Booz co insead-state-of-europe-revitalising-the-european-dream


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evitalising the European Dream: A Corporate View

Publish Date:
July 7, 2011

Karlsson, Per-Ola

Business leaders are cautiously optimistic about the future of Europe and see an opportunity to revitalize the European Dream, according to this study from INSEAD and Booz & Company. Some 2,000 business leaders were surveyed on how the EU should move forward to ensure its place as a global player. The survey was launched as part of the inaugural The State of the European Union forum.

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Aerospace & Defense, Automotive, Chemicals, Consumer Products, Energy & Utilities, Financial Services, Health, Industrials, Media & Entertainment, Oil & Gas, Private Equity, Public Sector, Retail, Technology, Telecommunications, Transportation

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Enterprise Strategy

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Booz co insead-state-of-europe-revitalising-the-european-dream

  1. 1. Revitalising the European Dream A Corporate ViewContact informationPer-Ola Karlsson Bruno LanvinSenior Vice President Director of e-LABBooz & Company INSEAD+46 8 50619049 +33 1 Bruno.LANVIN@insead.eduLudo Van der Heyden Robert GogelThe Mubadala Chaired Professor in European Executive CouncilCorporate Governance and Strategy +33 1 47237755INSEAD 1
  2. 2. Page 2 The State of the European Union: Revitalising the European Dream A Corporate View Page 3Foreword Table of ContentsWhen the next generation is willingto declare ‘We Believe in Europe’,then, and only then, can we be satisfiedthat we have left a positive legacy.The eurozone and sovereign debt crises, cutbacks in member states’ social Introduction 4pension and welfare systems, slow progress in reducing unemployment, 1. A Pragmatic Dream: How the Corporate World Sees the European Union 5and important institutional changes have shaken Europe’s confidence. 1.1. Where the EU Is Most Needed 5Member states have been called upon to Europe must undertake its transformation ambitions of providing a stable, sustainable,renew their commitment to solidarity in a journey with passion and commitment. and fair society. When the next generation is 1.2. Ready for Action 10context in which many fear that Europe has At a time when many are questioning the willing to declare ‘We Believe in Europe’, then,been passed over in favour of the emerging merits of the European model and debates and only then, can we be satisfied that we 1.3. Ongoing Dualities and Apparent Contradictions 12giants elsewhere in the world. Jean Monnet, are dominated by cynicism, it is important have left a positive legacy.the architect of modern European unity, not to lose sight of Europe’s real and unique Against such a backdrop, how do business 2. Dreams into Actions 14commented that much of Europe’s history has strengths. The European Union still remains a leaders consider the European project andbeen marked by its ability to transform adversity key destination for foreign direct investment, its record so far? Is Europe still a source of 2.1. Walking the Walk: The Economic Dimension 14into an impetus for change and progress.1 and its competitive advantages are substantial. inspiration and energy? Can the dream of a Yet the sustainability of those advantages will 2.2. A Model to Reckon with: The Social Dimension 15Multinational corporations are constantly globally competitive Europe be revitalised? require some fundamental changes to theexposed to global shifts in economic power, governance process of Europe’s institutions Is the business sector ready to contribute to 2.3. Keeping the Dream Alive: The International Dimension 15political stability, and social movements. such a revitalisation, and if so how? These as well as new pan-European and nationalTo survive across multiple and quite diverse policies that will require determination from are the main questions at the core of this 3. Focused Energies: The Broad Picture Ahead of Us 16geographic and cultural boundaries, these report, a collaboration between the European all interested parties.corporations have had to develop practical Executive Council (EEC), INSEAD, and Booz 4. Closing Thoughts 18strategies for doing business while also The revitalisation of the European dream is & Company, which is intended to supporthelping significantly to shape the regional both a short-term necessity and a long- discussion and debate at the 2011 conference Acknowledgments 18and local environments in which they term obligation of us all if we are to ensure of business and opinion leaders, The Stateoperate. Corporations have a clear view and that future generations inherit something of the European Union, held in of the contributions required of them more than just unconvincing rhetoric. Theto support and even accelerate the required European dream must inspire and motivate Dipak C. Jainchanges. It is entirely appropriate that their all parts of society, renew each citizen’s Dean of INSEADvoice be heard in discussions of how the belief in the values that Europe represents, Per-Ola KarlssonEuropean Union should change to improve and ultimately, encourage all Europeans Senior Vice President & Managing Director,the lot for all. to achieve their individual and collective Europe, Booz & Company1 Jean Monnet, Memoirs (Doubleday & Company, 1978).
