Interview with Günter Verheugen, vice-president and commissioner for enterprise and industry

EURACTIV interviewed Commissioner Günter Verheugen on the relaunched Lisbon strategy for growth and jobs, REACH and industrial policy.

One of the most difficult issues in the relaunch of the Lisbon agenda was the question of ownership. One of the key remedies was that member states and stakeholders should take ownership. In October the member states are expected to present their Lisbon action plans – do you have any indications that member states are really, seriously working on these plans? 

Yes, they are. We have sent delegations from the relevant Commission services to member states, delegations with high-level officials from different DGs, and they have already completed the consultations with 25 member states. The reaction was extremely positive everywhere, and my personal impression is that the idea shared by President Barroso and myself – that we should develop a new partnership approach and the Commission should not behave like a school master – is very promising. The meetings were very constructive everywhere and I expect to have the national plans on my table in October as foreseen. 

For the first time in the history of the European integration process we will have in parallel a Community action plan and 25 national action plans based on the same integrated economic guidelines that we have already adopted. Of course, this is not very sexy to the public – the whole issue is not of major concern for the wider public – but experts know how important it is, and this was precisely the most important weakness of the Lisbon strategy. There was no clear division of competences and responsibilities then, but this time we will have it. I said in my press conference last week that I have to be very cautious, but my first impression is that the new strategy is beginning to work. Of course, the real test is still to come; the test is not the preparation of a programme but the implementation. 

So is the Commission going to evaluate these national plans, and will it be able to reject plans if they are not satisfactory? 

No, we have deliberately decided not to put in place a system like the Stability and Growth Pact, but a very light system, very cooperative; as I said, a partnership approach – but of course, the Community action plan and the national reform plans will be evaluated in the annual report that we have to produce next year. So there will be benchmarking, there will be scoreboards, we will describe the best practices and clearly define strengths and weaknesses. 

That is somewhat in line with what the Kok report said at the time, looking at good practices and bad practices… 

Not fully. In one important point the Kok report went further – Kok was in favour of the famous ‘naming and shaming’. My experience with that type of relationship between the Commission and the member states is very, very negative. So it was a clear decision that we have made, independently of the member states, not to use the naming and shaming concept but the partnership approach as I have described. 

Lastly on the ownership issue: what was mentioned in the relaunch of the Lisbon agenda was that you would talk to the social partners, for instance, as one of the stakeholders. Have you done that? 

Yes. I have discussed it with the Federation of European Trade Unions, and so has Barroso. I have discussed it with the major European federations of business and industry – so we have done that, and we expect member states to do the same. 

At European level there was an interesting joint position by ETUC and UNICE just before the spring summit. Do you expect that at national level you will have the same convergence of views on Lisbon? Will there be the same consensus building in most countries? 

No, I don’t think so, certainly not everywhere. It differs. I couldn’t imagine that in Germany for instance, where labour market legislation is one of the hottest issues and it’s highly unlikely that trade unions and employers will have the same view on very important macro-economic questions, questions of industrial delocalisation – I do not really expect that consensus will be reached. In some countries yes, in some countries not, it will differ. 

There is a possibility of important policy changes in Germany. Will that bring a more business-oriented and reform-minded Germany, a Germany that is closer to the Lisbon objectives? 

It remains to be seen, whether there is the possibility of a major policy change; I do not know. Certainly, there is a possibility that there will be a change of government, but whether that actually means a far-reaching change of policy is in my view very, very questionable. If I analyse the political platforms for the elections due to be held in September, I do not see very far-reaching alternatives, with the exception of the far-left which will not of course be eligible for government. I cannot complain – the Schröder government fully supports our competitiveness agenda, Schröder was very instrumental in helping us to get the revised Lisbon agenda. So I have the full support of Germany and the Competitiveness Council and my personal view is that it will not change. It’s difficult to foresee, but I do not think in very broad terms that the political direction and orientation of the country towards European integration could really change. 

The Party of European Socialists has criticised the Community action programme that you presented last week, saying that it is not demand-driven enough. Do you disagree with that? 

This is an old debate, I have discussed it with my friends and comrades and with the socialist group very often. I do not deny that I have some sympathy with the argument, but the problem is that the Commission does not have the instruments to do that, it’s very simple. That is something that, if it can be done, must be done by at member state level. The only thing that we can do is to use European spending to increase growth and employment; that is, how we implement the European budget. I think that we have already made obvious major changes and the major programmes in the European budget are clearly redesigned in such a way as to directly contribute to the growth and employment strategy. It has a very important impact on, for instance, the way structural funds are used, rural development is used, and of course the areas of infrastructure, trans-European networks, research, and the competitiveness and innovation programme that is under my responsibility. 

