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06 EDITORIAL Greek debt deal rattles the Eurozone

08 OPINION

Building agencies to rate public policy Designing policies that support growth Austerity vs. Democracy in Greece

16 ECONOMY Reasons for the Developed Existence of F.D.I. in Greece and total FDI Inflows by Country of Origin during the period 2003-2013

20 COVER STORY

EIB in 2015: remaining commitment for Greece and priority for youth employment, SME support and ‘Plan Juncker’

22 ENERGY SECURITY Europe’s energy security is the Energy Union the answer?

27 SPECIAL REPORT

Europe Has More to Fear than Fear Itself Rethinking How Economies Work How Europe can learn from sports industry successes A European approach to corporate tax Europe must listen to its people

38 THE WORLD A need for UN to redefine its role

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42 TRENDS The Research Institute for European and American Studies, Greece (RIEAS) Our makers town and the makers movement

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EDITORIAL

Greek debt deal rattles the Eurozone by N. Peter Kramer

hortly after the bailout extension was agreed by the EU finance ministers, Greece indicated it will ask for further financial assistance. A sign that the agreed bailout extension is only the beginning of a long battle between Athens and its international creditors. Greek Finance minister Yanis Varoufakis said that Greece needs a “new arrangement” in order to meet the country’s repayment obligations of around €11.5 billion between June and August. He was not asking for some of the country’s debt to be written off, saying that Athens has learned that “haircut is a dirty word. I’ve learned that”. “Just as we don’t want to hear the word ‘troika’ anymore, so our creditors don’t want to hear the word haircut”, he said, with troika referring to the trio of lenders the European Commission, the European Central Bank and the International Monetary Fund, and synonymous for many Greeks with harsh austerity measures by some even called ‘waterboarding’. Varoufakis said there were more “intelligent” options to a debt haircut that could be considered, such as linking credit to the Greece’s economic growth. He spoke of sovereign bonds whose returns were tied to Greece’s GDP figures: “Then our creditors would also have an interest in Greece’s economy starting to grow again.” Greece received a four-month extension to its bailout, which was due to run out on 28 February, but only after much political bad blood had been

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spilt between Athens on one side and Germany, the main eurozone creditor, on the other. Athens was riled by what it saw as German obstinacy and insistence on following the austerity path, Berlin by the Greek government’s way of negotiating. Meanwhile, Varoufakis has already indicated where the battlelines will lie. He said Athens will prioritise debt repayments to the International Monetary Fund, but that the €6.7bn bond repayment to the ECB in July and August are “in a different league”. “We shall have to determine this in association with our partners and the institutions”, he said.” If we had the money we would pay… they know we don’t have it”. Eurogroup Chief Jeroen Dijsselbloem suggested that, if Greece pushed ahead with reforms, it could get a “first disbursement” of the next tranche of bailout funds. Also the Spanish Economy Minister Luis de Guindos and one of the Commission VP’s, Dombrowski, mentioned the possibility of a third bailout. Greek Prime Minister Alexis Tsipras was not amused and reacted “let them forget a third bailout. The Greek people put an end to bailouts with their vote.” Indeed the Greek people agreed with him. A poll published after the political struggles in the Eurozone showed that 76% of Greeks had a positive view of the Syriza-led government so far, with two thirds supporting their approach to negotiating with the Eurozone.

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OPINION

Building agencies to rate public policy by Ricardo Hausmann*

he avenue to economic growth is often blocked by an inadequate supply of productivity - enhancing public goods. Modern production requires many inputs. Markets provide some, but others are provided by governments. For example, a biomedical plant is more valuable if there is good infrastructure, a trusted drug authorization system, and health insurance. These inputs are deeply affected by government actions, embodied in millions of pages of legislation and thousands of government agencies. To increase overall productivity, governments need to improve the provision of millions of different public goods. Given this complexity and the vast and changing array of needs, how can this be accomplished efficiently? Markets face a similar problem: they need to provide a changing basket of billions of different private goods. However, markets have the advantage of

