EUROPEAN FORUM FOR NEW IDEAS IDEAS FOR EUROPE. BUSINESS PERSPECTIVE RECOMMENDATIONS

EUROPEAN FORUM FOR NEW IDEAS IDEAS FOR EUROPE. BUSINESS PERSPECTIVE RECOMMENDATIONS

To the Authorities of the European Union and Governments of the Member States The European Forum for New Ideas, which took place in Sopot, ended with the signing of the Sopot Declaration. On behalf of the EFNI participants, business leaders and eminent intellectuals from Europe and other regions of the world, I presented the Sopot Declaration to Herman van Rompuy, President of the European Council, Jerzy Buzek, President of the European Parliament and Donald Tusk, Prime Minister of the Republic of Poland, on 30 September 2011. I made a promise to follow-up on EFNI 2011, with a package of recommendations based on a summary and analysis of five plenary sessions and twenty panels of the European Forum for New Ideas. HONORARY PATRONAGE Bronisław Komorowski President of the Republic of Poland The Sopot Declaration was the essence of our expectations of politicians. It included conclusions and expectations addressed to both, politicians and business leaders. We emphasized that the European Union has ensured peace and respectable life to Europeans and therefore, it must be rescued. The rescue operation requires an accelerated political integration, efficient decision making system, strengthened European institutions and shared responsibility of Europeans for the future of this continent and the world. As entrepreneurs, we emphasized that the European single market must be urgently completed. We also pointed out the need for deregulation, cohesive and robust economic governance, orientation and focus of all the EU policies and institutions on growth, employment and business competitiveness. The recommendations presented in this document cover all five areas highlighted in the Sopot Declaration as critical to the great European Project. They include: n The future of the European Union: vision, governance, institutions, leadership and a social model n Single market and deregulation n Euro zone and economic government Herman van Rompuy President of the European Council Jerzy Buzek President of the European Parliament Polish Presidency in the Council of the European Union 2011 1 n Competitiveness and innovation n Population strategy, demographic challenges, migration, making use of the unexploited potential of women, youth and 50+ age group Our future depends on whether and how consistently we are able to introduce the necessary reforms in each of these areas. The business community has already declared their support to such reforms but politicians must take charge and initiate the process. Therefore, we wish to bring this package of recommendations to your attention. Henryka Bochniarz President, Polish Confederation of Private Employers Lewiatan Vice President, BUSINESSEUROPE

