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01-07-2012 "Attracting investments in Europe" - publication THE GREEK ECONOMIC ALMANAC 2012
Growth is today at the heart of the EU and global concern. Two years after the implementation of structural and fiscal adjustment programs and growth in Europe still remains top concern for the citizens and the global economy. Following the current challenges, I took the initiative of submitting an own-initiative report to the European Parliament on "Attractiveness of investing in Europe". This report urges for an integrated and coherent strategy, at both national and European level, that will include fiscal consolidation, economic cohesion and growth-oriented policies. In this context, Europe needs to fully exploit its competitive advantages as well as its achievements in order to maintain its leading position in the field of global and regional investments.
It is important to stress the fact that a strategy for attracting investment should be founded on two pillars: (i) making Europe an attractive destination for foreign investors (ii) making entrepreneurship attractive for the local entrepreneur. Europe remains the largest regional destination for foreign direct investment (FDI). A quarter of the world's total consumption and investment takes place within its expanding borders. However, the growing competition by the emerging economies and the prolonged uncertainty over the European debt sustainability are weakening this position. Furthermore, the EU remains one of the key players in global financial services, considering that US and EU financial markets continue to provide around 3/4 of global financial services. There is no doubt that investors attracted by EU's internal market, the high-quality and diverse human capital, the emphasis given to the corporate social responsibility, the relatively predictable business environment as well as the research and innovation capacity, should remain in the european region.
In this respect, my report calls on the Commission to prepare a communication on the attractiveness of investing in Europe, in comparison with our main partners and competitors, identifying the advantages as well as the weaknesses of the EU and develop an integrated strategy and specific policies and recommendations, to improve the EU's investment environment in all european regions. In this context, I have proposed the creation of an ad hoc European Observatory for foreign direct investments that could provide a better monitoring of investments allocation within the single market, the policies applied and the orientations in order to promote Europe as an investment destination. It is also important to stress that the Union must introduce investments as a key element of all flagship initiatives within Europe 2020 Strategy, meeting critical needs for growth and employment as well as incorporating their main contribution towards tackling the fiscal crisis. Towards this direction, I invite the Member States to promptly cooperate with the Commission and Eurostat, in particular, to work for the definition of a common framework of sub-targets and indicators that would enable national investment policies assessment. The abovementioned structures could constitute a complementary mechanism to the scoreboard (designed in the framework of the new economic governance package) in order to better assess macroeconomic, commercial and regional imbalances among Member States, focusing particularly on indicators that affect attractiveness of foreign direct investment and their impact on the real economy and employment in the EU regions.
European cohesion and regional policy can mobilise additional sources of private and public finance to support investments. This is why I strongly support adequate financing of cohesion policy while providing flexibility for efficient allocation of resources and a quick Union response to unforeseen circumstances. Taking into consideration the banks' liquidity drainage, the appropriate financing and use of the EU funds can act as a catalyst for attracting additional financing from the private sector.
It is very obvious that the EU economy needs a financial sector at the service of the real economy, providing stability and being able to cover the financial needs of households and companies. This is why we need to work for a larger participation of institutional investors in European venture capital partnerships, given the great heterogeneity in the types of venture capital investors in Europe as well as the considerable differences in their development stage and size. More attention should be given to developing a common framework for sovereign wealth funds, considering the expectations for their increasing role within the markets, while ensuring adequate transparency and accountability. Though, harmonizing incentive programs is important since different national policies and measures may arise in the absence of a common line agreement within EU. It is also important to note that the access of third country firms to European markets is subject to national regimes, contributing to uneven competition as well as unequal distribution of benefits to investors.
The Single market is one of the EU's most significant advantages in developing a friendly and motivational environment for businesses and consumers. It is a priority to ensure that businesses can compete openly and fairly in the European region. The report highlights the tax obstacles that Europeans face in cross-border situations like discrimination, double taxation, difficulties in claiming tax refunds and in obtaining information on foreign tax rules.
The report favours the conclusion of free trade agreements with major partners as a response to increased trade protectionism as well as the opening-up of public procurement to competition.
The report also highlights the important role that innovative financial instruments can play, such as project bonds and the ones based on public-private partnerships, for ensuring stability and liquidity in Europe. The report favours a greater role for the European Central Bank, while the European Investment Bank and the European Bank for Reconstruction and Development can act as catalysts in injecting liquidity and reducing excessive financing costs that many countries face. Europe must provide targeted incentives to investors in order to promote synergies in cleantech and green sectors, taking into account the intense investment activity in developing countries for renewable energy technologies.
Most important, though, Europe needs a smart strategy to drive knowledge economy and competitiveness in response to the recession. Investments in research and innovation will significantly strengthen capacities, infrastructures and human capital, targeted in particular at SMEs and start-ups, areas with considerable growth and competitiveness prospects. Building up stronger links between research and the business world and internal market is the key to success.
European strategy for investments must be bold, ambitious and coherent. The responsibility for its successful implementation simultaneously depends on the European institutions and the Member-States as national governments, the social partners and the local authorities.
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