  3. 3. Page 4 The State of the European Union: Revitalising the European Dream A Corporate View Page 5Introduction 1. A Pragmatic Dream:In many respects, the European How the Corporate WorldUnion remains a work in progress. Sees the European Union In describing Europe as a ‘realistic utopia’,2 Mario Vargas-Llosa saw the 1.1. Where the EU Trade. An overwhelming 95 percent of business leaders believe that the EU should European Union as a model for every Is Most Needed take a unified position on trade issues, and country around the world looking nine in 10 feel that any such policy should to promote democratic ideals and Overall, our survey paints an optimistic foster free trade. Results ranged from commercial goals. We too believe picture of the EU’s future. The ongoing 100 percent support for free trade from strongly in that ideal. In hopes of financial crisis has made some business Bulgarian, Norwegian, Danish, Polish, and helping shape the future of that ideal, leaders less confident in the ability of many Swiss respondents to 70 percent support and better understanding what Europe European Union national governments to from the French. There is also clear support has achieved and what it can aspire to, navigate successfully through economic for responding strongly to protectionist we surveyed more than 2,000 European turmoil. Yet these business leaders clearly threats via complaints to the World TradeIts complexity often gets in the way of a full appreciation of the progress made business leaders, policymakers, and believe in the ongoing importance of the Organisation (WTO) or through the usesince its creation more than 50 years ago. Recent setbacks (such as the rejection policy shapers, both inside and outside EU itself, and they greatly value the EU’s role of countermeasures. As to the use of the European Union. The goal of the as a supranational institution that guides protectionist measures by the EU itself,of the European Constitution by some members), difficulties (the economic crisis survey was to better understand how legislation and policy among its 27 member respondents from four countries (Hungary,and its acute effects on other members), and challenges (to the euro in particular) they perceive the European Union, states—so that the trade opportunities Portugal, Romania, and France) tend to be in particular its achievements and currently offered by the EU-27’s €12 trillionhave often received more attention than progress made in reinforcing the EU’s its potential. Their responses, as we market and a population of more than 500 relatively more in favour; their affirmative answers ranged from 23 to 39 percent. Still,ability to speak with a single and more powerful voice in the world, or in shall see, say a great deal about their million continue to prosper. these are, in the overall picture, certainlyadvancing its infrastructure, or in strengthening its ability to innovate. eagerness and ability to revitalise the Economic policy not dominant perspectives. They may be a European dream. reaction to the financial or economic crises European business leaders today these countries face, a desire to protect Overall, the corporate view that overwhelmingly believe that the EU addsWhen members of the media address the survey. We have also considered European Union members have views threatened local exports. These are also emerges from this survey is positive. value with regard to trade, monetary policy,European questions, their attention the views of members of the European different from those of members who perhaps the sign of more local perspectives Most respondents recognize the value and budgetary policy. In addition, they seeis often focused on political, Commission and their cabinets, as well joined more recently; sometimes on liberalism or capitalism, and hence have of the achievements of the ‘European the EU as having the power to amplify theinstitutional, and regulatory issues.i as of thought leaders from international apparent contradictions emerge to be heard and especially countered experiment’, and they believe in the voice of individual member states when itThe core roles of business in building institutions such as the Organisation from the aggregation of responses. through actions rather than illusory discourse. EU’s potential to grow into a global voices a unified European position on keyand reinforcing Europe’s future are for Economic Co-operation and Yet the overall message that emerges Generally, the European project should not leader. The results we found give us international debates such as those involvingoften understated, or even ignored. Development, as expressed in from this study is loud and clear: For shy away from a need to prove itself. confidence that the corporate world climate change, sustainable energy, and extensive and fruitful interviews. business leaders, the European dreamAs a starting point in developing this is fully committed to continuing its is still alive. Revitalising it is worth the security policy.white paper, we sent an online survey As could be expected, the answers