.

As it becomes increasingly difficult for Europe to compete with developing countries in thissection of the market, so it will be crucial both to consolidate our positionin the medium-high technology sectors, and to steadily address weaknesses in arange of high technology market segments, especially Information and CommunicationTechnologies.

Building a competitive economy for the 21stcentury will mean inevitable adjustment. This means making our economiesflexible enough to diversify and specialise economic activity, and it meansinnovating and investing in education and research in order to strengthen ourcompetitive advantages. 

There is no question that the changes brought byglobalisation and the demands they make on our economies will not be welcomenews for everyone. The rise in competition and the shift to a knowledge basedeconomy will inevitably put certain jobs at risk, particularly for those in someindustrial sectors.

But adapting our economies for global competition shouldnot mean sacrificing social justice. Structural changes to our economies mustbe accompanied by suitable social policies, that will help Europeans adapt tothe challenges that globalisation brings. It means supporting those who findthemselves out of work and providing the best means to get them on their feetagain. We must equip Europeans for a labour market in which adjustment tochange and life long learning is the norm, and this means strengthening theiremployability and improving our education systems at all stages.

To cope with the challenges of globalisation theEuropean Union is  a powerful leverage.Globalisation is laying down the gauntlet, and the European Union is respondingin all aspects of policy making, with a combined strength and internationalweight that would be difficult to match on the level of individual nationstates.

Ladies and gentlemen, I would now like to outlinethree major spheres of EU policy which are helping us to manage and shape theforces of globalisation. The first is Economic and Monetary Union, the secondis structural reforms under the renewed Lisbon Strategy for Growth and Jobs andthe third is our enlarged, European Internal Market.

 EMU: creating a stronger European economy

Economic and Monetary Union and the euro plays a keyrole in helping Europe to face the challengesof globalisation.  Let me give you two examples.

- First, with regard to interest rates. The EMU isbuilt on a solid stability oriented framework. The fiscal policies of theMember States have to respect the limits set by the Treaty and by the Stabilityand Growth Pact. The very existence of a common rule restricting deficits is veryunique to our monetary union. There is no equivalent in the US, Canadaor Australia.

Together with the ECB's monetary policy aimed atdelivering price stability, this framework helps to preserve the confidence ofthe markets and brings low interest rates. Our companies can benefit from betterfinancing conditions than any of their competitors, with the historicalexception of Japan.They can therefore invest and develop their activities more easily.

- Second, the increasingly international role of theeuro is providing us with a firm footing in the global economy, helping protectour companies against foreign exchange risk. It is an important asset, and onethat is felt most keenly by businesses in countries where the old nationalcurrencies played a very limited international role.

Those companies were almost never in a position toimpose the use of their currency in international trade. Within only a coupleof years, this situation has changed dramatically.  In 2006, around 60% of euro zone exports wereinvoiced in euro and therefore protected against the effects of exchange ratevariations. 

I know that the strength of the euro is accused bysome as being an obstacle for our companies. But the reality is that the euro's real effective exchange rate is stillreasonably close to its long-term average. As a matter of fact, euro area netexports have held up well since 2002 and throughout this period ofappreciation. The euro area trade balance is in slight surplus and its currentaccount virtually balanced. If in doubt, it helps to recall a simple fact:  the world's leading exporter happens to be thelargest economy of the eurozone, Germany.

However, the successes enjoyed by EMU do not obscurethe fact that there is room for improvement. Boosting the growth potential ofthe euro area, enhancing adjustment to economic shocks and making sure thatcontinued fiscal consolidation leads to healthy and sustainable public financesare all high on the agenda as EMU approaches its tenth anniversary. TheCommission will consider all these issues as we approach a decade with theeuro, and will present a set of policy priorities in 2008 for building astronger EMU.

It will also be necessary to ensure the successfulenlargement of the euro area over the coming years, and I hope that Estonia will be a part of this process as soonas it can comply with the Maastrichtcriteria.

 

Advancingstructural reform under the Lisbon Strategy

 

Structural reforms under the Lisbon Strategy forGrowth and Jobs represent a second key pillar of the EU's response to globalisation. They target the remaining competitiveweaknesses at the heart of our economies, aiming to foster the economicdynamism, sustainable growth and full employment that will be necessary tocompete in the world economy.

Labourmarkets

Numerous initiatives have been taken in MemberStates to reform their labour markets, and to make their economies moreflexible. For example, almost allMember States have taken measures in the field of unemployment andwelfare-related benefits and many countries have liberalised employmentprotection legislation for temporary contracts, reduced the tax wedge to"make work pay" and introduced reforms to public pension systems.

Estonia, in particular, has carried out a comprehensive pensionreform, raising the retirement age and creating a three-pillar pension system. Inparallel, this country is also taking important steps to reduce the taxation oflabour.

We are now reaping the rewards of these labour marketreforms. The utilisation of labour has increased, leading to the creation of 10million jobs in the EU since 2000. Estonia has also enjoyed a strong rateof job creation in recent years, accompanied by a significant reduction inunemployment to 5½ % of the total labour force in 2006.

Product markets

In product markets, Member States have directed reformefforts at fostering fair competition, improving the efficiency of publicinterventions and stimulating innovation. Accordingly, national competitionauthorities and regulatory bodies have been strengthened and major steps havebeen taken to liberalise network industries.

Investment in innovation has become a key priority forEU Member States as never before, while various measures have been put in placeto upgrade the quality of general education.

