In 2011, European listed companies had EUR 750bn of liquid cash. How can this huge capital of the Old Continent's companies be put to use to foster economic growth and improve the competitiveness of European businesses? Regaining leadership, a vision for long-term development, deregulation, and exploitation of the existing potential, including, first and foremost, social potential, will enable Europe to re-establish its strong position on the global scene – this was a consensus among the participants of the PKN ORLEN's panel discussion Economic Architecture of the New Europe. What can be done to make institutions, governance and regulations support growth?, held today as part of the European Forum for New Ideas in Sopot.
The diagnosis of the current situation is clear: despite the ambitious objectives provided for in the long-term growth strategy 'Europe 2020', adopted three years ago, the EU economies are still developing at a slower pace than the global competitors. The Old Continent has retreated from the position of a positive change initiator to that of an observer that merely watches what is going on globally and has to adapt to changes originating in other parts of the world. The rapidly growing economies of the US, Canada or BRIC countries are leaving Europe far behind, and therefore maintaining a safe status quo is not a good strategy for Europe in the present times. A high unemployment rate and lack of a plan for the use of the young generation's potential add to the low competitiveness and sluggish economic growth to form a picture of contemporary Europe, which is in need of change so that the EU becomes a smart (expertise and innovation driven), sustainable and inclusive economy, as envisaged by the 'Europe 2020' strategy. The indispensable tools to foster this change in Europe were the object of a debate held by renowned intellectuals from all over the world during this year's European Forum for New Ideas in Sopot. It was moderated by Professor Leszek Pawłowicz, Deputy Chairman of the PKN ORLEN Supervisory Board, and its participants were: Henryka Bochniarz – President of Boeing Central and Eastern Europe and President of Confederation Lewiatan, Clyde Wayne Crews Jr. – Vice President for policy at the American Competitive Enterprise Institute, Janusz Lewandowski – EU Commissioner for financial programming and budget, Michael O’Leary – CEO of Ryanair Limited, John Peet – editor of 'The Economist', and Günter Verheugen – former EU Commissioner.
The discussion was initiated with a reference to the European integration's long and difficult passage from the European Coal and Steel Community, an initiative comprising only 15 states and hardly uniform in terms of programme and economy, to the politically ambitious project involving 28 member states. Particular attention was drawn to the thousands of regulations, directives and decisions that have been issued since 1952, the time of signing of the Treaty of Paris, which laid the foundations for the European integration we know today. In 2012 alone, precisely 1,799 acts of law entered into force, preceded by 2,062 pieces of legislation in 2011. While initially the EU legislation applied to a community of fewer than 20 members, much less diversified internally than now, all decisions made today have to accommodate the much more complex needs of the whole European Union of 28 independent states.
In this context, a particularly vital role is played by the EU regulations on energy prices, since they directly affect the competitiveness of most European industries. It is the prices of energy that force individual companies to move their businesses out of Europe. Electricity prices paid by industrial customers in Europe are higher than in the US: by approx. 60% in France, approx. 90% in the UK, approx. 110% in Germany, and as much as approx. 280% in Italy. This environment discourages investments in the Old Continent and thus forces investors to channel their capital to other markets. Job market regulations are also very important – companies in Europe cannot rely on flexible employment options in case of an economic downturn, which are available, for example, to their counterparts in the US. "In the energy sector there is no chance for working out a single, one-size-fits-all solution that could be applied to anyone. The new EU member states require different measures than the founding members of the Community. On the other hand, if there is a sector that is in need of a clear, stable and predictable environment, it is indeed the energy sector," Günter Verheugen emphasised.
A case in point, showing the particularly strong dependence between companies' standing and the prices of energy, is the refinery and petrochemical sector, represented, among others, by PKN ORLEN. This is the sector that supplies the whole economy with fuel and is the main source of budget revenue in the EU states. Over recent years, there has been a distinct tendency to close down refineries in Europe: no new refinery has been opened in the EU for 30 years, and the competitive position of the industry is weakening – mainly due to the rising costs resulting from various regulations. On the other hand, the European policy was defended by Janusz Lewandowski. "While the seemingly inevitable decline of the Old Continent is a theme today, I look at it in terms of the share of value-added product exports in the total trading balance; Europe maintains its share at a more or less stable level of 20 percent of the world's exports of value-added products, which is a proof of its strength. Of course, I do not deny that the EU needs reforms, and in my opinion the only thing that can legitimise it is the usefulness."
A factor that frequently determines regulations in the energy sector, and affects the energy prices, is environmental issues. The best example here is the fixed share of renewable energy sources (20%) in overall energy consumption, which all member states are required to achieve by 2020. Unfortunately, this solution does not take into account the different situation and capabilities of the individual member states. Unrealistic and complicated climatic regulations, as well as the lack of a pan-European agreement with respect to the production of gas from unconventional resources, significantly weigh on European companies' competitiveness. But this is not all. "The aviation industry is an example of failure of the Brussels' regulations. Ryanair has proven that deregulation would result not only in cheaper flight tickets, but also in a higher level of prosperity. Brussels is seeking to solve global climatic issues by means of regulations in the aviation sector. Leave us alone," Michael O’Leary harshly commented on the EU measures.
The panelists' conclusions were in general very definitive – Europe needs a balanced deregulatory policy that would encourage primarily the private investors, and, as a result, contribute to the revival of the European economy. Stagnation in this area leads to curtailing freedom of investment, creating unnecessary risks, and increasing the costs of establishing, running and closing down a business. A critical review of the regulations governing those industries which have the largest influence on other sectors was declared to be the most urgent matter. This policy should build trust that will contribute to increased investments also in other areas. "I believe that all participants of this debate would agree that the best solution for Europe now would be to create the post of a Commissioner for Deregulation within the European Commission, who would be responsible for streamlining and reducing the number of regulations," said Leszek Pawłowicz to summarise the panel discussion at its close.
Energy, Environment, Development. Objectives which need not be at odds