In the era of populism old ideas are being rolled out again. One of them is the concept of basic income, which has recently been circulating in many political debates in various member countries and international conferences, including Davos and the World Economic Forum’s annual meeting this year. Many variations of basic income are on the table, and some have even been translated into electoral promises, for example Five Star’s late proposal on Citizens’ income.
Finland’s former government actually ran a pilot project on basic income, whereby 2,000 people across Finland were paid a tax-exempt income of 560 euros for two years. Participants were unemployed, and no other conditions were required to receive the payment.
The pilot project received much more enthusiasm from outside Finland than within Finland itself. The main reason might be that while outside Finland the pilot project was taken as an indication of structural change to the whole social welfare system, in Finland the project was really seen as just a test, mainly launched to realise a long-standing objective of the Prime Minister’s Centre Party.
The first set of results came out more than a month ago. While more specific studies are yet to be published, these results indicate that while people receiving the income were happier, the income did not have an impact on the employment status of the test group.
In Finland, reactions have not been enthusiastic. Heikki Hiilamo, Professor of Social Policy at the University of Helsinki, has commented on the preliminary results of Finland’s basic income experiment, noting that effects on the labour market were minimal, and survey results demonstrating that basic income recipients had better subjective well-being are questionable.
These results indicate that while people receiving the income were happier, the income did not have an impact on the employment status of the test group.
Taking the results into account, it is not surprising that with the Finnish parliamentary elections taking place in just two weeks’ time (on 14 April), and with other reforms taking centre stage of discussions, the basic income topic has faded away totally from the electoral debate. Indeed, while many parties initially made proposals they called ‘basic income’, after it was pointed out that these proposals do not really respect the basic definition, the label was dropped.
Reflecting on the results of the basic income experiment, Finnish politicians Juhanna Vartiainen and Asmo Maaselkä pointed out that basic income is not suitable for a developed country like Finland, especially if it happens to be of large geographical size. Basic income is not able to equalise the cost of living in different parts of the country in the same way as income support can, nor does basic income adapt to the situations of different families.
Basic income would possibly suit countries with low levels of basic security and a low cost of living with a lot of low-skilled work not requiring higher education, i.e. developing countries, not countries in Europe.
Introducing real basic income would mean radical reform of labour market structures
In addition, basic income cannot be debated without speaking about compatibility with labour market structures, starting with incentives for the labour market to target specific groups, such as young people without qualifications.
In order to ensure that getting and applying for a job would remain attractive, the society-wide labour contracts would need to be rethought if basic income were introduced, as would the minimum wage and the prohibition of zero-hour contracts, for example. This was obviously not done in Finland due to the temporary nature of the experiment, and the results speak for themselves: there was no boost in the integration of people into the job market.
If the cost neutrality of introducing basic income is taken as a guideline, the problem of basic income to the political left becomes obvious. Already existing support, allowance and regulatory structures which have been dear to the left would need to be erased. As an example, the Finnish Social Democrats (SDP) oppose the basic income.
The entry of basic income into Finnish political discussions appears temporary based on what we can see from the current debate. However, the debate around basic income is useful; complex social support systems and overlapping unemployment benefit schemes need reform and simplification in most European countries.
The need for simplification most likely means that in many countries some variation of a universal credit system will be debated, but as UK’s experience with the universal credit system shows, simplification of multi-layer system takes a lot of effort.
In a similar way to Finland’s political debate, many proposed models will be called ‘basic income’, but in reality represent only some variation of it. Pure basic income will hardly be introduced in European countries, but simplification of our current social and unemployment allowance systems is absolutely needed.Tomi Huhtanen Economy Elections EU Member States Jobs Social Policy
Basic income is basically unworkable – so let’s drop it
02 Apr 2019
Even in polite conversation, the subject of gender equality and women’s rights generally evokes an emotive response that often veers into wider subjective judgements about identity, values and society. Ironically – and there are countless ironies when considering these issues – these discussions generally get mired in fruitless arguments about the end result of gender inequality (such as the gender pay gap) rather than seeking to tackle the underlying causes (education, childcare and work-life balance to name but a few).
There are three primary misunderstandings which are contributing to the vacuous nature of much contemporary political debate on gender issues. First, and perhaps the most common misconception, is to think that gender equality only concerns women. The fact is that gender equality is often viewed – by both men and society – as a feminist issue only. This is why it is crucial to explain that gender equality concerns us all.
Recent Martens Centre research illustrates the importance of gender equality in a growing European economy. The paper identifies four strategic policy actions to help tackle the structural rigidities that facilitate gender inequalities. These are:
- the promotion of better work-life balance
- embedding equality in national tax systems
- tackling gender stereotypes through education
- understanding the benefits of long term investments for long term gains in terms of equality policies
The paper also clarifies that it should be the EU’s responsibility to focus on setting the overall strategic objectives that need to be attained, but the implementation of specific gender policies should be tailored towards the institutional, economic and cultural framework of each country and should be implemented at national level, in line with the principle of subsidiarity.
Second, it is important that men take an active part in this debate and are not viewed as the “enemy” by proponents of gender equality principles. The emotive reaction of those experiencing inequalities often seeks to frame the issue as a clash of genders: “us” versus “them”. But actually, the move towards greater equality needs men and women working together and sharing the same goals.
Equality should not be seen as a victory for women over men’s “predominance”. It should be seen as a crucial achievement of a society that is more reflective of the daily challenges facing tens of millions of European families.
The third misconception is that gender equality issues are a prerogative of the Left and as a result centre and centre-right political forces should avoid seeking to replicate or support this “progressive” agenda. Yet, such a view places perceived political imperatives before combatting issues impacting most severely upon traditional centre-right voters, namely hard-working Middle-Class families.
Centre and centre-right political forces can and should mark their distance from the leftist, radical approach by promoting a set of concrete, achievable policies aimed at reducing inequalities for the benefit of our economies and societies.
To name a few examples: designing a tax system and maternity-paternity measures that encourage both spouses to work, securing access to affordable and good-quality childcare, promoting projects and initiatives in schools aimed at fighting gender stereotypes and, last but not least, enforcing the prevention and sanctions against any discriminations, misconducts and abuses in the workplace and in any other environments.
It should be remembered that gender equality issues go beyond the partisan/ideological discourse and concerns every political actor which is supposed to give precise answers to people’s needs and demands.
Gender equality is one of the core principles of the EU. This is set forth in, for example, Article 2 of the Treaty of the European Union. Gender equality is, at its core, concerned with developing a society which rejects discrimination based on gender, without denying or undermining the importance of traditional customs or rules.
The European Peoples Party (EPP) is a party based on core Christian-Democratic values of solidarity, respect of human dignity, equality and justice. The challenge, therefore, is not so much to embrace gender equality issues, but rather to transform our political rhetoric into political action. Action that will have a beneficial and lasting impact, not just upon women, but for Middle Class families throughout Europe and for our societies at large.Margherita Movarelli Eoin Drea Centre-Right Jobs Macroeconomics Social Policy Society
Tackling gender equality – one misunderstanding at a time
19 Feb 2019
Gender equality is one of the core principles of the EU. This is set forth in, for example, Article 2 of the Treaty of the European Union. Equality between men and women includes equality in the labour market. However, this equality is far from having been achieved. Building on our forthcoming research for the Martens Centre, we explore in detail four factors that may explain the gender gap in labour force participation across countries. These factors are education, taxation, the provision of childcare, and cultural and historic norms. In discussing these factors, we focus on case-study countries which represent different regions and feature diverse institutional characteristics: Germany, Italy, Poland and Sweden.