pursuit of the European dream. effort; business is ready to contributeto more than 38,000 European business we received were as complex and Completing the economic integration actively to that effort, and it has Yet European business leaders are alsoleaders in February 2011. This white multifaceted as Europe’s business of Europe is clearly a top priority for business strong views on how corporations and naturally pragmatic. They understandpaper summarises and analyses the community. The concerns of large leaders that requires continued commitment. other stakeholders can best go about the challenges and ambiguities thatresults of the more than 2,000 European corporations are not the same as those They are convinced that the EU has a unique addressing the matter. pose a threat to the EU’s future. They seebusiness leaders who responded to of smaller firms; long-established opportunity—one that must be captured— areas in which the EU is needed, as well to advance the European business agenda as other areas in which ‘more EU’ may in a wide variety of specific areas: not be desirable. And they are willingThis report is structured in three parts: to point out the areas where EU action can be most effective in unleashing thePart 1: Summary and analysis of the survey results, followed by a discussion continent’s potential. In this section, of the region’s opportunities and challenges. we analyse the attitudes and opinions of European business leaders towardsPart 2: Key messages regarding economic, social, and international agendas. EU policy in various economic, educational, and social spheres.Part 3: Assessment of the EU’s ability to revitalize the European dream, in light of its capabilities, needs, and challenges. 2 Mario Vargas Llosa, ‘L’Europe est la dernière utopie réaliste’. In an interview published by Le Monde after Vargas Llosa received his Nobel Prize, 7 October 2010.
  4. 4. Page 6 The State of the European Union: Revitalising the European Dream A Corporate View Page 7 97% 96% Unemployment 94%Exhibit 1. 94% 93% 93% Unemployment. In order to offset the Portuguese and Greek respondents 85% 84%Percentage of respondents who 84% 83% anticipated decline in the EU workforce are among the most optimistic withbelieve monetary questions 77% 76% 75% 73% 71% 71% 69% and education numbers, 70 percent of business leaders respect to education, perhaps becauseshould be decided by the EU 63% 62% favour subsidies for the reintegration of significantly smaller proportions of their Although education, innovation, and the unemployed into the workforce and populations have currently completedrather than national states. 47% unemployment lie outside the EU’s primary 68 percent support subsidies specifically secondary or tertiary education. As a mandate, they are elements critical to a for women. Only among respondents from consequence, respondents may believe prosperous future for Europe—not only for Switzerland—where unemployment is less that improvement is not only desirable, but their role in promoting economic growth but than 4 percent—does support fall below feasible. Similarly, respondents from newerSource: Booz & Company andINSEAD 2011 State of the European also for the help they can offer in ensuring 50 percent. Given the country’s low (and EU member countries are more optimisticUnion Survey (2,034 respondents); greater social and economic inclusion. After falling) unemployment rate, it may be that about improvements in education’s fitBooz & Company analysis Belgium Spain Greece Italy Bulgaria France Portugal Finland Nthrlnds Austria Norway Germany Denmark Poland Sweden Romania Hungary Switz. Ireland UK decades of high employment in Europe, the Swiss do not view this as an effective with business needs than those from older Eurozone Non-Eurozone the current financial and economic crisis lever. In any case, the Swiss are outside member countries, most likely because has returned the issue of unemployment to the EU. Unemployment rates elsewhere, they view current performance gaps as centre stage, both at the national and the however, do not appear to influence an opportunity for local improvement European level. It is anticipated that changing response levels. With regard to subsidies and because the lower industrialization demographics will lead to an overall decline for women, respondents from every level in those countries means such gaps in the EU workforce of 20.4 million workers, or country except Hungary and Switzerland are bigger there. Business leaders express Monetary policy. Overall, eight out of Budgetary policy. Six out of 10 Security. Fully 85 percent of business 12.6%, between 2020 and 2060.4 Hope is not favour them, and more female respondents a desire for closer university–industry 10 business leaders believe that the EU European business leaders favour EU leaders also look to the EU for a unified sufficient. Putting the EU to work, reducing favour them than do males. partnerships, and that may be the next should lead European monetary policy, and leadership on budgetary policy; when position on security policy. This