Opinion Nani Beccalli-Falco, President and CEO of GE Europe: Europe reloaded

Last weekend European voters were able to choose who will represent them in the European over the next five years. They now have mandate to address many of Europe problems and make the urgent changes which are needed. Those who will be in the Parliament will have to make brave decisions to renew the EU in many fundamental aspects.

2014-05-27 11:46:07

There is no doubt that Europe has turned the corner and is emerging, albeit battered and bruised, from the economic crisis.

Unemployment is at an unacceptably high level with over 25.7 million people unemployed, our manufacturing base has been eroded with over 3.4 million jobs lost since the financial crisis hit in 2008. Industrial production, while recovering, is still approximately 10 per cent below its pre-crisis peak in 2008 and investment is estimated to have dropped by 380 billion Euro since 2008. There is clearly a lot of work to be done to restore Europe's prosperity and drive investment from abroad and within.

Europe remains a major destination for FDI. However, when we take a closer look at the facts and figures the trend is worrying. Our attractiveness for FDI has diminished from 40 per cent of global investment in 2003 to 20 per cent in 2013. At the same time China's share rose from 3 per cent to 9 per cent representing almost half of that of the EU. While the economic crisis clearly has been a factor in this decline the reality is that it had begun to set in as far back as 2003. That said there were some positive improvements in 2013. Europe (excl. Russia) ranked second for total FDI inflows in 2013 and inflows rose by more than 25 per cent, the fastest growth in any region. The increase in the EU was even higher at 38 per cent which, while encouraging, is a far cry from the pre-crisis and 2003 levels.

Stability, ease of doing business, market access, infrastructure, skilled workforce, productivity and competitiveness are some of the key considerations for companies, like GE, when it comes to making decisions on where and when to invest. Another factor is the ease of making those investments happen. As a company, which has over 94,000 employees in Europe, we have continued to invest here even throughout the economic crisis. Of the 8 billion Euro which the company has invested in acquisitions over the past two years, 5.12 billion Euro (or over 60 per cent) has been invested in Europe and we remain committed to continue to look at suitable and synergistic opportunities to invest here where it makes sense.

While Europe remains an attractive place to invest it falls far short in terms of maximising its potential for investment and growth. Europe's future competitiveness, and indeed that of its 28 member States, will be driven by ensuring that it maximises the untapped potential which exists and by exploiting the advantages of its size and economies of scale. For Europe to realise its full potential it still requires significant reform, social, political, economic and fiscal reform and it requires greater integration.

Europe needs to address some key issues which are inhibiting investment and competitiveness. Its structures, processes, policy making and governance need to be simplified to ensure we eliminate unnecessary costs, remove barriers to trade and investment and create a faster, more agile economy.

Europe remains far too fragmented. Greater integration and completing the Single Market is very much an economic imperative. It should not as Mario Monti said be "yesterday business". For example, the creation of a single market for services through ensuring greater harmonisation of regulations and standards across the EU could potentially add up to 4 per cent to GDP. At the same time reducing operating costs and improving the ease of doing business. Similarly, significant benefits would flow from the creation of a single market for energy including reductions in the cost of manufacturing, exploiting economies of scale and facilitating the 1 trillion Euro investment which is required over the next 20 years to build and develop our infrastructure and increase European competitiveness.

Access to a skilled workforce is also critical factor in attracting and maintaining investment. Europe faces a real issue on that front partly as a result of ageing demographics. Currently there are about 1.7 million job vacancies in the EU in service sectors as well as in industry. A common EU labour market and greater mobility between member states, along with a uniform system for recognising qualifications would do much to boost European attractiveness to labour as would labour market reforms.

Finally, as the negotiations on the Transatlantic Trade and Investment Partnership (TTIP) continue we are conscious of the huge upside there is for Europe by removing and breaking down barriers to trade and investment on both sides of the Atlantic.

As Europe transitions we have a real opportunity to move beyond austerity and to take a fresh look at things and implement a robust and realistic strategy for the growth and renewal of the EU. Improving our attractiveness and competitiveness as a destination for invest must be central to that effort.