Survey Brings Corporate View to “The State of the European Union”

Survey of 2,000 executives under discussion at Brussels

By Shellie Karabell

A new survey shows business leaders believe financial decision-making within the European Union should be more centralised and the EU itself could shrink in order to become more competitive. INSEAD, Booz & Co, and the European Executive Council (EEC) surveyed more than 2,000 executives from around the world to create this survey on the corporate view of the EU, to be discussed at the second annual “The State of the European Union” conference presented by the EEC in Brussels at Egmont Palace.

Respondents expressed confidence that the EU will remain an essential payer on the international stage, indicating that the current economic crisis is a time of transformation of the EU project, and acknowledges the possibility that some countries may be forced to leave the Eurozone, thus creating a two-speed Europe: a stronger and smaller core moving faster than the rest. They also believed Europe’s greatest challenge is its lack of competitiveness and low level of growth – problems which require structural change if they are to be surmounted.

“The financial crisis presents a rare opportunity for long-overdue structural reforms and even for questioning the existing political agenda,” said INSEAD Dean Dipak Jain. “It is important that the corporate view be heard so that Europe can attract new investments, talent and resources, and generate new prospects for business and economic growth.”

The executives surveyed fully support the completion of the single market in Europe, and the transference of “best practices” among member states, but felt that no one EU social model would suit each member country. Hence, while economic integration was perceived as necessary, social flexibility was seen as an important factor in the successful future of the EU.

The report is organised into six areas: The Corporate View on the EU, Austerity and Responsibility, Europe’s Social Structure, Technology and Innovation in Europe, Younger Voices and the BRICS Perspective, and Questions for Debate. Authors are: Ludo Van der Heyden, the Mubadala Chaired Professor in Corporate Governance and Strategy; Bruno Lanvin, Director of INSEAD eLab; Per-Ola Karlsson, Senior Vice-President & Managing Director, Booz & Co; and Robert Gogel, Co-Founder of the European Executive Council (EEC) and CEO of Integreon.

Business Leaders Vote on Europe: Optimism Despite Economic Crisis

Eurozone foreseen as potentially smaller but stronger, EU as political and economic force

Brussels, 31 May 2012 – Business leaders voting on a series of questions posed at the State of The European Union conference expressed belief in the European Dream and an optimistic outlook on the future of both the EU and the Eurozone.

The business leaders present at The State of The European Union actively participated in the debates by way of a voting system showing immediate results. The main results of the voting were:

• When asked what business leaders thought the Eurozone would look like when the dust settled from the crisis, 39% expected it to look much the same but excluding Greece and possibly other countries. But 29% expect the Eurozone to be much more of a “United States of Europe”, a union that is not just monetary and economic but also political. 
• By contrast, when asked what business leaders thought the Eurozone should look like, 77% expressed a desire to become a sort of “United States of Europe”, encompassing both the economic and the political realms. 
• 76% of business leaders at the conference believed in a federal model for Europe. 
• In Q1 2012, the GDP of the 27 EU Member States grew by 0.1% compared to Q1 2011. When asked what the expected growth rate would be in 24 months the business leaders at the conference took the positive opinion of anticipating 1-2%. 
• There was a more long-term perspective when considering how long it will take the European labour markets to operate as one: 49% of business leaders present felt that it would take a generation to reach this goal. 
• When advised “The media consistently portrays the rise of China and other BRICS as a threat to our economic position. However, this rise should be seen as an opportunity that will lead to mutual gain” 79% agreed that global trade partners have not given up on Europe for good reason. Europe still remains a good place to invest and conduct business. Research and development is consistently viewed as a key asset to the growth of the European Union. 
• 52% of business leaders attending the conference believed that an increase in corporate funding would create a better education system in a time of austerity and 38% felt that a reallocation of government budgets away from other sectors would help meet the goal. 
• When asked where a young entrepreneur with creative ideas might be likely to set up shop, 45% of business leaders present said “outside of Europe.” However, the remaining 55% was split across European countries, with 28% of people feeling that London is still a desirable location for entrepreneurs.
• The source of the next big innovation in Europe is expected to come from industry (e.g. energy, ICT, aeronautics), with 43% of participants voting for this choice. 22% expect the next innovative leap to come from services (e.g. banking, commerce, education).

For more details on the results of the voting and videos of the debates which took place at The State of The European Union please visit www.stateoftheeu.eu and click on Live News Desk.

In addition to the debates at the conference, The European Leadership Award, announced by Tim King of the newspaper European Voice, was awarded to Mario Monti, the Prime Minister of Italy.

This year’s Annual Forum of The State of The European Union was hosted by the European Executive Council, Burson-Marsteller and INSEAD.

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Contact:
Xanthe Visram
Burson-Marsteller
Tel: +32 2 743 66 39 or 0478 84 03 86
Email: xanthe.visram@bm.com

Who are the Young Europeans?

Youth unemployment - as much as 50% in some countries - is one of the biggest probems facing the EU at the moment. Younger Europeans favor shifting the burden of solving that problem to the EU level, perhaps because they are losing confidence in their own governments. This is according to State of the European Union report co-author Per-Ola Karlsson, managing Director of Booz & Company Europe.

The next generation has hopes that the EU institutions can stimulate industrial policy and create new and more jobs...more so than their elders. The young also believe in prioritizing innovation via more spending on research & development and training, and they are less supportive on free trade issues than their elders. Low-carbon policies are also important to a younger generation in favor of policies supporting sustainability.