European Forum for New Ideas 2011 THE SOPOT DECLARATION Ideas for Europe. Business Perspective Europe, it is high time for action The European Forum for New Ideas, an international discussion forum of business communities, took place in Sopot, 28-30 September 2011. The event was organized by the Polish Confederation of Private Employers Lewiatan in collaboration with BUSINESSEUROPE and the City of Sopot. Business leaders from the EU member states, politicians, leading intellectuals, representatives from academia and cultural sector were invited to take part in the debate on the future and role of Europe. Together, we have an opportunity to create Europe of our dreams and capabilities. We have a chance to build Europe based on solidarity and enhanced integration. The European Union, which was created to avoid conflicts, has changed the face of the continent and become an inspiring project for several European generations. We firmly believe, and we want to persuade everyone, that none of the European countries is able to live up to challenges of the contemporary world alone. Changes and challenges, which unfold today, must become the source of our success. During the course of five plenary sessions, twenty panels and debates, EFNI participants sought solutions to the most important economic and civilization problems of Europe and the world. The crisis of the European project was an important discussion theme. Over 1100 participants from Poland, Europe and other continents took part in the event. The panellist line-up included Günter Verheugen, former EU Commissionaire; Oliver E. Williamson, Nobel Prize Laureate; Nouriel Roubini, famous economist; Hernando de Soto, eminent Latin American economist; Peter Schwartz, author and futurist; Gesine Schwan, former President of the European University Viadrina; Jürgen Thumann, President of BUSINESSEUROPE; Stafan Nilsson, President of the European Economic and Social Committee; Arnaldo Abruzzini, Secretary General of EUROCHAMBRES, and Benjamin R. Barber, philosopher and political theorist. The Polish panellists included, amongst others, Danuta Hübner, Member of the European Parliament; Jan Krzysztof Bielecki, Chairman of the Advisory Council to the Prime Minister of Poland; Aleksander Smolar, President of the Stefan Batory Foundation; Magdalena Środa, ethicist and philosopher; Michał Kleiber, President of the Polish Academy of Sciences; Jerzy Hausner, Member of the Monetary Policy Council, and CEOs of the largest corporations operating in Poland. Prominent politicians also took part in the event, including Jerzy Buzek, President of the European Parliament, Herman Van Rompuy, President of the European Council, Bronisław Komorowski, President of the Republic of Poland and Donald Tusk, Prime Minister of Poland, and Lech Wałęsa, former President of Poland. The great project of Common Europe urgently needs to: l Accelerate political integration. Further economic integration will not be possibile without underlying political integration which is needed to maintain and enlarge the monetary union, the critical precondition of the integration process. l Introduce an efficient decision making system, adequate to meet the challenges which we currently face. l Strengthen the EU institutions, their stance and shared responsibility of the European citizens. l Complete promptly the European single market and foster deregulation. l Introduce cohesive and robust economic governance and shift all EU policies and institutions to focus on growth, employment, and competitiveness of the European companies. l Develop efficient business environment to promote innovations, enhance competitiveness and enable Europe to tap into its potential. l Develop a cohesive population strategy, including immigration strategy, to respond to the demographic challenges. l Better utilise the potential of women. l Develop an efficient cooperation policy between the EU member states, Eastern Partnership and Mediterranean region countries. These expectations were voiced by the participants of the European Forum for New Ideas. We, business people are committed to support the implementation of these ideas. The European Forum for New Ideas was organized on the occasion of the Polish Presidency in the Council of the European Union and ended with the signing of the Sopot Declaration. Conclusions from debates and action proposals were summarized as recommendations and will be presented to the authorities of the European Union and governments of the member states. Since the event was highly evaluated by its participants, PKPP Lewiatan intends to organize EFNI in subsequent years. From politicians, we expect strong leadership, effective communication and social dialogue. The European Project has no precedence. It is high time for Europe of Citizens. Let the Europeans feel responsible for Europe, in the same way that the EFNI participants did. Sopot, 30 September 2011 The Sopot Declaration was read by Dr. Henryka Bochniarz during the Closing Session of the Forum and handed over to Donald Tusk, Prime Minister of Poland, Prof. Jerzy Buzek, President of the European Parliament and Herman Van Rompuy, President of the European Council. 2 3

The Future of the UE: Vision, Governance, Institutions, Leadership and a Social Model Europe has no precedence but the European Project has not been completed. Europe needs to return to the sources of its political and economic success of the past decades and revisit the vision of its founding fathers. Ideas formulated at that time continue to be attractive and may inspire new solutions. Europe needs to answer questions about actions which must be taken and priorities, which should become a basis for further development and extension of the integration process. The current crisis provides an opportunity for far reaching reforms. Our goal is to ensure that Europe is full of ambition and optimism, entrepreneurial and creative, promoting new ideas and competitive. We need concrete actions which should help build the European identity and infuse the economy with new energy. Centrifugal tendencies, discouragement and resentment will be rising in Europe. They should not be ignored. The EU should respond with acceleration. A clear perspective should be promptly developed to provide for more and not less integration. Europe must move into a deeper integration process instead of lingering in the shallow waters. The political leaders should serve as change agents in this process. Vision, Leadership, Governance and Institutions n The European Union must become an entity led by the strong leaders. Therefore, in face of the new threats, the EU needs to take measures to recover its energy and put this inert drift to an end. n Europe must become a cohesive political entity and be perceived as such by the external world. The EU leaders should accept responsibility for specific programme areas and be equipped with broad based powers necessary to implement reforms. This cannot be achieved without member state s sovereignty being partially limited and the EU transformed into the federation. n Europe needs a simple constitution, efficient and goal oriented. It needs integration and cooperation as well as careful implementation of the community projects by the member states. Otherwise, borders will be soon reinstalled, the common currency will disappear and one of the most beautiful visions, which has ever materialized itself in the history of this world, will be reduced to rubble. n The European offices should be forced to rationalise their management. This will be a message to all European people that the EU administration is to serve them and that it does not exist for its own sake. n The current complicated decision making system practically rules out any strong leadership while the EU institutions are in need of powerful leaders to contain the crisis. n A fast track should be urgently established for key decision making processes. It is not the lack of capital that prevents private sector companies from investing. The companies put investments on hold as they see no decisions and prospects for the economic growth in the EU. Europe needs a transparent action plan and political leaders who inspire trust and confidence. n Adequate measures must be taken to attract talent to the European politics. Transnational education programmes should be designed for the future and current politicians. They should be modelled on the best standards borrowed from the business education curricula and focused on problem solving skills and pragmatic management. n Efficient leadership requires courage. Decision makers should start telling the truth about the true economic landscape. They should explain to the societies that there are winners and losers, bull markets and bear markets. n The story of Europe is lukewarm. Its vision lost appeal. The European leaders should develop an attractive and uniting vision of Europe. 4 5