level of financial support, and replacing that support step in EU educational priorities after with educational and technical development Education. Although educational policy fortunately respondents from eurozone U.K. respondents are excluded, that rises support is not surprising, given leaders’ decades of exchanges. is the road that business leaders know from remains the responsibility of individual countries were significantly more in favour to nearly seven out of 10. This is a clear concerns about supplies of raw materials, corporate practice. If the future of the EU is to member states, the EU plays a supporting Innovation. Business leaders see (88 percent) than were their cohorts in approval rating for any democratic voting. energy, and manufactured goods and be knowledge based, Europe as a whole must role in promoting the quality of education education and innovation as intricately non-eurozone countries (64 percent). When it comes to the business leaders from other imports, as well as concerns about focus on preparing the workforce to contribute and skill development. It encourages intertwined, and are almost unanimous in (See Exhibit 1.) Unsurprisingly, just 47 the three countries with the highest levels ensuring open markets for European effectively through education and the cooperation between states through their view that closer collaboration between percent of respondents from the United of debt (Greece, Italy, and Belgium), nearly goods and services. That support drops development of appropriate skills. Moreover, exchange and joint study programs, universities and business is one of the best Kingdom were in favour of EU leadership nine out of 10 believe that the EU should to 70 percent among 20- to 29-year-old in a rapidly changing global economy, language education, networks, and ease ways to foster innovation. In addition to on monetary policy, preferring national be responsible for the budgetary policy of respondents, reflecting a general trend innovation is the key to ensuring the future of mobility. According to our survey, collaboration, they cite increases in the leadership on such issues. And that was all its member states. Respondents from of less support among younger members. competitiveness of European business. business leaders think the quality of share of funds going to applied research an unusually sympathetic sample: U.K. countries with low debt are more divided This worrisome trend needs to be reversed. education in Europe is improving. Eight in and creation of cross-border centres of business leaders are clearly more in favour on the issue; still, a solid majority remain If Europe is not for its young, what future We asked business leaders for their views 10 believe that education’s fit with business excellence as the best ways to stimulate the of EU leadership than the U.K.’s population in favour. The vote from the business can be truly envisaged? on these critical issues. will improve by 2030; 70 percent believe innovation required to drive growth in the as a whole, amongst whom just 23 percent leaders is clear: On budgetary matters, Industrial policy. Business leaders that the education gap between eastern EU over the next 20 years. supported a single currency for Europe, the EU has much more credit than the are evenly divided over the issue of EU and western Europe will be closed; and a according to a January 2009 Guardian poll.3 national governments—and that support leadership of industrial policy. Respondents slight majority believe that the EU will be Ireland, too, stands out with the lowest grows as leaders can directly contemplate from the energy and retail sectors are most home to a greater number of top 100 global support for unified monetary policy among the budgetary problems their national in favour of harmonised industrial policy; universities than it is today. The picture is respondents from eurozone member states, governments have created. approximately six in 10 are in favour in both one of gradual improvement. at just 62 percent in favour. This is likely a Energy policy. Nine out of 10 business groups. Members of the youngest age group result of Irish frustration at the inability of its leaders look to the EU for a unified position are also more in favour than their elders; here, national government to devalue its currency on climate and sustainable energy. One too, six in 10 are in favour of unified industrial to soften the impact of the debt crisis the exception is Poland, where support falls policies. Those in the younger demographic country faces. The European project could to 57 percent, most likely because of its also take a stronger position on the issue: be identified nationally as a scapegoat— position as the largest hard coal producer Nearly 40 percent ‘strongly agree’, which is but it ought to be stated that the crisis in Europe and the high proportion of coal more than 20 percentage points higher than was fuelled by European integration, yet in the country’s energy mix. Furthermore, other age groups. determined at the national level. Business Poland is