Young Europeans were keen to ensure that training is in line with what employers need - referring to today's skills mis-match between companies needs and those seeking jobs.

Today, cultural differences are merging with Euro skepticism, believes David Earnshaw, CEO of Burson-Marsteller Brussels.  It's about complexity, variety, difference, "messiness," he believes - a new kind of xenophobia and how young people feel about foreigners. "Today," he says, "individualism is killing the minimum amount of collective will we need as a collective society."

Protectionism & Nationalism on the Rise
Protectionism and nationalism are growing within Europe, especially between East and West, according to Philippe de Baeker, Member of the European Parliament. He says that young people with talent tend to leave this environment for places like the USA to escape perceived xenophobia.

A young European blogger, Michael Hansen, said today's youths are "citizens of the world" who just happen to live in one country or another and Europe needs to have better "brand recognition"  - getting the message out there about the European Dream...and how do we market that? He believes differences between cultures are breaking down rapidly these days because of social media.

Edouard Tetreau. a French investment advisor, said there are two missing words in the discussion with today's European youth: "dream" and "faith". If we don't solve the problem of youth unemployment in the next months we will not have an easy retirement time for these people. It's not about skills, it's about the mindset.

Tetreau had three propositions:

1. It's not about the prizes you win, it's about having big dreams: optimism.  Henry Ford said: "whether you think you can or not, you're right." It's the optimism of Churchill; It's choosing the way forward. Optimism is a choice, and we have to bring this optimism back to Europe and start to educate our children that there is a way forward.

2. A sense of belonging. What is it that we stand for? Our geography? Our past? No - it's about human rights, what we stand for, what we will fight for. We are lacking emotion.

3. Action - not in the future but now. We as business leaders can answer the question now: Do I hire this guy now? Do I take the risk? It's not only countries taking policies but companies.

Copyright INSEAD Knowledge 2012

What is the European Social Dream?

"There is a deep crisis across Europe," Jacques Guers, President of Xerox Europe, told the State of the European Union conference in Brussels. "And the EU needs flexibility to survive. German people don't want to share in the pain; Greek people don't want to face austerity programs. Both sides see the EU as a threat to the way they are living."

What then is flexibility? It has good and bad connotations depending on where you are living. Nordic countries have a good deal of flexibility because their employees have security - money, income to pay for their rent if they chose to move to take a different job, according to Bernadette Segol, Secretary General of the European Trade Union Council (ETUC). 'This is negotiated flexibility," she said. She added that democracy will not survive of it does not encompass a market economy, referring to the disparity of wages between investment bankers and the average worker and the need to more equitable distribution of pay.

The Senior VP of 3M Europe believes the problem is not one of competitiveness and social spending but one of labor laws. "We need flexible labor laws," added Patrick Deconinck.

Inability to Negotiate
We are seeing a decline in our ability to negotiate on an industrial level as the economic crisis worsens, said Segol. "As negotiations undertaken over the past year or so are overturned by government, we have less confidence in our ability to negotiate and this creates less flexibility out of fear." She advocated money for life-long learning and training as this would help increase flexibility in the work force. Finance Ministers are deciding economic governance that have a direct impact on social issues in Europe.

The regulation of the single market is bound to expand to regulation of the social market according to Laszlo Andor, European Commissioner for Employment, Social Affairs and Inclusion. "When we speak about the European labor market we should first speak about the openness of the individual countries and we see that we still have a lot more do - because we have to create opportunities for people to work. This is one of the most important thing he EU can give to its citizens...why isn't it happening at a scale that helps the entire EU? There are several internal barriers: language, residence, entitlements, recognition of certificates and diplomas...it is not homogeneous like the USA."

Creating harmony in these areas will hep to fix the labor imbalance within the EU by making it easier for people to move to where there are jobs.

Copyright INSEAD Knowledge 2012

Competitiveness is Good for Social Welfare!

The most competitive countries in Europe (i.e. UK, Finland, Germany, Denmark) are also the ones with the highest social welfare spending, according to a report prepared by INSEAD and Booz & Company at the State of Europe conference in Brussels. Report co-author Ludo Van der Heyden says this means that as Europe grows together, it has more to share. But these same countries did not spend more than their competitiveness could support (see graph below).

"This shows there is no trade off between competitiveness and social spending; there are just bad allocations," he concluded, however, most respondents believed that social spending should NOT be centralized at the EU level but should remain a national priority.

There were some extremes at the country level regarding perceptions of competitiveness and social expenditures. In Poland more than 80% of respondents said they thought social systems were a deterrent to competitiveness, but the Hungarians strongly disagreed.

"Europe is not about the average," said Van der Heyden. "While the EU tries to raise the average, this is not to say that every country is to be 'average'."

Copyright INSEAD Knowledge 2012

What will the EU look like...?

Business leaders voting on a number of questions asked during the State of the European Union conference in Brussels have not given up an optimistic outlook on the future of both the EU and the Eurozone.  Results on three key questions, to which some 500 executives and policy-makers replied are:

Europe Should Speak Up!

"We Europeans are too shy about explaining what we are doing! Our stakeholders do not know!" Dominique Reiniche, President of the Coca Cola Company Europe told the State of the European Union conference in Brussels. She added that businesses are strong in leadership but must do more to generate good will in society..."if we don't do this, we will fail."

Reiniche supports engaging in public-private partnerships and even creating a social network in jobs and entrepreneurship to explain what skills are needed by today's employers. By sharing advice and best practices, and by engaging other groups such as NGO's and students, the image of business in Europe can be rebuilt.

Copyright INSEAD Knowledge 2012