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the invisible hand: a decentralized system that provides the information, the incentives, and the mobilization of resources needed for the system to self - organize. Every private good has a price. Goods are provided by profit-motivated firms that respond to prices. Capital markets allocate resources to those expected to be profitable. But the public sector cannot rely on this invisible hand. Public goods usually have no price, the government usually does not have a profit motive, and there is no decentralized capital market that decides which public goods to fund. This leaves the government at a severe disadvantage that can easily transform public goods into a constraint to growth. The solution is not to attempt to develop an omniscient central planner but instead to develop a market-like mechanism that can generate feedback, crowd-source ideas for reform, and create

OPINION

incentives for improving performance. This tends to happen naturally but inefficiently. Because different private actors have different needs, they tend to organize themselves into interest groups to lobby the government for the public goods that most affect them. Some of their requests are win win, raising overall productivity. But others are not; they are about redistributing rents, as when interest groups seek government coercion to suppress suppliers, workers, and competitors or when they ask for tax privileges. In fact, lobbying groups are often deservedly perceived as enemies of the public interest. However, without them it is difficult to generate information about opportunities, obstacles, and solutions at the level of detail that is required. To create an alternative invisible hand for public goods, we need interest groups to play a more constructive and socially legitimate role. This requires improved transparency and smaller informational asymmetries. Here we can learn from the role that credit-rating agencies and auditing firms

play in building trust in capital markets. These organizations summarize massive amounts of information, allowing market participants to more efficiently assess the performance or risk of each firm or security. I propose the creation of independent public-value rating agencies that would analyze the proposals to government made by interest groups in terms of the public interest and the creation of shared value. Having initiatives rated by independent agencies would enhance the ability of societies and political systems to assess the legitimacy and value of requests for reform and would create incentives for interest groups to focus on win - win rather than rent-seeking requests, thus improving the provision of public goods that enhance shared growth. * Ricardo Hausmann is the director of the Center for International Development, at Harvard University, and a professor at Harvardâ&#x20AC;&#x2122;s John F. Kennedy School of Government.

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OPINION

Designing policies that support growth by Catherine L. Mann*

o achieve rising and shared prosperity requires not a silver bullet but an arsenal of policies deployed in systematic fashion. Most important, it requires a new level of understanding of how those policies interact and how they play out in the actual workings of an economy: among workers, in factories and offices, and between nations. This is a challenge, but policy makers can compare strategies and learn best practices to increase the likelihood for success. Moreover, in a globalized world, policy makers will need to consider each otherâ&#x20AC;&#x2122;s approaches even as they focus on their own goals. And what is the goal? Productivity growth is necessary but not sufficient to support broad-based well-being, which also depends on quality of life,

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health, and environment. Productivity growth both affects and is affected by the distribution and volatility of employment and incomeâ&#x20AC;&#x201D;at the individual and household levelâ&#x20AC;&#x201D;and these feed into well-being, both within and across generations. Ongoing research is uncovering the complexity of the productivity process. As evidenced in the McKinsey case studies, and confirmed by analysis using firm-level data, current assessments of the future path of productivity underestimate the potential for improving the pace. Analysis with large firm-level data sets reveals the relative importance of different avenues of improving productivity. The diffusion of best practices across firms within a sector, and the uptake of productivity-enhancing lessons learned across

OPINION

sectors can increase productivity within an economy and allow it to catch up to the frontier. Even in countries that are home to frontier firms, there is incomplete diffusion of known technologies within and, even more so, between sectors. Policies that support business and worker dynamism and the reallocation of resources promote this within- and between-sector diffusion and catch-up. But diffusion and catch-up are not enough to ensure rising prosperity: innovation that pushes out the technological frontier is also needed, and this depends on the extent and efficiency of resource reallocation, and the magic and confidence of ideas. What holds back firm and worker dynamism? In the current environment, sluggish demand makes reallocation particularly costly. And local factors are certainly important in some (although not all) economies, such as access to credit and quality of business regulation. However, in general and across nearly all economies, one crucial factor limiting a firmâ&#x20AC;&#x2122;s ability to restructure and reallocate is the poor match between workers and jobs. The matching process includes characteristics of the labor market and labor policies, but fundamentally this is about skills and location and the psychology of change. The reallocation process itself affects matching. Productivity growth tends to expose workers and households to increased