As a result, the shift to a knowledge-based economyappears to be underway, with private research in the EU having risen by morethan 5% in 2005. If announced plans are implemented as intended, R&Dspending will increase to 2.6% of GDP by 2010, up from 1.9% of GDP in 2005. In Estonia, the Research and Development andInnovation Strategy for 2007-2013 sets the target for total R&D expenditureat 1.9% of GDP for 2010, but aims to reach the "Lisbon level" of 3% of GDP by 2014.

All of these structural reform efforts signify an importantstep forward in Europe's quest forcompetitiveness. However, keeping up the momentum for reform in 2007 and beyondwill be essential for the EU.

So far, progress has been limited in some importantareas such as competition, particularly in retail and financial services. Thereis considerable scope to make labour markets more adaptable by improvingincentives to work and reforming the benefit systems. Measures are also neededto improve the quality of public finances.

Improvements in all these areas will be crucial if weare to make the European economy as dynamic and competitive as possible. Assuch, the strong economic recovery that we are currently enjoying in Europe is a unique opportunity to push the structuralreform agenda forward.

Estonia

Estonia is not exemptfrom my warning to pick up the pace of reform. It is true that in recent years,this country has introduced bold and comprehensive structural reforms which haveconsiderably increased the economy's responsiveness to market forces and its internationalopenness.

However, certain sectors in Estonia now face labour shortagesand, as a result, labour supply is becoming a bottleneck for further catchingup with EU average GDP. At the same time, wage inflation could startundermining the competitiveness of Estonia’s products on domestic andinternational markets.

Increasing both labour supply and productivity thereforeremains a key challenge. Estoniawill need to raise the skills level of its labour force further, by pushing forimprovements in education and lifelong learning. Further adjustments to thelabour legislation would also help create an even more flexible labour marketand therefore increase labour supply and productivity.

Let me turn your attention now to a third veryimportant asset brought by the EU, one that is instrumental for improvingEuropean competitiveness. I'm referring to our enlarged Single Market.

 

Takingadvantage of the enlarged Internal Market

 

Before I elaborate on this issue, I will take theopportunity while here in Tallinn to point outthat EU enlargement has itself made a crucial contribution to strengthening Europe's global competitiveness.

The recent EU expansion, that saw 12 new countries andtheir 105 million citizens join the Union, has without doubt acted as acatalyst for economic dynamism in Europe. Ithas multiplied trade and investment between the EU15 and the newly acceded Member States,and opened up new opportunities for EU businesses. The added competitivepressures have sharpened the competitive edge of European companies, makingthem stronger contenders in the global marketplace. 

The enlargement has also strengthened our InternalMarket and reinforced the benefits already brought by this key European achievement. Since its launch in 1993, the InternalMarket is estimated to have created 2.5 million new jobs and brought 800billion euro of extra wealth to the Union.

Moreover, the enlarged Single Marketfunctions as a platform preparing European companies for global competition:

 

-    first, as asource of sophisticated and innovation-driven demand, the Internal Marketprovides the incentives for EU producers to specialise in high-value addedproduction;

 

-    second, byproviding unrestricted access to the 490 million consumers of the EU, theInternal Market offers companies the chance to exploit economies of scale inR&D, innovation, production and advertising;

 

-    the InternalMarket makes the EU a more appealing location to do business. By attractinginward FDI, the Internal Market encourages the diffusion of new technologiesdeveloped elsewhere;

 

-    advantagesare also brought as increasing trade openness puts added downward pressure onthe prices of imported products. A well functioning Internal Market ensuresthat this leads to lower prices across all EU markets, eventually bringing benefitsto EU-based firms and consumers;

 

-    finally, theconsolidation of the Internal Market gives EU Member States the possibility ofpresenting a common position in global economic forums, based on sharedeconomic goals.

I note that the speed of transposition of ECdirectives has been high in Estoniaso far, and that the Estonian authorities maintain their commitment to adoptingthe euro as soon as possible, which will eventually consolidate the benefits ofthe Internal Market.

However, while I have clearly set out the successes ofour Single Market, I do not want to give the impression that it represents afait accompli, as this is by no means the case. The European Union remains afar less integrated trade area than the US and red tape and excessiveadministrative and technical barriers continue to impede the free flow of goodsand services. The fact that we are far from establishing a single market forservices is a serious drawback given that this sector now covers 70% of Europe's economic activity.

Strengthening these weak points in the Single Marketand ensuring that it is adapted for the global age is now a high priority forthe EU. The European Commission is currently carrying out a thorough review ofInternal Market policies. This review will be published in November and will addanother string to the bow of Europe's agendafor strengthening competitiveness.   

 

 

Conclusion

Ladies and Gentlemen, to conclude, I am convinced thatglobalisation and the rise of global economic competition is first and foremostan opportunity for Europe and for Estonia.

Today I have outlined how the potential benefits ofglobalisation can be developed and exploited through strengthening EMU,implementing further structural reforms, and through the completion of theenlarged Internal Market. In this respect, the European Union is our vehiclefor reform and a powerful tool for succeeding in global competition. 

Once again I congratulate Estonia for the impressive progressmade since the introduction of the kroon, 15 years ago. This country is anextremely valuable partner in our Union and I look forward to the day that wewill welcome Estoniaas a member of the euro area .

But the European Union and ourenlargement process is about much more than expanding borders, markets and thesingle currency. It is about sharing our unique values of democracy andtolerance, and it is indeed about solidarity.

We reaffirmed this principle during theEU-Russia summit in Samara last week. It should be clear to all that there areno double standards in our relationship with third countries, be those Russia or otherpartners, and there are no limits to the solidarity among EU Member States. While I say this,Europe needs to develop a constructive and positive EUpolicy towards Russia,to find the best solution for developing a mature partnership.

Thank you for your attention.

23 Mai 2007
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