European Identity and Solidarity European Social Model The new vision of the continent cannot be created in isolation from the world. The European Union may and should have ambitions to inspire and create global solutions within the framework of the broader cooperation with the emerging markets. G20 is not sufficient for this purpose as it lacks leadership and fails to reach consensus in the majority of the topics discussed. Policies remain at the national level while problems, which we face today, have global outreach. It is necessary to reach out to the Europeans and take the bottom up approach to inspire the European identity. This identity must be based on whom Europeans would like to be, not on who they are today or who they were in the past. These goals may be attained by developing: The economic crisis forced governments to reconsider their spending and consequently, to rethink their social policies. With budget deficits on the rise, it will not be possible to sustain the government spending at the current level in the long-term. The welfare state model, which prevails across the European Union, is not sustainable. At the same time, the crisis had the most adverse impact on the poorest and the least qualified people who are not able to cope in the world of the tightening competition. They need to be provided with the necessary social safety net. n It is necessary to reconsider the social policy to make it more efficient, cost-effective, reasonable, and targeted at those who are in real need. n Common education curricula and textbooks which highlight the European affairs and are not segregated by national memories. n Transnational cultural projects n European mass media n The new social agreement should include amongst others: social and economic implications of the demographic situation i.e. ageing of societies, immigration and related problems, the social model and market model (private interest vs. public interest), accepted level of the European solidarity and shared responsibility, and priorities of competitiveness. n Profound democratization of the European Union n European Civic Space and placing emphasis on explaining political decisions to citizens. An open and sincere dialogue helps increase approval for difficult reforms. Today, politicians take little time to engage in the dialogue. As a result, the fundamental ideas of integration fade away. n Pan-European information campaign to remind 27 member states societies about the community values and reinstate their faith and pride of Europe. n The European social model is considered a burden on the economy. It does not have to be. In the future, following some modifications, the European social model may become a source of competitive advantage over the US or China where social tensions may be rising. 6 7

Single Market and Deregulation Euro Zone and Economic Government The crisis cannot be treated as an excuse for protectionism and it should not hinder closer economic cooperation and integration. The single market must not be obstructed as it provides the foundation for the future economic stability of Europe. n The review of the European legislation is needed to eliminate redundant regulations and consolidate the legal framework. The volume of legal acts adopted at all levels of the EU should be reduced by half. n Persistent efforts and determination of the EU institutions are needed to further all actions aimed at harmonization of laws and removal of barriers to competition. The first steps, which would help entrepreneurs, include: low-cost wire transfers, European mortgage market and removal of barriers obstructing the cross-borders service provision and e-commerce. n During the time of crisis, every single job saved is a success. The European companies will not be competitive on the global labour market if they are not able to use their resources in the flexible manner. The variety of employment forms, ease of hiring and firing and low non-wage labour costs would help support employment during the time of crisis. Additional obligations imposed on employers and low relevance training courses offered to job seekers will have the opposite effect. The problems of Greece and Italy have clearly demonstrated that common monetary policy without hard economic policy coordination may jeopardize the entire community. Therefore, we need a strong European government to coordinate all economic policies. The economic crisis disclosed erroneous budget policies pursued by many European governments. Sanctions against the member states which trespass the safe deficit level and put the community equilibrium at risk must be applied automatically and inevitably. We say no to the tax increase but we say yes to the restructuring of the budgetary spending. Companies will not create new jobs when they are burdened with additional taxes. Citizens, who will have less money to spend, will not be able to stimulate internal consumption. However, each zloty spent from the Polish budget and each Euro spent form the European budget must be substantiated by the spending efficiency analysis. The current economic problems may be solved only with economic growth. As a result of growth, nations, regions and economies of the world work together. As the economic growth declines, political conflicts emerge. The economic policy of the European economic government and governments of all member states should be based on the following prerequisites: n 2014 should be the final date for the reduction of the excessive budget deficits by the member states. 8 9