heavily dependent on Russia leaders are thus more upbeat on the for its oil and gas imports, so it is highly European project, with the clear conclusion concerned about the security of its energy that they also have a major role to play in supplies. With that single exception, supporting the project. European business leaders are very prepared to stand in favour of strong, Europe is a global leader in R&D spend. centralised climate and sustainable energy According to a recent Booz & Company policies. Again, this represents a solid survey of the 1,000 public companies endorsement of the EU business leaders; that spend the most on research and they understand that national approaches development, European companies just will not produce effective answers. spent $162 billion on R&D in 2009, second to U.S. companies, which spent $194 billion, and ahead of Japanese companies, which spent $114 billion. European companies held five of the top 10 places in terms of R&D spend and seven of the top 20 places. 53 ‘Poll shows little support for joining euro despite pound’s fall’, Guardian, 2 January 2009.4 “In the euro area, the projected fall in labour supply between 2020 and 2060 is 12.6%, which translates into 20.4 million people (13 million if compared with the level 5 Barry Jaruzelski and Kevin Dehoff, ‘The Global Innovation 1000: How the Top Innovatorsin 2007)’. The 2009 Ageing Report: Underlying Assumptions and Projection Methodologies for the EU-27 Member States (2007-2060), 2008. Joint Report prepared by the Keep Winning’, strategy+business, Winter 2010 (published by Booz & Company).European Commission (Directorate General for Economic and Financial Affairs) and the Economic Policy Committee (Africa Working Group).
  5. 5. Page 8 The State of the European Union: Revitalising the European Dream A Corporate View Page 9 Social policy and EU expansion Decreasing labour pools translate to increasing costs. Businesses are Overall, as we have seen, business leaders In particular, EU business leaders are wary to which they have already committed aware that the long-term cost of human believe the EU should take a strong role in of delegating authority to the EU in matters should be brought to maturity before they capital is increasing: The war for talent economic issues and a supporting role in of social policy. A significant number also felt embark on new and distinct endeavours, has never been fiercer. This expected issues critical to future growth. They are much that the EU should not be enlarged further by such as social uniformity. Or they may be increase in costs is exacerbated in less willing to approve of an aggressive role the 2030 horizon. (For an overview of the EU’s reluctant to fund what they perceive to be some countries by the fact that age is for the EU in areas such as social policy, and expansion to date, see Exhibit 2.) Instead, lax social welfare policies through the EU a decisive factor in compensation. As of EU expansion generally. migration from outside the EU and subsidies and wish the EU energies to be focused on a result, even if there were no war for for the unemployed and for women should be economic policies, leaving social issues to talent, the aging workforce would lead In their view, the EU already has enough used to promote higher participation in the the nation-states. to higher costs. 6 on its plate for the short and medium term workforce. The direction here: Stay focused in dealing with the issues and agendas Expansion. Less than half of business on areas where progress is key; do not divert described above; any diversion from the leaders agreed that enlarging the resources and lose momentum with an agenda critical agenda items can be seen negatively. perimeter of the EU would help that is too spread out. This seems to us The advice for the EU from business leaders compensate for an aging workforce, eminently sound, businesslike advice. here is remarkably non-political (that is, it and even fewer saw such a move as a promises a broad agenda in which each voter Social issues. European business leaders means of stimulating economic growth. Respondents from countries more recently country tend to favour expansion more subsidies for the integration of women and the can find something he or she likes) and can are generally reluctant to delegate national Indeed, two-thirds of respondents didn’t admitted to the EU tended to favour EU strongly than those from non-neighbouring unemployed or opening up the EU’s borders be summarised as follows: Stay focused on a sovereignty on social topics to the EU; think that enlarging the EU to include expansion more strongly than those from the states, presumably because the candidate’s to further immigration (see Exhibit 3). few critical agenda items, maximize the ability the rate of support on social, educational, high-growth countries would fuel founding EU member states. It may be that integration would give the respondent’s Considered by country, respondents’ to deliver in these areas, and play a subsidiary and health policies ranges from 41 to 44 economic growth