EU recovery plans must address gaps that the COVID-19 crisis has exposed

More than strategies, we need actions to help EU industry regain its competitiveness, argues the EESC’s Stefano Mallia.
EESC

By Stefano Mallia

Stefano Mallia is President of the European Economic and Social Committee (EESC) Employers' Group

04 May 2021

The European Commission will this week unveil its much-awaited Industrial strategy review, amid growing concerns about a slow and uneven recovery from the pandemic. But more than strategies, what companies need are fast actions to help Europe regain its competitiveness and growth.

At the moment, we are far behind the US and China when it comes to economic growth. US president Joe Biden’s $1.9tn fiscal stimulus is estimated to add one whole percentage point to projected global growth.

The OECD more than doubled its 2021 growth forecast for the US itself, from 3.3 to 6.5 percent and forecasts by the end of next year that US output will be one percent above its projected pre-COVID path.

The eurozone, in contrast, will by then still trail more than two percent behind what was expected before the pandemic. Even though the European Commission seems more optimistic, employers are convinced that a return of the economic activity to pre-crisis levels is not for tomorrow.

The economic recovery in Europe as it stands shows severe differences in performance across regions, but also within individual sectors. A large part of the digital industry has performed well, and so has the healthcare industry.

Enabling industries like chemicals, construction, and the food and drinks sector are likely to experience a V-shaped recovery from the crisis. Despite the initial shocks, the automotive and textile industries appear to be on a recovery path since the first lockdowns.

But sectors that are dependent on human contact and interaction, such as the cultural and creative industries and the airline industry have been severely hit by the crisis.

"We need actions and a new sense of urgency. Ratification of the Next Generation EU package in Member States has been too slow and so is the preparation of national recovery plans"

So, will the industrial strategy review, which is about to be launched by the Commission, be fit for purpose to maintain and promote EU industry competitiveness?

This may indeed be the case as long as this review of the industrial policy is in sync with the Green deal and the Recovery plan. Together, these three elements will form a strategic three-pronged drive for growth.

But now we need actions and a new sense of urgency. Ratification of the Next Generation EU package in Member States has been too slow and so is the preparation of national recovery plans.

There is no secret to a return to growth and competitiveness. The recovery plans must address the gaps that the pandemic crisis has exposed. The overreliance on some supply chains rather than others must be redressed. We need more diversification to maintain and build on new competitiveness.

But more than anything, we need a more coherent innovation ecosystem. The pandemic has unveiled a fragmented EU framework related to industrial innovation. On one side, we have built industrial alliances - batteries, hydrogen - and on the other hand we have formed cluster collaborations and interregional Smart Specialisation Partnerships.

But the barriers to entry into the industrial innovation landscape are still too high, placing it beyond the reach of many EU places and their businesses, particularly SMEs, which we should not forget are the backbone of the EU economy.

This calls for a more integrated and cross-cutting approach, placing SMEs at the heart of all key political decisions, such as the Green Deal, the Industrial Strategy and the Recovery Plan for Europe.

The ‘Think Small First’ principle must therefore be applied to all policy areas impacting SMEs, and particularly all programs related to investment and innovation. A failure to address this could result in widening of the EU’s innovation performance gap, further entrenching the divide between the Union’s industrial winners and losers.

"This is even more urgent because the recovery risks becoming uneven between EU regions. If we don't help those regions that have less capacity to bounce back from the severe economic consequences of the pandemic, we risk jeopardising the overall Single Market"

This is even more urgent because the recovery risks becoming uneven between EU regions. If we don't help those regions that have less capacity to bounce back from the severe economic consequences of the pandemic, we risk jeopardising the overall Single Market.

Improving their access to industrial innovation support should be at the core of the Industrial Strategy update, with targeted investment for capacity building and pathways to support innovation diffusion and uptake.

With innovation, industry needs cheap energy, both by seeking instruments in new models of the electricity market and with the promotion of the energy transition to cleaner fuel.

Slashing energy costs for small and medium-sized enterprises in all sectors, associated with energy saving actions that will be financed from the Next Generation EU fund can become a game-changer for many companies.

Last but not least, people and businesses must own this transformational agenda for recovery. The process will gain speed only if people eagerly engage in the transition. We have no time to lose and no strategy will succeed unless it has society behind it.

So now that we have the strategy, we need to recapture the sense of urgency to deliver change, especially if we want to be at top of the growth and competitiveness rankings. It is an uphill battle but it is one that we must win.

Read the most recent articles written by Stefano Mallia - Minimum wages are a matter for national governments, not the EU

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