I think that if you analyse the structure of the European budget and the way in which the current Commission is changing the way in which it is implemented, you see clearly that the priority for growth and employment is the leading principle everywhere. 

You said that we lack the instruments at European level to go for a more demand driven approach. Your socialist friends point to government investment plans in Portugal and Spain as good examples, but then of course the problem you run into is the impact on their own budgets and the financial difficulties in which they find themselves – Portugal, for instance, is already over the 3% deficit as you know. So are we blocked there, do we need even more stability and growth pact flexibility than was granted under the last review? 

I think that the last reform of the Stability and Growth Pact was a very intelligent one, and we should now leave it as it is. My understanding of the Stability and Growth Pact should be implemented is that it has to be very rigid in good times, when the EU’s budget is strong, and more flexible in bad times. So a more demand-driven policy is, in my view, in line with the reformed stability pact, it would allow us to show a little bit more flexibility if it is needed. But it is limited; I would never support the idea of implementing a traditional Keynesian policy, that is a matter of the past. 

I suppose on the other hand, you would not agree with those critics that say that the Commission is going for a very neoliberal approach? 

No, this is simply not true. If I were to describe the political orientation of the Commission, it is clearly a socially-oriented market economy, there is no doubt. This has been seen when we discussed the review of the Lisbon strategy. There was a major debate in Europe that said we should not reduce the equality of growth and employment, social cohesion and sustainable development. In fact what the Commission is saying is that we need a growth and employment initiative in order to enable us to deliver, and to continue to develop, sustainable development and social cohesion – so there is a much stronger and closer connection than we have in the member states. 

But if you say that economic growth and jobs is the precondition for social inclusion and environmental protection, does that not imply that the three dimensions are not the same? 

I have to say it is the most important instrument. You need more than just economic growth and jobs to have social inclusion and sustainable development, but without it you cannot have them. 

This equality between the three pillars sounds good, but it has sometimes led to the perception that it is not a very dynamic programme, that it ignores the need to sometimes prioritise one above the others… 

It depends on the circumstances. I would very, very strongly argue against the idea that the equality of the three pillars must be visible in each and every action, which would be extreme nonsense. There must be an overall balance and the Commission certainly shows that. 

Within the Commission, there is a perception that it took some time for the different commissioners to start working together in these different commissioners’ groups, such as the one chaired by you and one by Mr Barroso. What is the present role-sharing and to what extent have the commissioners’ groups led to a better focus of the services? 

I can only make a judgement concerning the two groups in which I am active, that is the Competitiveness Council group which I chair, and the Lisbon Agenda group that I co-chair with the President. As far as the Competitiveness Council group is concerned, this is really a centre of economic integration in the Commission. We have an excellent team spirit and meet very frequently – eight times already. Our agenda is much more than just to prepare the agenda for the Competitiveness Council; we discuss all the important economic horizontal issues and invite commissioners like Spidla, Hübner, Reding, who have responsibilities but are not members of the group. So I’m very satisfied with the work of this group: we have prepared the communication on the new Lisbon strategy, we have prepared the integrated guidelines and the community action plan. We are discussing major strategic issues like the question of ‘deindustrialisation?’ or ‘delocisation?’ and the programmes of structural change in Europe as a result of global competition, so it’s a very good forum. 

The Lisbon group has a different role. It’s a kind of forum where commissioners can hold strategic debates, a group that prepares strategic decisions and policy orientations, rather than the day to day work of the other group. What I can 100% guarantee that we have achieved in the Commission is that for the first time we now have a system that guarantees horizontal co-ordination in the whole area of the economy, and that’s very good. 

By the way, there is an interesting element here. Commissioners, the Competitiveness Council group for instance, everybody will tell you the same thing. But I’m not sure whether services would tell you the same. So it’s still a problem to convince our services that we have a new spirit and a new approach, that we don’t want the typical reaction, ‘There is something coming from another DG? We are against. Don’t infringe on our area.’ You know – the normal turf battle. I have, of course, no clear evidence but my view is that even for an international organisation the commission spends too much time and energy on internal coordination. What does it mean in practice? A lot of time is spent and nothing is produced. We try to change that, and I never had difficulties with the commissioners. Any reports in the press of disputes or difficulties with commissioners were not true. 

