Wednesday 30 June 2010

Project Europe 2030 and Innovation Union

The future prosperity of EU citizens will be decided by our collective choices between reform or witnessing our decline. During the Lisbon strategy decade, we crawled in the slow lane. The new Europe 2020 strategy is now supposed to bring us jobs and growth, but without renewed resolve it will only become another pompous pipe dream.

The European Commission is preparing the flagship initiative Innovation Union, and the governments in the EU member states are drafting their first National Reform Programmes (NRPs) based on the Europe 2020 strategy.

Read on, if you want our leaders to deliver.

Council supportive

With China just ten years from closing the innovation gap with Europe on present trends, the Programme of the Belgian Presidency of the EU Council takes research, development and innovation seriously, at least verbally.

The research communities, innovation systems and other stakeholders have an opportunity to set Innovation Union and the other Europe 2020 flagship initiatives, as well as the first new generation National Reform Programmes on course for success.

Project Europe 2030

The Reflection Group chaired by Felipe González looked at strategic choices for the European Union in a long term perspective. Project Europe 2030 offers valuable ideas and suggestions to official drafters, research and development (R&D) communities and the wider public:

Report from the Reflection Group on the Future of the European Union "Project Europe 2030 - Challenges and Opportunities" (Council document 10559/1/10 REV 1)


The Reflection Group posed two fundamental questions to politicians and EU citizens (page 4):

Will the EU be able to maintain and increase its level of prosperity in this changing world? Will it be able to promote and defend Europe’s values and interests?

Human capital

The Project Europe 2030 report underlined the crucial importance of human capital and the need to catch up (page 7):

Human capital is the key strategic instrument for ensuring success in the global economy. And yet, Europe has lost considerable ground in the race to a knowledge economy. Catching up will require a coordinated effort. Member States must mobilise the resources they agreed to invest in R&D, with the help of the private sector, and reform all aspects of education, including professional training. The Union must also act through its own revised budgetary instruments, while making better use of the European Investment Bank and the European Investment Fund. Finally, we need to consider the possibility of opening up new sources of revenue, for instance through the imposition of a carbon tax.

European Research Area

In a manner comprehensible for a wider public of informed citizens, under Growth through knowledge, the Reflection Group depicts the challenges for the European Research Area (ERA) and argues for increased R&D spending on the way towards Innovation Union (page 24 to 25):

Despite numerous calls for substantial increases in R&D spending, the last decade saw relatively little change – the EU’s expenditure remains at 1.8 per cent of GDP. A concerted effort is needed in Europe to reach the ‘Europe2020’ target of 3 per cent expenditure on R&D and the creation of an “Innovation Union”. This must include budgetary reallocations and greater private sector funding. EU centres for pre-competitive applied research should be developed (public-private partnerships between states, regions and private industry) together with increased support for investigator-driven free research through the European Research Council.

To this end, it will be crucial to simplify the procedures for accessing public funding, including EU funds. This would above all benefit small dynamic businesses, which are often the driving force for forward-looking innovations. Today, SMEs account for half of the EU's GDP although they benefit from only 15 per cent of R&D programmes. New forms of partnership are needed between researchers at publicly-financed universities and researchers at privately-financed companies to ensure a continuous pooling of knowledge throughout the process of research and innovation. In particular, more funding is needed for applied research that would benefit SMEs.

Excellence must be the main criterion for granting public aid both at national and EU levels. The role of the European Research Council must be expanded and strengthened, with funds allocated strictly on the basis of peer reviewed excellence, actual or potential. Likewise, the EU must encourage the development of “European poles of excellence” while ensuring that this process of concentration would not lead to the creation of “intellectual deserts”.

Last but not least, the European Research Area must become a reality – an area without borders where all scientific potential, wherever it is, can be fully tapped thanks to the free movement of researchers, ideas, technologies and capital. This process of “Europeanization” must itself be part of a more general openness to the world. Transfers of knowledge have now become the indispensable complement to the traditional drivers of globalisation based on material and capital flows.

The views of the Reflection Group are not new, but they are presented in a clear and convincing manner.

Regulatory framework for innovation

The Reflection Group states the need for dynamic Europe-wide markets in services in order to unleash innovation and creativity (page 25):

Europe often finds it difficult to translate scientific research into new products, new patents, new entrepreneurial activities and new jobs. A lack of competition in service markets inhibits innovation, raises costs and limits growth. Financial services, next generation digital services, energy solutions and services to promote health and learning have all huge potential. The EU is well placed to become a leader in the new service industries, but only if service providers are supported by a Europe-wide market and a new regulatory environment where innovation and creativity can actually flourish.

Free global markets that respect intellectual property rights are the essential breeding ground for innovation. It is therefore important that Europe remains committed to improving market access both inside and outside Europe, most effectively through the completion of the Single Market, both in regard to services and new technologies. At the same time, the EU must reform the rules on intellectual property, for instance through the creation of a straightforward European patent system that is affordable, quick and reasonable, and offers effective protection on a European scale.

In this context, it will equally be important to put in place the measures needed to reinforce risk capital markets and the availability of seed capital. In particular, SMEs – which are very often at the forefront of innovation – need more adequate support mechanisms, including access to risk capital, to help them compete in the global marketplace.

The creative economy will continue to evolve faster than the political processes intended to support or regulate it. Every day it reveals new horizons and revolutionary prospects. Flexibility and responsiveness must therefore be the backbone of any regulatory framework in this field. Facilitating a culture of risk-taking and entrepreneurship is even more important. Only this will allow the EU to fully reap the rewards of research and experimentation, and with it to create new jobs.

From words to action?

Half a century from the launch of the Common Market, the European Union is still struggling to achieve a functioning internal market (or Single Market) in services.

Just a few examples:

The general Services Directive is a complex and ill digested compromise between European ambitions and tribalist instincts. Many member states have been slow in putting the Services Directive 2006/123 into practice. (See information note 18 May 2010, document 9475/10.)

Businesses and consumers pay the price of fragmented digital markets, as shown by the 15th progress report. Splintered markets do not give birth to world class services at affordable prices.

The “straightforward” European patent system has resisted the efforts of several EU Council presidencies keen to act as midwives.

Project Europe 2030, by the Reflection Group, highlights important challenges and opportunities facing politicians, public officials, business leaders, unions and citizens. Innovation Union needs energetic support, decisive action and high quality communication.

Ralf Grahn

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