Through this analysis we propose four policy actions designed to place gender equality in the labour market at the heart of a growing European economy. These are (1) the promotion of better work-life balance (2) embedding equality in national tax systems (3) tacking gender stereotypes through education and (4) understanding the benefits of long term investments for long term gains in terms of equality policies. To conclude, we acknowledge that it is preferable to implement policies that are tailored towards the institutional and cultural settings in each country and to specific groups of workers. Thus it is important that gender policies should be established at the national level. Rather than seeking to expand its competencies in the areas of education, taxation or social policy, the EU should focus on setting overall objectives.Growth Jobs Macroeconomics Social Policy Society
Women in a Man’s World: Labour Market Equality Driving Economic Growth
22 Oct 2018
The rapid technological progress in automation, robotisation and artificial intelligence is raising fears, but also hopes, that in the future the nature of work will change significantly. There will be changes in what we do, how we form workplace relations, how we find work and the role of work in a society. Some believe that these changes will be for the better: we will need to work less and thus will have more free time. Others think that the changes will be for the worse: there will be fewer ways to earn a living.
The central question of this paper is this: will adages such as ‘By the sweat of your brow you will eat your food’ and ‘No bees, no honey, no work, no money’ become obsolete? Will work disappear and with it the societal relations and inequalities that result from differing success in work? If this is going to happen, what policy options do we have to address the issue?Economy Innovation Jobs Society Technology
The Future of Work: Robots Cooking Free Lunches?
11 Jul 2018
Last week’s Social Summit for Fair Jobs and Growth, also known as the Gothenburg Summit, was a success. Commission President Jean-Claude Juncker obtained the endorsement of the Heads of State and Government to his proposed Pillar of Social Rights, while the Swedish presidency promoted at the European level a theme that is at the heart of the Swedish model back home.
The EU has started a difficult process of reflection on how to reorganise itself as a successful multilevel union in the next decade. It is therefore only natural that its possible future role in social policies should be carefully considered. I would like to make three points which seem to have received little attention in the debate so far.
The EU welfare we already have
First, in anything but name there is already an embryo of EU welfare, albeit a very dysfunctional one. The Common Agricultural Policy makes up around 40% of the EU budget, and in essence it is a programme of income support to farmers explicitly designed to grant them a safety net. The ground for this policy to be so sizeable – in fact the ground for it to exist at all, at least at the European level – is far weaker than it was fifty years ago, but here we are.
The Common Agricultural Policy is in essence a programme of income support to farmers.
Cohesion policy – another big item in the EU budget – is strictly speaking not a welfare programme, as it addresses inequality between regions, as opposed to individuals, but it has redistributive effects. It has financed many worthy projects in the EU’s poorest regions – sure, many unworthy ones too – but it seems to have miserably failed to foster convergence.
Then there is the European Social Fund, which is modest (10 billion) but it exists, and that’s its main merit. It would be useful to see these programmes as elements of EU welfare – perhaps suboptimal and in need of reform – but to be included in an overall debate on social Europe.
The two fundamental weaknesses of the European Pillar of Social Rights
Second, there is now a European Pillar of Social Rights (EPSR). Its twenty principles are structured around three broad goals – equal opportunities and access to the labour market, fair working conditions and social protection. A scoreboard will be used to assess the relative performance of Member States (MSs) against these principles under the European semester, providing a solid governance framework to encourage the achievement of the set goals.
As with many similar EU ideas, it is interesting and well-structured. As with most similar EU ideas, it suffers from at least two fundamental weaknesses. To begin with, there is a clear abuse of the rhetoric of rights, sadly common to so much contemporary public policy.
What does it exactly mean to say, for example, that ‘young people have the right to continued education, apprenticeship, traineeship or a job offer of good standing within 4 months of becoming unemployed or leaving education’?
Or that ‘everyone has the right to timely and tailor-made assistance to improve employment or self-employment prospects’? Whose obligation is it to grant those rights? And who’s going to enforce compliance if, for example, a young person does not receive ‘a job offer of good standing within 4 months’?
When words still meant something, every right had a correlative obligation.
When words still meant something, every right had a correlative obligation which was legally enforceable and backed by public powers. This is clearly not the case anymore. Now declarations of wishes and desires whose realisation is largely beyond the reach of public authorities are solemnly proclaimed as ‘rights’, inevitably fueling popular and populist anger when it becomes clear that they cannot be enforced.
The second weakness of the pillar is all political. As the inglorious Lisbon strategy and the – admittedly more glorious – Europe 2020 strategy, the EPSR is largely made up of non-binding commitments by MSs within what was once called an Open Method of Coordination (OMC), i.e. a soft governance system that tries to foster convergence through peer pressure, benchmarking and supranational monitoring.
True, the EPSR will be more institutionalised than previous instances of OMC, but the essential political point is the same: once more the EU is committing to a grand vision of something – social Europe in this case -, without having the slightest control over the means and initiatives necessary to deliver it, which largely remain in national hands.
If there is any success, it will be a national success. If there is no progress, it’s the EU that will have proved to be ineffective. Nothing new under the sun – well, the clouds – of Brussels.
It’s subsidiarity, stupid!
There is a final, important point that deserves close scrutiny. Bluntly put: I suspect that arguments for social Europe are ultimately bound to be arguments for harmonisation – possibly for total harmonisation – and against subsidiarity.
To illustrate my point, let me take the one piece of European welfare that seems to make most sense in the EU context: a federal unemployment insurance scheme. This sounds very plausible and sensible, as it would provide much needed automatic stabilisers in a very suboptimal currency area constantly exposed to asymmetric shocks. But, as always, the devil is in the details. Unemployment is not only a function of the economic cycle but also of domestic policy factors. As long as national policies differ, any federal unemployment insurance scheme is bound to subsidise bad policies in countries with high unemployment, at the expense of countries with good policies and low unemployment.
As with many similar EU ideas, the EPSR is interesting and well-structured. As with most similar EU ideas, it suffers from at least two fundamental weaknesses.
The only way to eliminate the differentiation created by domestic policy choices is – logically enough – to eliminate domestic policy choices, i.e. to progressively harmonise social and labour market policies through binding benchmarks at the European level. Unsurprisingly, such benchmarks were supported for the long-run by the five presidents’ report of 2015 and featured as one scenario – perhaps the favourite scenario? – of the recent Commission’s reflection paper on the social dimension of Europe.
To summarise: social Europe deserves to be seriously discussed in the context of the future of Europe debate. When doing so, let’s remember to include in this discussion EU social policies that already exist, as well as to go beyond mere symbols and rhetoric.
Most importantly, let’s remember that in a union of states that wish to retain their identity and policy differences, arguments for social Europe cannot be made on purely technocratic ground. They must be assessed against an overriding commitment to subsidiarity.Federico Ottavio Reho Education Growth Jobs Social Policy
Federico Ottavio Reho
The social Europe no one is talking about
22 Nov 2017
At present the biggest threat to the monetary union is posed by the anti-European political parties. These parties call for their countries to leave the union. They are thriving especially in countries with slower economic growth and high unemployment rates. The best remedy against them is to increase economic growth and thus reduce the unemployment rate in their home countries.
The measures taken to achieve this need to be systematic, rather than merely temporary patches. In peripheral and semi-peripheral economies, undercapitalised banks and the lower competitiveness of domestic producers are slowing down growth. The correct measures to address these problems include banning dividend payouts by undercapitalised banks and creating minimum standards for competitiveness.
Read the full article in the June 2017 issue of the European View, the Martens Centre policy journal.Ivan Štefanec Eurozone Growth Jobs
How to ensure the survival of the monetary union
20 Jun 2017
Many European countries are currently facing serious challenges related to weak public finances and political populism. This article suggests that the ageing phenomenon has been a major contributory factor to both of these problems. The European welfare states were created in a period of favourable demography, and it has now become politically much more difficult to keep them fiscally sustainable because of the ageing population and the associated deterioration of the dependency ratio.