n During the time of the economic prosperity national budgets should show surpluses which could be used during the time of the economic downturn to stimulate growth without the risk of excessive debt. n One of the reasons for the current crisis is a growing disparity between the value of goods produced by the real economy and the value of financial assets which increased radically as result of unsupervised money creation. There are two mechanisms to bridge this gap, either by reducing the value of financial assets (debt deflation) or by increasing the price of real goods. Under the current circumstances, both mechanisms should be applied. n Since the EU is a supranational entity, its budget should become more independent on the member states contributions and should be based on its own revenues. n Central banks, in particular FED, were involved in the dangerous money creating mechanism (QE) while their goal should be to safeguard the value of the currency. Therefore, measures should be taken to control the use of the monetary policy instruments by the central banks whenever such instruments are used in the way which is not congruent with the central banks primary objective. n The failure of the asset documentation system was a mainspring of the current crisis. As the market of structured financial instruments continues to grow, the creditors are not able to clearly identify the location, ownership title, and first of all, valuation of the underlying assets. In face of this problem, the companies should simplify and standardize their balance sheets in order to make meticulous internal assessment of their operations and to increase their transparency for creditors. n Euro should be weaker. German economy may be doing well with the strong Euro but peripheral economies of the EU struggle and they need the euro dollar parity to recover their competitiveness. n The infrastructure funds must continue to flow to the peripheral economies to avert massive cuts in capital expenditure. n Financial liquidity of Italy and Spain must be sustained. n A controlled debt reduction mechanism must be developed for insolvent governments and banks as well as controlled procedures for exiting the Euro zone. n European banks need an immediate recapitalization. n All the member states of the EU should carry out structural reforms and follow the budgetary discipline in order to achieve the long-term growth and economic stability. n The anti-crisis policy is based on the dogma of too big to fail. Governments do not let mismanaged, inefficient financial giants fail as they are afraid of the multiplier effect causing individuals and companies to lose their assets. The multiplier effect is prevented at the expense of massive public grants and growing debt of the state and citizens. This situation distorts the rules of the free market economy as it rewards mismanaged organizations and corrupts the board members of large financial corporations. First, regulatory mechanisms should be used to contain the growth of companies (especially in the financial sector) so that they do not reach such a scale that their collapse would put the entire economy at risk. In cases where growth of such companies could not be contained and they would find themselves in a serious predicament, a controlled bankruptcy mechanism should be developed and applied. n Europe should avoid tax increases. However, should tax increases be necessary the new tax policies may not be haphazard. The additional taxation of labour should be definitely avoided, since it will cause an increase in unemployment. 10 11

Competitiveness and Innovation Innovation is the only method to create the EU competitive advantage over other economies of the world. The Common Innovation Policy should be developed for the UE. The policy should be financed with the allocations curved out from the inefficient sections of the European budget, including CAP, which should be promptly put to an end. Member states should counteract any monopolies, oligopolies or corporate privileges which destroy competitiveness of the European economy. However, the legal regulations enabling such changes should be adopted gradually. n A thorough reform of the education system should be on the EU priority list. The current education system falls behind the digital era while it should support and enable acquisition of skills and competence which are necessary to ensure Europe s strategic adaptability, i.e. capability to embrace changes promptly. n Europe should spend twice or three times as much on culture, since culture is the source of new trends and creativity. It is also important to promote and teach economics and entrepreneurial attitudes at all levels of the education system. Europe has lost its risk taking capacity and hunger for success. Both must be recovered. In order to respond to the challenges of the globalization and avoid the strategic drift (declining position vs. BRIC economies), Europe needs a realistic competitiveness strategy and a clear view on how to build both, hard and soft powers. n The EU should be more active in supporting growth and hunting for talent. Other measures are also required to increase investment attractiveness of the continent. They may include cohesive and friendly immigration policy or budgetary reallocations to support education, innovation and creativity. Europe should look around and search for models which are worth copying and should analyze innovation and growth policies pursued by the US, China, India, Brazil or Asian countries. A new pragmatic competitiveness strategy, identifying resources and capabilities of the EU should have two time horizons, one for the current generation and other for generations to follow. This is the first step which must be made. Many of the proposed actions may require member states to play a more active role. In this regard, Europe must be flexible and should not stand firm on the principles of the market. n R&D spending and funding for the implementation of new technologies should be increased dramatically. This is an investment in the primary source of growth and competitive advantage. n The European Research Centre should be established in a form of a special economic zone providing a conducive environment for development of new technologies and business. Possibly, it may be necessary to identify and select the strategic international investment targets and invest accumulated capital, following the American or Chinese models. n The new European competitiveness strategy should be challenging, synergic (should include various areas) and have clearly defined priorities and flagship projects. It should encompass a variety of elements such as regulations, education, innovative tools for financing and supporting competitiveness. It should also endorse the fact that the Internet will be one of they key drivers of the economic growth in the EU. n All sector strategies of the EU should be reviewed to ensure that they do not jeopardize competitiveness of companies. n Digital barriers should be promptly removed and support should be rendered to e-economy, which is one of the key sources of growth. n A comprehensive EU policy should be developed to address climate, energy and industry issues. n A new climate agreement is necessary to sustain competitiveness of the European business and even out climate burdens placed on different economies. n The EU energy security should be enhanced based on the real implementation of a single energy market at the level of regulations and infrastructure, and based on the EU capacity to use its own energy resources. 12 13