across the region. respondents from founding states fear the country more in common with its neighbour. answers tended to reflect local perceptions role in the less critical ones. percent. Even the 60 percent of respondents (Interestingly, this was the only growth dilution of their voice and position within the If one is in the EU, it’s best to be in the middle. of immigration. German business leaders who advocate a common social model are strategy proposition of the five we EU, or are concerned that they will be asked tended to be more in favour of extra-EU Even in areas where the EU has a demonstrated Moreover, just 40 percent of respondents divided as to which model to adopt. This presented to respondents—including to bear the financial burden associated with immigration than the average, for example, competence, it should not be ‘excessively favoured enlarging the EU to make up may be attributable to the EU’s origin as an investment in innovation and member integrating new members not ready to meet no doubt reflecting their historically positive proactive’, respondents felt, when other for anticipated shortfalls in the European economic union; perhaps respondents feel state fiscal discipline—that was rejected EU requirements. Respondents from countries experience with immigration. priorities require most of its attention. workforce, whereas 60 percent supported that the economic and monetary processes by the majority of business leaders.) sharing a border with an EU candidate Exhibit 2. Exhibit 3. EU accession: From the “Inner Six” to the EU-27 In the face of anticipated labour shortages, respondents preferred subsidies for workforce integration over migrations 1958 1973 1981 1986 1995 2002 2004 2007 ?? and EU enlargement 10% 8% 16% 18% Introduction of the euro inFounding members 1981 Enlargement 12 countries 2007 Enlargement 40%– Belgium – Greece 32% – Bulgaria 57%– France – Romania– Germany 68% 47% 70%– Italy– Luxembourg 54% 50%– Netherlands 1986 Enlargement 2004 Enlargement – Portugal – Cyprus 40% – Spain – Czech Republic – Estonia Candidate countries: – Hungary – Croatia 1973 Enlargement (provisional 2013) 30% – Latvia – Denmark – Iceland Note: Numbers may not add to 100% 25% – Lithuania – Montenegro 22% – Ireland – Malta due to rounding – United Kingdom – The Former Yugoslav – Poland Source: Booz & Company and INSEAD Republic of 19% – Slovakia 2011 State of the European Union Survey 1995 Enlargement Macedonia 8% 8% 12% – Slovenia (1,949 respondents on reintegration of – Austria – Turkey – Finland unemployed; 1,944 on female integration; – Sweden 1,942 on extra-EU migrations and 1,938 Subsidise reintegration Subsidise female Resort to extra- Leverage the on potential new members). Booz & of unemployed in the integration in the workforce EU migrations demographic growth of Company analysis labour market potential new members Note: The 17 members of the Eurozone are shown in bold. Source: European Commission Strongly agree Agree Disagree Strongly disagree ( 6 Dr. Rolf Habbel, Dr. Wolfgang Zink, Katharina Dittrich, and Diana Heumann, ‘Smart Workforce Management’, Booz & Company white paper, November,2008.
  6. 6. Page 10 The State of the European Union: Revitalising the European Dream A Corporate View Page 111.2. Ready for ActionIn addition to their generally positive attitudes On average, 70 percent of the business On average, more than half of respondents Exhibit 4. 6%towards many of the EU’s economic and social leaders we surveyed indicated that they have are ‘concerned’ about Europe’s current Which EU policies could help 20%policy goals, the European business leaders we positive feelings about the EU overall; only situation, and fewer than 30 percent feel attract foreign investment in 36%surveyed expressed strong feelings about the 10 percent had negative or very negative either ‘confident’ or ‘enthusiastic’—attitudes 42% 30% sustainable energy?future of Europe generally and the ongoing feelings. Respondents from Switzerland, shared by respondents from every country. 56% 58%role of the EU in shaping that future. Norway, and other countries not part of the Yet compared with the results of a poll taken EU were more neutral or negative about last year in France, when almost 80 percent of 38%The most striking conclusion that emerges Europe than their counterparts in the EU. respondents were concerned about Europe’s 95% 92%from our survey is that European business Just six out of 10 respondents from the U.K. economy,7 these results suggest that businessleaders both male and female, from every reported positive emotions towards Europe— leaders now are actually more confident 47%country and from every industry, have a which is likely the manifestation of the about the condition of Europe.great deal of faith in Europe and even more 50% historically complex relationship between theconfidence in the role the EU will play in Many of the business leaders we surveyed Source: Booz & Company and INSEAD 32% U.K. and the EU, and a major weakness for the 39%Europe’s future. Many are, of course, quite see Europe as a declining