The rational policy response to ageing is to increase the labour supply by trimming unemployment benefits, increasing retirement ages and encouraging employment-based immigration. It is precisely such policies, however, that have eroded the support for traditional political parties and created a fertile ground for nativist populism. Thus, the European welfare arrangements may turn out to be politically unsustainable, even if it were theoretically possible to ‘rescue’ them with stringent and fiscally conservative economic management.
Read the full article in the June 2017 issue of the European View, the Martens Centre policy journal.Juhana Vartiainen Jobs Populism Social Policy
The future of the European welfare states: the intriguing role of demography?
16 May 2017
Technological change was never as fast as it is today. This is not a cliché, this is a fact: previous technological revolutions, such as the agricultural revolution or the industrial revolution provided humanity with abundant food, energy and industrial products.
ICT innovation is supporting the innovation process itself. Never before did so many people have such an easy access to so much knowledge and never before was it so easy to connect with other educated, empowered people.
The end of work?
There may be one downside to all this: the pace of innovation is killing jobs faster than new ones are being created. Indeed, if we were satisfied with the 1930s standard of living, we could have a 4 hour workweek and produce all the goods and services we need.
However, work is not just about satisfying material needs, it is about establishing a meaningful place of a person in society. Nobel Prize winner Wassily Leontief stated as early as 1983:
“the role of humans as the most important factor of production is bound to diminish in the same way that the role of horses in agricultural production was first diminished and then eliminated by the introduction of tractors.”
The fancy term for this is “machine induced human redundancy”. The usual answer to this problem is that creativity and education might prevent that. We hope that the answer to accelerating technological change is better education, more creativity, so that we can be the ones that are leading change, and so that our jobs and lives are not being destroyed in the process.
How to thrive in this new environment
I believe we have reasons for optimism rather than panic in this new environment. First, we are flexible: there are many different things that we can do and we can learn. This is why education, especially life-long education is so important. Machines too can do many different things, but machines can also help a not so perfectly skilled human to do work he/she alone would unable to do. Therefore, a key thing to learn in the future is man-machine teamwork!
Second, we are not only those who work, we are also the customer. As customers, we will always have new desires and demands. Humans will always be guided by the ambition to better their lives and new work will always be generated as a consequence.
Demands are shaped by values and culture and we need to educate these. Appreciating the local and the particular, as conservatives, creates more jobs than finding satisfaction in the global and the general. We need to preserve the innate feeling that humans like to deal with humans! And we need to reward the desire of people to feel useful. Being useful towards our fellows creates the interdependencies and the fabric of human society. The issue is not so much about jobs as it is about being of use to others, in one way or the other.
Education: learning what makes us human
Currently, school systems are ignoring or suppressing what makes us human. We learn how to be like machines: memorize facts, learn recipes and formulae. This is, as Andreas Schleicher from OECD likes to point out, easy to teach, easy to test, easy to replace by machines. Instead, learning should encourage us to preserve and develop what makes us human and what is uniquely human, things like curiosity, creativity, empathy and critical thinking. And, most importantly, social interaction and building communities.
Education will have to focus less on “just-in-case” topics, learning something in school in case we might need it later in life, and more on “just-in-time” learning, such as learning while working. It should be less about how to serve machines and computers, and more about how to control them; less about how to answer questions, and more about what questions to ask.
Currently, school systems are ignoring or suppressing what makes us human.
Education should focus less on how to solve problems, and more on how to define problems; less on how to obey decisions, and more on how to make decisions; less on how to make stuff, and more on how to sell stuff; less machine skills, more people skills; less how to be smart, more how to be good; less how to treat people like objects, more how to treat people like humans.
This calls for a major overhaul of school curricula and pedagogy, whose effects will only start to reap results in fifteen years at the earliest. Therefore, a major effort is required on all kinds of life-long learning approaches and on opportunities for experimenting with creative ideas.
More education is not a panacea
Education is not a panacea, though. Too often, when faced with a problem, politicians’ answer is “more education”. As if better educated people are a solution to everything. The “more education” mantra is politically un-controversial: who could be against more education? Who could be against better educated people? Who could argue with the fact that having better educated people in the right places would solve all of our problems?
Well, Hayek had already argued against that. More precisely, his argument is that we cannot expect to have perfect people everywhere; rather, we must create systems and institutions that work with imperfect people and yet produce optimal results.
Education is about perfecting people, but it is not the only tool that governments have. Rather than only focusing on (the non-controversial) education, governments should keep a 360 degrees view on other tools available in their toolbox.
The infrastructure of innovation
States should provide the right infrastructure for curiosity, creativity, empathy and community building. This would include technological infrastructure, human-human networking, modernized IPR legislation, flexible employment mechanisms, social safety nets, all in order to allow people to experiment with new ideas. Innovation should be permission-less. Legacy institutions and legislation should not stand in the way of inventing new ways of working.
And states should put in place a responsive market economy that will recognise and reward the winners of this permission-less innovation. It is not likely that politicians and civil servants will find a solution to the future of work, but people will, as providers and as customers. The role of the state is to provide an infrastructure for innovation, for the generation of ideas, and then recognise the winners.
By innovation I do not only mean technical innovation, but also innovation in business, institutional and social models. The role of the EU is not to enforce, from the top down, a new social model for the digital age, simply because the civil service in Brussels is unable to come up with such a model. Instead, Brussels should allow states to experiment with different solutions and then facilitate best practices to spread.
To sum up, humans will always survive and thrive by adapting, learning, and creating new demand and supply. If we were happy with our current standards of living, less and less work would be needed to achieve it; however, human nature will always aim for more and better and newer! Thus, we should never be afraid of running out of work, but of running out of being human, running out of ideas, running out of fertile ground for ideas to develop into businesses and running out of mechanisms that tie individuals into a community.
The text is an expanded version of the author’s introduction and closing remarks on the panel “Tomorrow, How Will We Learn and Be Creative” at the 2016 Economic Ideas Forum.Žiga Turk Economy Education Innovation Jobs
The end of work? It just isn’t in our human nature
25 Jan 2017
The creation of jobs across Europe remains a key economic and social challenge for the EU. Given the negative impact of the financial crisis on European citizens, the EU’s ability to promote effective job creation policies will be viewed as a major success of the wider integration process.
In this context, a new approach is required to provide a growth-based strategy for creating employment across Europe. What is required is an achievable strategy based on the realities of modern EU labour markets. This research, based on an analysis of six member states, provides a set of recommendations designed to reflect the current characteristics of the EU labour markets. This research concludes that:
- EU employment policies should be simplified and better coordinated;
- Clearly defined action s should be introduced to further improve labour mobility;
- The focus of policymaking should be switched from combating unemployment to creating jobs;
- It is possible to finance the recovery by bridging the gap between investment and reform.
It’s Our Job: Reforming Europe’s Labour Markets
04 May 2015
Kumardev Chatterjee is not only involved in shaping European innovation and entrepreneurship policy as the Founder and President of the European Young Innovators Forum, he actually started his first profit-making company at the age of 19. In this interview he talks about why he thinks new start-ups do not flourish in Europe as well as they do in the USA.
Mr Chatterjee, you were one of the 45 world leading digital thinkers requested by the European Commission to write a chapter for the project “Digital Minds for a New Europe” that aimed to articulate a vision for Europe in 2020. What is your vision of Europe 2020?