Population Strategy, Demographic Challenges, Migrations, Making Use of the Unexploited Potential of Women, Youth and 50+ Age Group Business Responsibilities It appears necessary for pension systems across Europe to have their primary goals restored, i.e. providing for people who are no longer able to perform physical or intellectual work due to their advanced age. The current pension schemes cover people who are able to work while the working population has to provide for them. As a result of better medical care and higher standard of living, people live much longer than hundred years ago when pension systems were designed. At the same time, they remain physically and intellectually fit for a long time. The demographic trends are merciless and show that the percentage of retirees will be growing higher compared to the working population. Thus, the current system is not financially sustainable. What are the possible solutions? n Europe should equalize the retirement age for men and women. It should eliminate all illegitimate privileges, such as early retirement, granted to various social groups. The retirement age should be raised to 70, at the minimum. Such a reform will help avoid the public finance disaster, restore the primary goal of the retirement system and in the long run, provide an opportunity for reducing the cost of labour across Europe. n Europe needs a strategy to retain the young people. It also needs an immigration strategy. Today, the entire world deliberates on how to prevent the talent drain. This is also the problem of Europe. Every year, 150 thousand graduates of IT studies leave Europe and only 20 percent of them come back home. n Adequate measures should be taken to actively support flexible forms of employment. n Youth unemployment is one of the critical problems, which must be urgently solved. The business community needs to work close with the educational institutions so that they equip the future workforce with the necessary skills and qualifications. Business and business leaders should also change and understand that profit is not everything. Numbers, charts and statistics, which land on our desks, are produced by people who have their ambitions, needs and concerns. Let us try to look at our activities from a different perspective, longer than the next quarterly report. Let us look for the paths of growth instead of looking for ways to optimize performance at any cost. There is no reason to fear the shareholders. The owners will appreciate such an approach more than the short-sighted plans aimed at the quick profit. The widespread belief dating back to the 1970 s, that the CEO s sole focus should be shareholders earnings is no longer valid. Today, the CEO must take into account the interests of all stakeholders, employees, customers and business environment. If the company is to be successful, its leader has to be mindful of the workers education and the development of the local community. The discussion about Europe s challenges is dominated by experts and narrowed to economic and political affairs while the majority of challenges which our continent is facing today have more to do with values and mental barriers. We need to change the spirit and scope of the European debate. While working on the new perspective on European challenges, it is advisable to use the great advantage which Europe has over its competitors, i.e. its diversity. A broad based discussion should involve the Internet and social media. It should also include the Pan-European wise men group and diagnosis made by the authority figures from other parts of the world, invited to join the group. Our proposals are addressed not only to the European and national politicians. They are also addressed to business organizations, NGOs, trade unions and leaders at all levels as well as ordinary citizens. Europe is our common business. Editor: EFNI Programme Team 14 15

TABLE OF CONTENTS EUROPEAN FORUM FOR NEW IDEAS To the Authorities of the European Union and Governments of the Member States Message from Henryka Bochniarz, President, PKPP Lewiatan.................. 1 European Forum for New Ideas 2011 Ideas for Europe. Business Perspective...............................2 Sopot Declaration Europe, it is high time for action...................................3 RECOMMENDATIONS. European Forum For New Ideas 2011 The Future of the UE: Vision, Governance, Institutions, Leadership and a Social Model....................................4 Single Market and Deregulation................................... 8 Euro Zone and Economic Government...............................9 Competitiveness and Innovation.................................. 12 Population Strategy, Demographic Challenges, Migrations, Making Use of the Unexploited Potential of Women, Youth and 50+ Age Group....... 14 16 Publisher: Graphic design: PKPP Lewiatan ul. Zbyszka Cybulskiego 3, 00-727 Warszawa E-mail: efni@pkpplewiatan.pl Dorota Kudraszew, MesmerCenter

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