At a time when the outlook for growth in Europe is becoming bleaker and all eyes are turned towards economic forecasters, those who think to ask businesses what they need in order to develop are few and far between. Nonetheless, we would do well to listen to a baker explain the conditions necessary for the growth of his bakery: first and foremost, he needs customers willing and able to buy his bread, then ingredients (flour, salt, water, etc.) and employees, and finally sufficient freedom to run his business – for example, food standards that allow him to innovate. The needs of a multinational company would scarcely be different: solid demand (consumption, investments, exports, etc.), high-level production factors (human resources, raw materials, infrastructure, etc.) and “growth catalysts” (suitable regulations, public services for quality businesses, etc.).
To accelerate growth, reforms are needed on all of these issues. However, as one plan after another was designed, these reforms seem to have been forgotten, for both good and not-so-good reasons. The good reason is that for the moment the debate has focused on two subjects, financing and currency, which are absolutely critical in the short term.
As for the bad reasons, the first is a question of choice. Where to begin? What aspect of demand, which factors of production and regulations? For choices of this sort, businesses have well-oiled strategic processes, while states have seen their planning capacity diminish. This has led them to adopt a sequential form of problem management according to urgency, as states are more likely to come to an agreement in such cases. However, this sequential management has its limits: key reforms such as education, the European labor market, innovation, energy transition, etc. take time. They must be undertaken well in advance – in fact, they should already be in place!
The second bad reason for the absence of reforms in the debate is that the financial crisis offers up scapegoats for lackluster European growth. These scapegoats – not all innocent – save us from having to analyze the deep-seated causes behind the problem. Nevertheless, certain causes have to do with the very foundations of the European model for growth: the sectors where competition and the single market exist have been strengthened. This has not been the case, however, for public services, which generally enjoy a monopoly. And yet, this half of the European economy accounts for 50% of GDP and regulates the other half. Naturally, it is not a question of having day-care centers throughout Europe compete against one another; evaluation and comparison of services across the EU should have played this role. However, initiatives of this sort, such as Pisa for education or Shanghai for research, have mostly come from outside the EU; the European growth plan has left out half of GDP!
As future plans are worked out, states must fulfill their role as “growth catalysts” and accept to evaluate and pilot their services according to the added value they provide for users, citizens and businesses.
Published in Les Echos