My vision is that Europe in 2020 will focus strongly on innovation and entrepreneurship, not only in the area of products, services and business processes, but also in the area of public procurement and government services. Some people think that innovation and entrepreneurship are the ‘cool stuff’, the ‘edge stuff’, but that is not yet the mainstream opinion. We need to have this absolutely reversed by 2020 so that entrepreneurship is seen as being mainstream, something that is driving more sectors of the economy.
How can we achieve this? If we come up with more financial instruments, many people, especially in business, will say that it is just another level of bureaucracy.
Innovation and entrepreneurship needs young innovators and robust private sector involvement in tandem with strong government policies and flexible financial support.
A lot of people don’t know that Silicon Valley, which has ended up becoming the paradise of private funding, innovation and entrepreneurship, started off as an area with companies and projects funded by the US Government for decades. Government directly funded certain projects there which led to the initial development of the ecosystem before it became self-sustaining and scaled massively.
Government helped create an ecosystem where companies could grow to the extent that they are now run completely privately. There is no shame in saying that public funding can help to bring down barriers that we have put up, it can seed the market and create an environment that is required to foster growth. This is particularly true for Europe, where public action is key to bringing down barriers. We will never have quite that level of ecosystem here in Europe if public funding and public action is not taken.
Yes, some people will say: ‘oh, but that is fake’. Well, is Spotify fake? Is Skype fake? I don’t think so. There are real success stories and the fact that some public financing helped them in the initial part of the story is completely linked to the fact that we have a high-tax regime and strong regulatory barriers. Why should the tax not be spent on creating an ecosystem where individuals are free of state dependency and create self-sustaining entities that further growth, jobs and prosperity?
Isn’t the main problem administrative barriers in Europe? In some countries it takes hundreds of days to start a company.
You are absolutely right. Just try as a citizen of one EU country to go to another EU country and set up a business there. It will take up to six months for the banks just to agree that you, as a European citizen with all the existing credentials in your home country – address proof, identity proof, bank proof, can actually open a bank account for business in another country.
So yes, administrative barriers are huge, but why are they there? I think it is pretty straight forward: they are there because of Member States’ inaction in this area. The Member States want to have oversight over everything. I don’t see the reason why each Member State should have control of European business transactions. The Commission and the European Parliament operate at the right level to deal with this.
So we need more EU level legislation?
Yes, we need the EU Member States to acknowledge that the market has to function according to European rules and not national rules. Of course there are national priorities and derogations in some areas but why should opening a bank account for business in another country be a national issue? Banks should be absolutely mandated to do that. If you are already known as a good bank customer in one Member State, you should automatically be able to open a bank account in another Member State.
Why are there no venture funds in Europe that could complement the bank system?
There is a lot of venture funding in Europe today compared to, let’s say, five years ago when the situation was quite dire. Some venture funds from the US and elsewhere have set up shop here but it’s all about access to finance.
Let’s say that you are in Bratislava and you try to access some money from a Spanish bank: you have to jump through several regulatory hoops just for that. And if you are a bank backing a start-up, it had better be in an area where cross-border trade is easy to do, otherwise you won’t get the financing.
The money is there but the will to invest is not at the same level as in the USA. Do an analysis of the number of pitch events where entrepreneurs can pitch and get money in Europe and it’s at one tenth of the US. A common anecdote says that the same pitch for a start-up that will make you hundred thousand dollars in Europe will make you a million in the US, because there you will not find so many administrative barriers to scaling up, on the contrary there is a robust single market where you can easily get your investment back.
So you think that Europeans have entrepreneurial spirit but we lag behind the USA because of administrative barriers?
If you go to Silicon Valley or any other major innovation centre in the world, you see that Europeans are there. And this is because we are innovative, we have a lot of ideas, we have a lot of creativity, we are highly educated. In fact we have the elements required at the level of the individual to build successful startups.
So, it has nothing to do with the fact that we are not innovative. It has to do with the mindset that we are not encouraged to take risk. Having creative ideas is not the same as actually taking the risk to set up a company to put your idea into action.
That’s the first part and the second aspect is, as I’ve said, that there are so many barriers, starting with access to finance, access to market, with all the regulation. The USA is actually the reverse. Even with a fairly basic idea you can get some money and get to the market pretty quickly, fail fast and then try something else.
Can digitalization help reduce these barriers? What should an ordinary citizen understand is meant by the word ‘digital market’ that is stressed so much by Jean-Claude Juncker’s Commision?
The citizen should hope to have an easier digital life. So, that means, for example, that instead of going to ten offices for one paper that you need, you can do it online from your home. Why should you run at least twice to the office when you need a driving license?
Several countries have awful digitalization because the public sector often opposes it. ‘Oh, if you digitalize, jobs will be lost in the public sector.’ But there will be maybe more jobs created in the private sector! We have to focus on the consumer, the end-user of the product.
The governments always have to ask: is this an innovation? Does the consumer benefit from this innovation? Or does the bureaucracy benefit from this? This is the crucial question: ‘Who should it benefit?’
Interviewed by Vladka Vojtiskova, proofread by Eoin O’Driscoll.
Kumardev Chatterjee was a speaker during the fifth annual Economic Ideas Forum that took place in Bratislava on 16-17 October 2014. He is a Young Innovation leader, top-tier ICT industry professional, European Commission appointed expert and New York Times published opinion leader, all by the age of 35. Chatterjee’s vision, opinions and views have been published by the New York Times, World Economic Forum, European Commission, European Business Summit, Microsoft and leading tech media across Europe. Chatterjee is one of the 45 leading digital minds around the world who have been invited to contribute to the European Commission’s “Visions for Europe’s future in the new digital era”, alongside Eric Schmidt of Google. He is an Advisory Board member of the Journal of Innovation Management with Henry Chesbrough. In recognition of his Innovation leadership and the high-impact achievements of EYIF, the European Commission and INTEL have awarded him as an Innovation Luminary – Young Innovation Champion.Business Innovation Jobs
Market has to function according to European rules and not national ones
09 Dec 2014
Banking Economy Energy Innovation Jobs
Economic Ideas Forum 2014, Bratislava – Conference Report
01 Dec 2014
‘You must either modify your dreams or magnify your skills.’ – Jim Rohn
SKILLS EROSION IS A PROBLEM
The real issue of the jobs crisis among young people is not the lack of income but the erosion of skills. Not being in the jobs market, dealing with daily tasks and problems, results in loss of ability to do things. Ultimately, you don’t gain new knowledge or skills and lose competitiveness. Less employers will take you on board as a result.
Staying outside the jobs market is not only detrimental to young people and their future but it is harmful to employers and to the economy as a whole (lower tax contributions and increased social welfare payments). Prior to the crises, many EU member states performed well in the job matching process. Throughout the crises both unemployment rates and job vacancy rates increased.
Our earlier research (http://ces.tc/1p898xg) showed that Europe is experiencing a long-run negative trend when it comes to youth employment. At the same time it revealed that the rate of young people not in education, employment, or training (NEET rate) remains unchanged in the long run. These two elements are sustained by the skills mismatch and vice versa. The research also revealed growing divergence across the EU as some member states are performing relatively well while others lag behind in youth employment and NEET rates.
THE COSTLY LACK OF SKILLS
In 2011 Eurofound estimated that the cost of jobless young people amounted to 1.21% of EU GDP. This translated into annual loss of €153 billion. In the long run much larger cost would incur due to the lack of skills in the EU.
An important piece of the puzzle is the issue of education and training reform with regards to skills. But there is a catch. Reforms should be implemented at national level because education policy interventions are reserved for member states, not the European Commission. An observation is that reforms are painfully slow across the EU, despite the urgency of the crises. This fact is revealed by the study on the implementation of Commission’s 2011/2012 Country Specific Recommendations. Only 18% of the measures were implemented while 43% were not implemented at all (as of March 2014).