It reminds me a bit of an interview we had with Commissioner Wallström in which she said it’s the culture in the Commission and services that has to change in some way. Do you see any progress there?

I agree that it is too fragmented, but as far as I can judge it there has been some progress, yes. For example, I announced in March that I will present an innovation action plan in order to mobilise innovation capacity. We have started to do that – then my colleague Janez Poto?nik [commissioner for science and research] said, “I’m doing the same in my area of responsibility, shouldn’t we merge them?”

 “Yes,” I said, “let’s do that. Fantastic idea.” For the services – let me be polite – it came as a surprise and some time was needed to swallow that, but then they did and now they are working together and we will have not two innovation action plans, which to say the least would cover a lot of the same ground, but a joint programme – already a good result. 

You have separate documents in preparation concerning the handling of state aids don’t you – so is that a separate policy? 

Yes, but it was discussed. The principles of the policy were discussed in my group and there was an orientation debate. Commissioner Kroes got the full support of the other commissioners, and she will come back with the proposal. 

So you don’t foresee any more difficulties concerning two similar words but different philosophies: ‘competitiveness’ and ‘competition’? 

No, that was never the case. I’m in full agreement with Neelie Kroes – and she’s a very strong Commissioner, by the way. We fully understand that competition policy is also part of the competitiveness agenda, it’s absolutely clear. If competitiveness is the key, it means that you accept competition as the basic rule for an economy. And then of course you ask the regulator to guarantee that competition is free and fair, not only in the interest of the consumers but of the companies themselves. 

Concerning REACH, which is one of your hot topics: as you know very well, it has been criticised by some in industry as being unworkable, undermining the competitiveness of industry. So is it compatible with Lisbon? 

The final result will be absolutely compatible with Lisbon, I have no doubt. Since the very beginning I have tried to work as an honest broker here. I was not part of the original proposal and I made a point of being very flexible. If there are problems with the original proposal – if it is not workable enough, or will create too many costs in some areas, or if the consumption of animals [for testing purposes] is too high (as I believe is the case), if it is too difficult for downstream users, or too burdensome for small and medium-sized enterprises – let’s try to find workable solutions. I have discussed it very often with the different groups in the Parliament, with the other stakeholders, and I think we are coming closer and closer to a consensus. 

I think it is too early for the Commission to make new proposals, I think we shall wait until after the first reading in the Parliament. But we are in close contact with the parliament, and of course if the parliament asked us whether the Commission could support a certain improvement or not we are absolutely prepared to answer this question. So as far as REACH is concerned I can guarantee you that it will be handled in a different way, it will not be like the Services Directive. 

And by the way, the situation is already much calmer than it was – not only because we don’t have a referendum coming up but because the industry itself produced an impact assessment that shows clearly that the figures used in the past were – to say the least – a little but exaggerated. In terms of costs, REACH is not ‘that monstrum’, as it was described. I see the major problem in the workability – this very complicated, complex structure – and I am doing my very, very best to make it lighter, more transparent and workable. But in principle, I strongly believe that we need the regulation. We are living with thousands and thousands of chemical substances every day, and we don’t know the effects – I think it’s important to know that. 

It seems that in the US some senators have picked up on the EU’s REACH proposal to come up with similar policies for their country. Do you think that REACH could indeed be a model for others? 

Yes, I think so. I very much hope so, I mean in the final version of course. I very much hope that the final version of REACH will be a model for other industrialised regions, not only the US. I have already discussed it with Japanese people and will discuss it in China when I visit in September. 100% yes – it is in our interests to have a harmonised regulatory environment as much as possible. That of course would guarantee that there are no problems for competitiveness. If you have the same rules everywhere, no problem for competitiveness. 

Let’s turn to industrial policy in general: your appointment for the second mandate was seen as a sign that industrial policy, perhaps French-German ideas, would become fashionable and influential again, and you are preparing this new communication on industrial policy. There have been several in the past, even a long time ago. What will be the new angle? 

It’s too early to say, we are still working on it. The only thing I can say is that I think it was psychologically extremely important to demonstrate that industrial policy is an issue again. And to make it clear that Europe needs a strong industrial base, and to defend our industrial base. There was a tendency in the former Commission – you can believe me because I was part of it – to neglect industry, to say that industry is a thing of the past and the competitiveness of Europe relies wholly on services and research and development. This is completely wrong. Without a strong industrial base we will not be independent, we will lose economic and strategic weight. And there will be very, very serious consequences for the social system and the labour market because a considerable part of the services sector is outsourced activities formerly produced in the industry, the clients of which are often solely in the industrial sector. 