power relative to 2011 State of the European Union Survey EU’s further overall development. (2,031 respondents on innovation; 2,022reasonably concerned about the region’s the rest of the world, and they believe that on education; 2,018 on specialisationcurrent economic problems; indeed, only 20 At the same time, however, the survey revealed the primary role of the EU is to counter this and 2,013 on subsidisation); Booz & 17% Company analysis 1% 1% 7% 10%percent feel the EU is a global power, and a number of major concerns on the part trend. That’s why the majority want to see the 4%30 percent see it as just a group of countries of European business leaders that must be EU’s influence grow by 2030. A large majoritywith limited international influence. Looking addressed in order to ensure the region’s future. of respondents would like the EU to increase Create leadership in Strengthen education and Reinforce specialisation by Reinforce subsidy policy toforward, however, 60 percent believe that the its influence in Russia, India, China, Africa, technological innovation skills of the workforce country (wind, water, solar) foster production and First of all, the consensus is that slow growth consumptionEU will be either a major or a primary power and the Middle East. There is less consensus is here to stay. The end of the economic crisisby 2030. around the importance of EU influence in Strongly agree Agree Disagree Strongly disagree that hit Europe in 2008 is approaching, and other Asian countries and in South America.Respondents from the EU’s founding Europe has not suffered too badly from it. As a rule, business leaders would like tocountries tend to be the most committed to This can be explained by the economic links see the EU—and hence their own businessthe EU. But there are exceptions. Respondents it has established with emerging countries— positions—gain influence in countriesfrom Germany and Ireland appear to be many of which managed to keep growing near them or those with high growth rates,losing faith in Europe, on average, and eight during the crisis—and by the fact that the were more hesitant about the promotion of helped bring business back into the discussion, could make progress towards the creation particularly India and China.out of 10 respondents from Bulgaria—not financial crisis was less acute in Europe than country-by-country specialisation in particular but dialogue remains fragmented, and it will of a unique patent system, deregulationyet a member of the eurozone—believe that in the United States. However, respondents Business leaders in a wide range of sectors, industries, and were against reinforcing need to be nurtured by both sides if Europe’s full that would increase the competitiveness ofthe EU’s position relative to the member believe that Europe will continue to grow at a including energy, transport, education, subsidies to foster overall production or potential is to be realised. That may be the most national oligopolies (a step already takenstates should be even stronger. Interestingly, relatively slow pace in the coming years— infrastructure, and information technology, consumption (see Exhibit 4). Again, European significant finding of this survey: Business leaders in the telecommunications sector), andbusiness leaders from Greece and Belgium, 2 percent or less per annum. believe that to sustain growth, resources must business leaders are much more pro-Europe in wish to feel more engaged and want the EU to the encouragement of venture capital. Thecountries that are currently experiencing be allocated more efficiently. Priorities need economic and innovation matters than their play a bigger role—in a focused way. creation of cross-border centres of excellence,national difficulties, also tend to favour the to be identified and market mechanisms put governments are. intra-European coordination to reduce the Finally, although Europe has a rich historyrole and influence of the EU. in place to encourage that level of efficiency. duplication of research, and incentives to stem Another concern voiced at several places in the of innovation, R&D expenditures in the EU Respondents heavily favoured the creation of the ‘brain drain’ of researchers looking for survey among respondents: Dialogue between continue to lag behind those of the U.S., Japan, leadership structures to promote technological better working conditions elsewhere would the European Commission and the private sector and Korea. Market-based and regulatory tools innovation and to improve the level of also enhance Europe’s research environment. is weak and must be improved. Business, it is are available that could enhance European education and skills of Europe’s workforce Europe’s business leaders wish to see more agreed, is suffering from a lack of voice in the research and innovation capabilities, but they in order to attract foreign investment in action from the EU. European Commission. The financial crisis has are not being used to full advantage. The EU sustainable energy efforts. However, they7 INSEAD, Les états de la France (2010).