TEACH THEM SKILLS
If Europe wants to reverse decreasing youth employment, lower NEET rates and match skills supply with skills demand, key items need to be incorporated in education curricula: Problem-solving, financial literacy, self-learning, critical thinking, creativity, digital literacy, and communication skills.
Problem solving and critical thinking relate to the ability to identify, approach and solve a wide range of issues at work or in life. OECD’s 2012 PISA study in problem solving reveals a shortage of such skills in Europe when compared to Asia. Financial literacy is an essential life skill about managing your own money. Research indicates that youngsters’ knowledge in this area is very limited. Digital skills are a must-have in every office but many young people don’t know how to work with office-related software products. Communication skills are needed when conveying ideas and getting your point across – even creative and innovative ideas are doomed when they are poorly communicated.
Self-learning is probably the most important component and it is the short cut to being more competitive on the labour market. Knowledge is now freely accessible online (Massive Open Online Courses) and young people should take advantage of that.
AN IDEA-TO-INCOME CULTURE
In addition to the new set of skills, already in high school, young people should be trained to follow an idea-to-income culture. This relates to self-employment practices and entrepreneurship as effective tools to improve youth employment. Such courses should help young people walk the path to establishing and running their own business, dealing successfully with regulatory environment and funding issues.
Finally and most importantly, teaching should always mean motivating, mentoring, engaging and communicating. Acquiring the previously mentioned skills requires innovative teaching approach, not only hi-tech class rooms. Training in such skills should be in the form of interactive sessions and projects, involving students and getting them used to applying the knowledge in everyday situations.
The Martens Centre, in cooperation with the Kós Károly Academy (KKA) and the Hungarian Youth Conference of Romania (MIERT), organised the 2014 EU Camp held from 8 to 13 July in Romania. A panel dedicated to the skills issue, education reforms and youth employment attracted more than 150 young people and provided answers to their questions.Kalin Zahariev Education Jobs Youth
Avoiding the cost of no skills
16 Jul 2014
The real reason for youth unemployment is structural incompatibility between the attained education and the needs of the labour market. Among Slovenian 24-29-year-olds, who have successfully completed their education, 24% are unemployed. This percentage is growing faster than unemployment rates in other EU countries. How is this possible, and what can we do about it?
An explanation can be found in two developments. The enrolment into tertiary education in Slovenia is about 70%, the highest percentage among all member states. The recommendation of the European Commission was 30% and was raised to 40% in Agenda 2020. Also, Slovenian graduates majoring in social sciences and liberal arts outnumber those who major in engineering and natural sciences by 2.68 to 1.
This structural incompatibility is of course interwoven with the economic crisis and it is obvious that the economic crisis increases the number of unemployed persons. However, there are professions which despite the economic crisis offer vacancies but for which young graduates with suitable education cannot be found. In Slovenia one should speak about two crises: the economic crisis and the crisis of human resources. Full or near full employment of young graduates is possible only if the economy is expanding and when new graduates match the needs of the labour market. We should have two goals: to establish an equilibrium between the educational structure of future generations and the labour market, and to find the solutions for unemployable graduates. Therefore, I recommend three distinctive measures.
The first measure, which is a starting point for all others, is to provide early and correct information to young people and their parents about the situation in the labour market. Without the necessary information they cannot make well-balanced decisions according to labour market needs. It is absurd to expect that the labour market and the choices for studies will automatically harmonise. Clear information is needed and it should come from an institution or non-governmental organisation enjoying the trust of the general public.
The second measure is an administrative restriction of enrolment in study programs, which should reduce enrolment from 70% to 40%. The restrictions should be introduced very carefully and on the basis of the largest possible political consensus. On the one hand, we should be aware that it is in the public interest that public financing only supports those study programs which are expected to produce graduates that can be employed within a reasonable amount of time after graduation. On the other hand, the basic right of each person to obtain the education he desires should be respected.
The third measure should be to introduce special study programs for young graduates to make them more employable. Unemployable graduates represent a social burden, a significant loss of talent and is a cause of social instability. As it is in the public interest to retrain them, the government should provide some assistance.
The crisis of human resources represents a serious threat to our economic development and social stability. The exit out of the economic crisis, and our future in general, depends a great deal on how we will address the human resources problem.Andrej Umek Education Jobs Youth
It is clear that a deeper analysis on the structure of professions and educational levels in member states with high youth unemployment and how the structure will be employable by 2030 is needed. Based on this study measures could be enacted that would coordinate the younger generations’ educations with the demands of the labour market.
Youth Unemployment: A Crisis of Human Resources
04 Apr 2014
On 16 December, a delegation from the Centre for European Studies (CES) met with officials from the Organisation for Economic Cooperation and Development (OECD) in Paris. In a meeting with Yves Leterme, Deputy Secretary General of the OECD, a range of areas including economic, social and industrial policies were discussed as priority fields for both organisations.
Tomi Huhtanen, CES Director elaborated on the activities and priority topics of the CES. He noted that both the CES and the OECD share the belief that implementing reforms will lead to growth and sustainability in the economy. During the day, further meetings took place with key OECD experts including Monika Queisser, Head of Social Policy Division and Eckhard Wurzel, Senior Economist where the topic of the European welfare state and the issue of competitiveness were discussed.
The role of education in economic growth was discussed with Simon Field, Senior Analyst, Directorate for Education and Skills while Andrew Wyckoff, Director of Science, Technology and Industry, alongside Alistair Nolan, Senior Economist provided their insight on innovation and industry as new sources of growth. Finally, the topic of entrepreneurship and small and medium-sized enterprises was discussed with Sergio Arzeni, Director of the Centre for Entrepreneurship at the OECD.Economy Education Growth Jobs
CES meets OECD experts
17 Dec 2013
What would your employment ad sound like, young man? The variety of crises (financial, economic and debt crises) that clouded over the EU triggered intense youth employment debates. At the Centre for European Studies we carried out in-house research that paves the way to solutions.
Figure 1: Employment rate, age 15-24 years, EU28 and Turkey, 2002-2012 Source: Eurostat, extracted Sep. 2013
Youth employment (age 15-24) in EU-28 shows a downward trend ever since 2002. There was an increase to 37.3% between 2004 and 2008 when the economic boom created higher youth employment rates. When the system plunged into crisis, youth employment rates decreased by a large margin. The crises aggravated a structural problem of youth employment. In 2012 youth employment rate in EU-28 (32.8%) come close to the rate in Turkey (31.5%).
Figure 2: Employment rate, EU-28, age 40-64 years, 2002-2012 Source: Eurostat, extracted Sep. 2013
Our analysis shows as well that elderly employment increased rather steadily since 2002 (from 62.6% to 67.6% in 2012). The pre-crises economic development boosted the employment rate to 67.5%. The 2012 numbers indicate a clear recovery path for the EU-28. This shows that young people took the burden of the crises. In addition to that, more and more elderly people remain active in the labour market. This is a key achievement of the active ageing policies.
Figure 3: NEET rate, EU-28, 2002-2012. Source: Eurostat, extracted Nov. 2013
EU-28 NEET rate (young people not in employment, not in formal/informal education and training) shows no improvement since 2002. Again, the pre-crises economy delivered some relief. In 2002 the NEET rate (age 15-29) was 15.6% and 15.9% in 2012. The number of young people that are not employed or do not participate in a training has remained unchanged. This indicates that more and more young people stay in education and training programmes to compensate for not finding a proper employment.
Figures 4, 5 & 6: NEET rates, selected countries, 2000-2012. Source: Eurostat, extracted Sep. 2013
When we zoom in at individual countries, growing divergence in the EU surfaces. We distinguish three groups.