So without an industrial base you cannot have such a strong service sector. International trade, by the way, is more or less trade in goods. Financial services are another thing, but that is very much concentrated and does not employ many people. Trade in services compared to trade in goods is relatively small – so if we do not have an industrial base, how shall we trade? That is the first point. The second point is that if we understand we need a strong industrial base we must make clear that we cannot protect our industries against competition, they must compete. There is no way back to the old times of protectionism or state interventionism. No way back – you have to compete. 

But what we are prepared to do is to sit together and discuss the strengths and the weaknesses, the challenges and the opportunities, and define the framework conditions which we need in order to give our industries the potential to grow, to invest, to make profits and to create jobs. That is what we are doing, and the new communication will have a matrix. Horizontal principles and horizontal problems will be identified and addressed, and in a sectoral way we will analyse the situation of the different sectors. And we will make a proposal as to how we can guarantee that in future we can create a close, permanent contact between the Commission and the different industrial sectors, so that we will know what is happening. This will act as a kind of early-warning system to identify difficulties so that we can discuss them, for example the regulatory environment as we are doing already for the Cars 21 group. I think it is something very, very new but I think everyone must understand that the role of the public stakeholders here (EU and member states) is a very limited one. I strongly believe that public authorities should not interfere in management decisions, that being a matter for the management. Our role is to define framework conditions that allow fair competition and allow companies to exploit their full potential. 

But why a new communication now? Already in 2004, there was one called ‚Industrial policy in an enlarged Europe‘. What is going to be new? 

You will see the difference when you see the paper. It is still in the making, but for instance we didn’t have a sectoral approach in the 2004 communication, and we will have a lot of very concrete proposals in this paper. It’s not just the philosophy, it is something that can and must be implemented. We will address certain key horizontal issues. For instance, the problem of intellectual property rights and counterfeiting, and there are many other horizontal issues of that nature. In parallel there is the sectoral approach that I have mentioned, and we are demonstrating how we do that with the Cars 21 group and it looks quite promising. 

Will there be similar initiatives? 

Yes, although I am reluctant to create high-level groups everywhere; in some cases you might need it and in other cases not. However, we need to have an instrument that allows us to organise cooperation between the Commission and all different industrial sectors in a more effective way. As well as the analysis I have mentioned, for each sector we will always ask the question, how does the new type of globalisation affect the sector – what is going to happen? We will certainly look closely at the area of research and development as that is a very important indicator: if we lose capacity for research and development and do not create enough capacity in that area, as a result we will lose production capacity as well, that is inevitable. 

When will we receive this communication? 

The inter-service consultation will start in August and it will be with you in September. 

Your previous position was as commissioner for enlargement. Do you think that a new government in Germany, if we have one after the election, will affect the start of negotiations with Turkey? 

No. Leading figures have already made it very clear that the principle ‘pacta sunt servanda’ [agreements have to be abided by] will apply. Of course everybody must be aware that the German representative in the accession conference will probably be critical, but I do not think that a new political situation in Germany will affect the start of the negotiations. 

The Commission mandate for the negotiations has not been approved by the Council yet. Some people say that if there is a reference in this mandate to a ‘strategic partnership’ or something similar, even as a fall-back option, that will make it difficult to accept from a Turkish point of view…

The Turks cannot accept that. What we have promised are accession negotiations, we have not promised negotiations on ‘something’. Of course the Turks cannot accept to negotiate either one thing or the other; the Turks would want to know what the purpose of the conference is. This is a conference, an international conference, and its purpose is to negotiate the accession of Turkey and nothing else. 

So for you, any reference to a fall-back option, however vague, can be ruled out? 

It already has one. It was my own proposal and already goes a long way. It says something that is in fact natural but never said before, that it is a process with no plan and that the beginning of the process does not mean that it will automatically lead to accession. Here you already have an opening and that is enough. Any more is not acceptable from the Turkish view – at least that is my impression from discussions with the Turks last year. But it is not my area of responsibility, it is a matter for the Council. The Commission has presented a proposal and I fully back that proposal. My advice to member states is to understand that this is a very important strategic issue, and that strategic issues shall not be weakened under the influence of controversial public debate.