  7. 7. Page 12 The State of the European Union: Revitalising the European Dream A Corporate View Page 131.3. On-going Dualities Exhibit 5.and Apparent Contradictions Exposed economies are more supportiveBy and large, the business community is European business leaders is similar to their This unfortunate tendency to impose of a financial safety netoptimistic about Europe’s economic future. dual corporate agendas: Reduce costs yet political or linguistic boundaries on businessThat doesn’t mean, however, that it is ignoring simultaneously increase innovation. The ‘cut efforts is not limited to sales; it also extendsthe complex, multifaceted challenges that the costs, grow stronger’ duality expected from to sourcing and research. Many SMEs, forregion faces as it looks to the future. As difficult the EU is one that these leaders apply daily instance, in their bid to survive the economicas these will be, the business leaders we in their businesses. crisis, reduced their R&D and innovationsurveyed are for the most part united in their The debate over free trade is by no means as expenditures, making themselves that much Debt burden and support for reinforcing nancial safety netsense of how best to meet these challenges. less prepared to improve processes and evenhanded. Almost 90 percent of respondentsAnd they see the EU as instrumental in the launch new products once the recessioneffort to overcome them, particularly with believe that the EU should not adopt trade policies designed to protect the region or its was at an end. And while an overwhelming % of respondents Countries with high debt andrespect to macroeconomic policy. individual countries from foreign competition. majority of our respondents support free who agree on reinforcing high support for reinforcing the trade, three-quarters support favouringThe most glaring problem the region At the same time, however, too many intra-EU trade, a protectionist stance. the nancial safety net nancial safety netcurrently faces involves the conundrumof debt versus growth. Overwhelmingly, European business leaders continue to A final contradiction lies in the significant 85% view economic issues through a narrow,business leaders believe budgetary discipline national lens. They often see their primary difference of opinion regarding whether the EU 80% Portugal Greece eis critical if Europe as a whole is to grow in should provide a financial safety net to member competition as coming from other Europeanthe future. As business leaders, they know businesses, not having realised yet that the countries when needed. Unsurprisingly, 75%that no organisation can survive, let alone real competition is coming from beyond respondents from countries with high debt, 70% France Irelandthrive, without good financial discipline. At such as Greece, back the concept, apparently the EU’s borders, from the U.S. and the BRIC Countries with low or Spainthe same time, they understand that financial countries (Brazil, Russia, India, and China). assuming that such policies would enable their 65% Belgiumdiscipline is only a ‘hygiene’ factor, and that countries to cope with their budget and debt medium debt and lowother factors are also needed to stimulate Almost all respondents favour boosting the problems. Equally unsurprisingly, respondents 60% support for Italy participation of small and medium-sizedgrowth. Aggressively investing in innovation, from countries with lower debt burdens, such as 55% reinforcement of theboosting the economic participation of small enterprises in the region’s economy as the Germany, are much less enthusiastic about the nancial safety net Hung Hungary best strategy to reach high growth. However,and medium-sized enterprises (SMEs), and policy, assuming that their states would be the 50% Netherlandsstrengthening education and workforce skills while many large European corporations have ones subsidising those with high debts. Romaniawill also be crucial to the effort to attain high emerged as truly global players, only a small (See Exhibit 5.) The mixed responses to such 45%growth rates and to foster foreign direct portion of SMEs have succeeded in taking issues make clear that the EU is not the land 40% Sweden Denmarkinvestment in Europe. advantage of global opportunities. SMEs of solidarity many would like it to be. UK often limit their trading ambitions to their 35% FinlandThese leaders’ thinking contrasts with the own national borders or local geographicongoing debate on how best to boost region, rather than seeking out global 30% Austria Germany 50%growth—through deficit reduction or or even pan-European markets. Polandeconomic stimulus to promote innovation? 0%Respondents do not see this as an either/ 0% 20% 40% 60% 80% 100% 120% 140% 160%or choice, and indeed, so far most European Source: Booz & Company and INSEAD 2011 State of the Europeancountries have applied a mix of strategies, Union Survey (2,009 respondents); Booz & Company analysis Debt as % of GDP (2010)using stimulus packages to spur growthwhile reducing expenditures and increasingtax receipts. The answer formulated by