The outperforming Denmark, Germany, Luxemburg, the Netherlands, Austria and Sweden where we see a clear recovery trend in terms of NEET rates.
The average Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia where NEET rates are high (especially in Bulgaria). The lagging Greece, Spain, Italy and Portugal where NEET rates increased sharply and are still increasing.
The negative youth employment trend and continuously high NEET rates is one thing but there is more to it. Our research points out few other burdensome trends – labour mobility, unpaid internships and temporary employment.
Labour mobility within the EU rests very low, according to OECD data. Important causes for this are bureaucratic procedures, the burdensome recognition of qualifications and language barriers. These issues lead to the bigger problem – the incompleteness of the European labour market.
Unpaid internships are the second chunk of the youth employment issue. A survey by the European Youth Forum reveals that approximately half of the internships in the EU are unpaid. Without remuneration, fewer young people will be able to afford a traineeship due to the cost of living. Thus fewer youngsters will stand a better chance of being employed. Another effect of unpaid internships is that there are no contributions to the social security and tax systems.
Temporary employment rates for young people in the EU are very high, soaring over 42% in 2012, according to Eurostat data. The main issue here is the lack of sustainability and high uncertainty among youth. This for instance prevents many young people from establishing families.
- The crises were a wakeup call. The EU youth employment rate is a long-term negative trend and a result of structural problems.
- NEET rates today will hit back on EU’s economy like a boomerang. Simply put, the economy will be held back by the growing size of the EU’s lost generation.
- Europe is like a car with wheels spinning at different speeds. There is a great country-to-country difference within the EU in terms of youth employment and NEET rates. Instead of convergence, we witness divergence.
- Labour mobility, unpaid internships and temporary employment are overlooked topics. However, these are crucial bits of the youth employment issue.
- Blame-it-on-Brussels attitude was and still is a popular excuse for many governments. However, social, labour and youth policies are foremost in the hands of the Member States.
- Implement reforms. Southern Europe and especially the former Socialist countries should address the low youth employment rates and high NEET rates. The 2014-2020 Programming Period offers funding tools for such reforms.
- Bridge business and universities. Start-up platforms and initiatives, spin-off companies and clusters should be prioritised by governments through public and private investment (risk capital).
- Update education and skills. Introduce: 1. Vocational training to the bachelor’s and master’s degrees; 2. Entrepreneurship education and training in secondary and tertiary education; 3. Digital literacy and transversal skills such as creativity, critical thinking, self-learning and communication.
- Support youth labour mobility. 1. Cut the labour mobility red tape through labour legislation. 2. Revision of national labour regulations should be encouraged more by the European Commission. 3. Full implementation of the European Qualifications Framework. 4. Improve the foreign language skills of the young Europeans.
- Restrain unpaid internships. There should be more tax relief for companies that employ interns but no unpaid internships.
- Limit temporary employment. There are two main priorities in this field – ensuring more, permanent but flexible work contracts and deepened social partnership.
- Proactive young people. Knowledge is widely and freely accessible nowadays – the internet. Accumulating skills and knowledge makes you more competitive with a better chance of being employed. This is not a front row ticket to employment but at least you are getting closer to it.
Young, never employed, under qualified, looking for a future. Hire me!
12 Dec 2013
The Centre for European Studies (CES) has launched an exciting new initiative to gather the best ideas from the youth across Europe. The “Up2Youth” public opinion survey is an interactive, online initiative for young Europeans to express and exchange ideas on the issues that matter the most to them. From education to jobs, and from social policy to foreign affairs, the survey allows participants to address a wide range of issues, but in a quick and user-friendly way.
European People’s Party (EPP) President Joseph Daul praised the initiative: “The Up2Youth survey is a fantastic opportunity for young people across Europe to make their voices heard, and the EPP is proud to be the first European political party to offer the youth the chance to share their ideas in this way. In view of the May 2014 European elections, politicians must listen to the youth, hear their concerns, and consider their ideas and solutions to the challenges we face. We look forward to the feedback we will receive and I can assure all participants that their ideas will be taken seriously by leaders throughout the EPP family, especially as we finalise our political platform for the 2014 European elections.”
The President of the CES, Mikuláš Dzurinda, also applauded the Up2Youth project. “This survey will allow Europe’s youth to tell EU leaders what is most important to them. I am confident that there will be no shortage of great ideas, and we are especially pleased to further the political process by serving as a platform for debate and discussion.”
The ten participants offering the best policy ideas will be invited to the EPP Congress in Dublin, Ireland on 6 and 7 March 2014 to meet and share their ideas directly with EU leaders, including the EPP’s candidate for President of the European Commission, who will be chosen in Dublin. Furthermore, the participant offering the very best idea will also be offered a paid, six-month internship at the CES in Brussels.
Visit our brand new Up2Youth page and leave your policy proposals: http://www.up2youth.eu/#!/enEducation Elections Jobs Social Policy Youth
CES launches the exciting ‘Up2Youth’ initiative
11 Dec 2013
Youth politicians all around Europe are thrilled. The topics of the young generation are finally high up on the political agenda: the Youth Guarantee, Youth Unemployment, and ‘Employability’ are now established in the political jargon. The political focus on the younger generation and the amount of policies made is evolving for each day that goes by.
As much as we embrace the fact and try to make our – the young people’s – voice heard, we still have to ask ourselves which tools would enable us to live a self-determined life – and which are the ones arousing covetousness at its best but add, in fact, little to a sustainable solution. Don’t get me wrong! Any efforts embracing what the young generation calls for should be appreciated. While elderly have their own strong representations, every young generation has to fight for their spot. Two initiatives are highly debated at the moment: The Youth Guarantee and the Loan Scheme for Master students.
While the Youth Guarantee is aiming at sudden support for the youth and tries to offer training or employment opportunities within four months to young people under the age of 25, we have to question whether the allocation of funds to achieve these goals is granted properly: the idea to focus on regions is good since it follows the principle of subsidiarity, solutions should be found on the level on which the problem actually exists. Nonetheless, by setting the measurement that youth unemployment needs to reach a level above 25% in the region, moral hazard behaviour might be triggered. Regions will have an interest in presenting themselves in a worse state than they actually are.
Even if an improvement would be achieved – that means young people will have found their way into the labour market or into training – the regions will have an incentive to present their levels of youth unemployment to remain above 25%. While this race to the bottom will aim at securing cash flow into the region, it weakens the efforts to move the youth out of its misery. It is effective, sustainable solutions that need to be considered. The grants provided in the Youth Guarantee program need to be orientated to programs that ensure sustainable educational programs and trainings. They need to focus on the actual demand in the labour market.
It is important to point out that actual achievements are not the main factor in the planning of policies. It is rather the opposite, if we take a look at the Master Loan Scheme Guarantee. It is a mean that shall empower students to move across Europe, in order to study in a master programme in their desired field of studies. Both, the EU Commission and the European Parliament tasked the European Investment Bank (EIB) to channel through guarantees to private banks. These will then be able to hand out student loans at a reasonable interest rate. It is a tool envisioned to particularly fill one gap: provide financing for students that desire to complete their entire master studies abroad. Conventional Erasmus funds cannot be tapped for such, they can only be utilized if a student is enrolled in a university program from which he then takes parts of his study for a semester or two abroad.
It is more than just closing a financing gap, it is also considering the regional diversity and richness we provide in Europe: in the 21st century, it is more important than ever to invest in human capital ad in education. While technology is certainly a tool in helping to bridge distances, this is only true within a limited scope. When education cannot be delivered to the student wherever he may be, then the student must be enabled to go get this knowledge at another destination. Specialized learning at the best can be achieved easily with the loan scheme guarantee. 300.000 students shall benefit from this mean in the period 2014 – 2020. It is 300.000 young, highly-skilled students that do believe in their abilities. They are willing to put their claims onto the future and their prospect in life.
Opposing this idea of creating opportunities will only result in the creation of a ‘lost generation’: Not a ‘lost generation’ in a sense as some politicians refer to these days when speaking about the unemployed youth. But we need to be careful not to create a lost generation that is being patronised! No one is forced to apply for any loans, but if people want to achieve great things in their lives and have trust in their abilities; they should by no means be stopped.
We need a generation that believes in its bright future here in Europe!Eva Majewski Crisis European Union Jobs Youth
Freedom and the Prospect of Education
25 Jul 2013
With respect for common rules and values, solidarity but also strong national responsibility, and the EU functioning in a way the citizens can support it and feel it as their own, Prime Minister Jyrki Katainen highlighted.
PRESS RELEASE, 6th June 2013 Helsinki
Today in Helsinki, the Prime Minister of Finland, Jyrki Katainen, opened the 4th Economic Ideas Forum (EIF) organised by the Centre for European Studies (CES) with the title “From Reform to Growth: A Roadmap for Europe”, by emphasising the need to keep Europe united. “Europe cannot afford divisions between Member States. Leadership is about unity, not about divisions.” PM Katainen stressed that leaders have to be responsible. In his speech he pointed out the need for a profound debate about Europe’s future, “we should not allow dogmatic voices to dominate it”. He reminded the audience of both populists, who attempt to blame the EU without offering solutions, and of those who demand the immediate creation of a United States of Europe. Instead, he advocated a modern, pro-European pragmatism that includes both ‘more Europe’ and more national responsibility. “We need more Europe, but fair Europe”, with respect for common rules and values, solidarity but also strong national responsibility, and the EU functioning in a way the citizens can support it and feel it as their own. PM Katainen said it’s time Europe regained its self-confidence: we need to highlight what has worked, reminding the international audience of that the euro has been successfully stabilised and the eurozone kept intact. “In Greece, the talk is now of “Greekovery“ instead of Grexit”. He also mentioned the importance of strengthening the Economic and Monetary Union, for instance by establishing the banking union, reminding, however, that more needs to be done. According to the Prime Minister, unemployment remains the biggest challenge, especially with the youth. Measures are also needed to improve financing for small and medium-sized companies and to make Europe strong enough to meet global competition. “We have to also protect our continent from protectionism”, he added. Prime Minister Katainen lauded the Economic Ideas Forum for providing a good opportunity for leaders to exchange views without time constraints. On Friday 7th June the EIF will welcome discussants such as Enda Kenny, Taoiseach of Ireland, Antonis Samaras, Prime Minister of Greece,Valdis Dombrovskis, Prime Minister of Latvia, Olli Rehn, Vice-President of the European Commission, and Michel Barnier, European Commissioner for Internal Market and Services, among others.Business Centre-Right Crisis Economy Jobs
We need a united and fair Europe
06 Jun 2013
The labour market varies very widely across the EU’s member states. While unemployment rates in Greece and Spain have soared above 20 percent in the wake of the financial, economic and sovereign debt crises, other countries such as Sweden, Germany, Luxembourg and Belgium are struggling to find skilled labour. In theory, this should make it very attractive for job-seekers from the particularly badly-hit regions to migrate to countries where their skills are needed. But despite this, there is little mobility between EU countries. This is illustrated by the fact that there are more Mexicans living in the USA than EU citizens living in another EU country. There is no doubt that the crisis has triggered an increase in the numbers of people migrating between the various EU countries, but if we ignore the movement of citizens from the new EU member states of Bulgaria, Poland and Romania, the number of people migrating as a result of Europe’s economic imbalances remains very low. The proportion of workers in the EU who are citizens of another EU country has significantly increased, but the increase in those countries that are particularly suffering from a shortage of skilled labour is less than the average. So it seems clear that the imbalances between the European labour markets have only had a limited effect on this increase.EU Member States Jobs Migration
Jobs without Frontiers: the Potential of the Single European Labour Market
06 May 2013
Over recent years, the German labour market has undergone an astounding transformation. What was once a problem child has now become an international role model. For decades, Germany suffered from endemic structural unemployment and high numbers of long-term unemployed. It was particularly difficult for unskilled workers to find employment due to significant barriers that prevented them from entering the labour market. In the mid-2000s, a raft of reforms was introduced that resulted in the unemployment rate being halved, despite the difficult economic climate. Germany has found its own, very individual and very successful labour market model to face the challenges of globalisation. But its success in Germany does not mean it can simply be transferred to other countries without modification. However, Germany’s experiences can certainly help its European partners to find their own ways of reforming their national labour markets.EU Member States Jobs Social Policy
Success via Reform: the German Jobs Miracle
06 May 2013
Today, no one disputes that credit is vital for small and medium enterprises. Despite the momentum that big businesses give to our economies, SMEs are still the basis of the Spanish productive sector and the ones employing the majority of citizens in Spain and in Europe.
With the crisis, the challenges facing SMEs have become more pronounced. Not only because of the drop in sales as it is the case for other companies, but because of major difficulties in accessing credit. A few years ago, almost any solvent SMEs in Europe could take out a loan. However, the situation has changed and today, the financial market is “fragmented”. What do we actually mean with this? Simply that the criteria for accessing credit varies greatly across Europe. For example, an SME in Spain must satisfy vastly different criteria than an SME in Germany in order to take out a loan.. The result of this is that banks are failing to grant loans to companies in Spain, while similar companies in Germany are being provided with the credit they need. Moreover, even in cases where they can access loans, Spanish companies end up paying a hefty premium, estimated by Deutsche Bank to be in the region of three and four percent.
This fact is drowning many small and medium Spanish enterprises and therefore affecting the recovery of the country and of Europe as a whole. If SMEs do not have access to credit, their ability to run a business is severely impeded and this in turn has serious consequences on the employment situation and economic growth. We need to consider the different possibilities available to solve this problem. The ECB is expected to cut the interest rate by 0.5% in a few months. However, we have observed how a decrease in interest rates will not solve the fragmentation in the financial markets. We should therefore consider measures such as the ECB changing its collateral policy and authorising banks to use SMEs debt to access credit from the ECB. There is also possibility that the ECB could buy SMEs debt directly from banks in the periphery countries.
These measures, as opposed to low interest rates, would have a direct impact on SMEs, as they could access credit and thus bring us back to the path of growth. The two questions that will decide the future are: will Germany accept such measures? Will the ECB assume a role that it has until now refused? I have no doubt that something is moving in the ECB.Pablo Zalba Banking Business Crisis Growth Jobs
SMEs: A Solution from Europe
30 Apr 2013
The CES is currently looking for a dynamic, motivated and innovative individual to fill the full time position of Financial Administrator, based in Brussels. Applicants should apply by 18h00 on 26 April 2013 at the latest. For more details regarding the key responsibilities of the position, the desired skills, experience and candidate requirements, please visit our page: http://thinkingeurope.eu/join-team.Jobs
Join our team, we are hiring!
15 Apr 2013
President Obama’s state of the union address contained a big success for transatlantic relations: “And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.”
A comprehensive Partnership agreement, covering investments, regulatory convergence and other non-tariff barriers would be a game changer in world trade relations. And this, for different reasons:
– It would enable the European Union and the United States to lead instead of follow when it comes to standard setting. This might seem as a technical argument but it is not. It would enable the EU and the US to set world standards for electrical cars, mobile devices, etc. giving our industries a competitive advantage.
– Indirectly, this Partnership agreement will increase the appetite for other economies to open up as well. When barriers to invest between the EU and the US are lowered, it will increase the interest of emerging economies to engage in similar negotiations. As they will want to avoid that EU or US investments are diverted from their economies to the transatlantic economic area. As such, a EU-US agreement will revive multilateral free trade negotiations.
Overall, a EU-US Partnership will make both economies more competitive and stronger. Such an agreement will not be a zero-sum game but a gain for both parties. However, some EU and US industries will face more competition and might lose or, to the contrary, become more globally competitive. Moreover, it might make the US a bit more European and the Europeans more American, an evolution that should benefit both societies.Stefaan De Corte Economy Growth Jobs Trade Transatlantic
Stefaan De Corte
Transatlantic Free Trade – An Agenda for Jobs, Growth & Global Trade Leadership
14 Feb 2013
The “Occupy Wall Street Movement” has gathered in New York since September. Organising via blogs and adopting the slogan “We are the 99 per cent” (as opposed to the 1 per cent of the population who are wealthy), these protests have reignited an almost forgotten counter-globalization movement. Many different groups within society–not only unemployed people–are involved in a movement which currently has no real core identity.
The Left, including the extreme Left, wants to claim ownership of the intentions and goals of the very heterogeneous groups participating, which even differ from country to country. In many European cities, protest movements are visibly on the rise, including the “United for Global Change”, a so called world-wide protest day, on October 15th. This counter-globalisation movement is seeking to find a strategy to combine their objections with those of the national protesters. On 15th of May “los indignados” (the indignants) protested in economically troubled Spain, and protests in Greece likewise were composed of people with different political views and social backgrounds united by anger and despair. In Greece, one can even say a massive movement has emerged.
The counter-globalisation movement seeks to use these opportunities to recall their old slogans such as “A better world is possible!”. Indeed, after its emergence at the end of the 1990s, global, European and national elites have taken the old demands of the organization “Attac” seriously (the introduction of the Tobin Tax on financial transactions), which was founded in Paris in 1998 under the name = Association pour une taxation des transactions financières pour l’aide aux citoyens. Maybe surprisingly, the counter-globalisation movement was not very visible during the first global financial crisis in 2008.
This is changing now. First of all, after 3 years of crisis in many EU countries, with bank bailouts and an apparent retrun of at least some actors in the financial sector to some bad old habits, managers and bankers are much more clearly the scapegoats today. Second, countries like Greece, Spain and Italy have to implement strict austerity measures that are seriously hurting more and more people. Third, dimming economic perspectives for many Europeans correspond to a pervading sense of relative decline of Europe (and North America) vis-à-vis the emerging economies in China and elsewehere. Moreover, “citizens in anger”, formerly supporters of the state and the market economy who are shocked by the political and business elite, correspond very much to the bestselling French booklet “Indignez-vous!” (Time for Outrage). The author, Stéphane Frédéric Hessel, born in 1917, is a former ambassador, concentration camp survivor and French resistance fighter. The 32-page essay was first published in a small batch of 6,000 copies selling for not even 3 euro per piece. By the end of 2010, 6 million copies had been sold. But the ideas are extremely heterogeneous and specific: Hessel’s reasons for personal outrage include the growing gap between social classes, France’s treatment of its illegal immigrants, Israel’s behavior towards the Palestinians, the need to “re-establish a free press”, the need to protect the environment and the importance of protecting the French welfare system. He calls, from a leftist perspective for a peaceful and non-violent insurrection.
The Left has tried with the emergence of the counter-globalisation movement to give themselves a new narrative, in the words of the philosopher Slavoj Å½iÅ¾ek, a “communist manifesto for the 21st century”. Å½iÅ¾ek was involved in the Wall Street protests, as well as Naomi Klein. The Canadian journalist wrote in 2000 with “No Logo” a bible for counter-globalisation activists. Her bestselling book can be interpreted as a manifesto with neo-anarchist and Marxist inspiration.
But the protests have also met with some applause, or at least profound empathy, among conservative thinkers: Philipp Blond (the “red Tory”) has criticized Thatcherism from a fundamentally Catholic perspective years ago. The Daily Telegraph columnist and biographer of Margaret Thatcher, Charles Moore, has begun to think, in his own words, “that the Left may have been right, after all”, in a column written even before the London riots of early August 2011. His critique of neoliberalism was eagerly taken up by some German conservative intellectuals such as Frank Schirrmacher (editor of Frankfurter Allgemeine Zeitung) and Lorenz Jaeger (journalist). In Southern European countries, conservative criticism of the market has a longstanding tradition. But in European electoral politics, the main thrust relevant to the EPP family will continue to come from the Left.
The mainstream Left, such as the Party of European Socialists and many of its member parties, is trying to profit from the new wave of protests by pointing out that they have criticized “neo-liberalism” and “casino capitalism” for a long time already, and demanded stronger state intervention in the economy (“more politics, less capitalism”), a financial transaction tax, stricter banking regulation, as well as less emphasis on austerity and more on stimulus. Of course, this last point is made especially by socialist parties in opposition, not those in power in Greece and Spain which have to enact austerity themselves.
Currently, we can see all possible forms of protest: violent and non-violent, reactive and preventive in terms of the timing of police intervention, spontaneous and long-planned, illegal and legal in respect to the law, repressive and tolerant in the ways of expression, brutal and calm related to the degree of force used and broad and selective in terms of an intended programmatic agenda. There is an ambivalent, declining confidence in legislatures and governments, but no general distrust of coherent polities within European national systems. But more and more, populations (as well as the media) are in fear of a so-called casino-capitalism and the alleged injustice of the financial system.
Options for a smart reaction:
Here is how the EPP family should react to the protests and their underlying resentments, as well as their instrumentalisation by our political competitors:
• The new global protest movement is extremely heterogeneous. It combines really existing new fears about the future of individual people with well-known and somewhat worn out radical leftist ideology.
• The main difference between 2008 (when protests were expected but never materialized) and today is that austerity has begun to bite, and that the general mood of economic decline has spread.
• The EPP family should point out that it understands the individual fears about economic perspectives, and some of the anger about financial market instabilities and bankers’ payments. But it should not buy into the anti-capitalist rhetoric of the Left. Nor should we show any understanding of the violence used by diverse radical groups which have only been waiting for the moment to profit from protest movements like this.
• It should point out the contradictions in the leftist narrative: between a general critique of austerity on the one hand, and the budget cuts by socialist governments themselves. Above all, it should make a clear distinction between smarter financial market regulation that is needed to SAVE the markets, and a fundamental critique of the market economy which is the road to nowhere.
• It should keep on repeating that besides airing their resentments (however justified or unjustified they are) and criticizing “global capitalism”, the “Occupy together” protests have not shown any coherent, systemic alternative to the globalized economy. Socialism, for the time being, is not on the placards. As soon as it appears, our family’s answer should be to point to the evident failures of socialist economics in the 20th century.
• Above all, it should point out that in order to overcome the crisis, we will all have to work longer and harder, and keep on innovating our economies, which includes both smarter regulation and further liberalisation, f.e. in completing the EU Single Market.
Picture source: www.blog.timesunion.comFlorian Hartleb Crisis Jobs Society Values Youth
Occupy Together: The emergence of a unified global protest movement?
10 Oct 2011
This paper advocates the introduction of a flat rate income tax in the Netherlands. It also gives some recommendations for lowering the flat tax rate by shifting away from income taxes, increasing value-added taxes and broadening the tax base. It concludes by showing that a marginal tax rate plus social security contributions of 33.25% is possible. The focus of this proposal is the Netherlands, but several aspects of it may be relevant to other EU Member States.Economy Jobs Social Policy
Flat but Fair: A Proposal for a Socially Conscious Flat Rate Tax
01 Jun 2010