job and income volatility, which adds to the growing inequality and low social mobility across generations. As the pace of technological change increases, and as people age, the need to change jobs and the nature of the work itself may increasingly bear on well-being. Thus a pursuit of productivity alone will not maximize potential economic gains nor ensure shared prosperity. Even as we redouble our policy efforts to promote economic activity, we must deepen our understanding of how policies can improve the relationship among workers, working, and change and how regional and international policy affects individual economies. Research examining the behavior of individuals is starting to shed light on which policies can best help individuals navigate change. This is important also because faster and more efficient resource reallocation helps economies to recover more quickly from adverse shocks, thereby contributing to economic resilience, reduced inequality, enhanced productivity growth, and higher living standards. * Catherine L. Mann is the chief economist at the Organisation for Economic Co-operation and Development and a former senior international economist of the US presidentâ&#x20AC;&#x2122;s Council of Economic Advisers.

EUROPEANBUSINESSREVIEW

OPINION

Austerity vs. Democracy in Greece by Mark Blyth and Cornel Ban*

Europe Crosses the Rubicon!It may be odd to use a Roman metaphor to describe a Greek political event, but in this case, it’s apt. Just as Julius Caesar crossed the Rubicon River because he could, in spite of the warnings of the Roman Senate not to, so Alex Tsipras, leader of the antiausterity party, Syriza, has decided to try to end austerity in Greece, in spite of Europe’s leaders saying he shouldn’t. Whether Tsipras will succeed is still unclear, but whatever happens, his victory represents a crucial turning point for Europe-a signal that time has run out on austerity policies.

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“Tsipras” had to happen somewhere eventually, because there’s only so long you can ask people to vote for impoverishment today based on promises of a better tomorrow that never arrives. If voting for impoverishment brings only more impoverishment, eventually people will stop voting for it - and the timing of “eventually” will depend on when people’s assets run out. In the Greek case, backers of the incumbent New Democracy party and its austerity policies constitute that quarter of the electorate who still have assets (pensions, paper, and portfolios) after five years of depression and who want to preserve what they have. The 36 percent that voted for Syriza were the young, the asset-less, and the unemployed - people who either lost what they once had or never had much to begin with. Greece’s 1.9 percent of growth last year means essentially nothing to a society that has lost nearly 30 percent of GDP in a little over half a decade; on the current course, it would take, by latest estimates, two generations for the country to get back above water. Syriza’s victory presents two lessons for the rest of Europe. First, no one votes for a 15-year-long recession. Second, you can’t run a gold standard in a democracy. Either the gold standard goes,

OPINION

or democracy goes, and that is the choice Europe may face sooner than it thinks. The Euro is the gold standard that pretends that it’s not one - and therein lies the rub. While Europe has a plethora of national parliaments and free and fair elections, as well as a European parliament and multiple institutions with delegated power to represent the interests of citizens, once a country is a member of the Eurozone, certain things happen that bypass any possible democratic checks. On the upside, its credit history gets rewritten. Greece and Italy get to borrow like Germany (with predictable results). On the downside, when a Eurozone country is hit with an economic shock, it cannot respond to it through the exchange rate (devaluation) or by using the printing press (inflation). It must choose between default, which is not allowed, and balancing its books through internal devaluation (austerity). And if that means a couple of constitutional coups d’état have to happen in the heart of democracy to get the policies through, as happened in Italy and Greece in 2011, then so be it. So austerity becomes the only game in town. Although it may be rational for any one country to be austere, when multiple countries that share the same currency with no common fiscal policy do so, the result can only be a massive contraction of GDP and a corresponding increase in debt - which is exactly what has happened in Europe in recent years. The boost in consumer and investor confidence that austerity was supposed to

provide never materialized, and the Eurozone as a whole slid into recession, and then, in the periphery, into depression and deflation. Now that all of this has occurred, however, the politics of sustaining the euro have changed, and changed utterly. Until now, Eurozone policymakers’ obsession with fighting inflation has given them a one-sided understanding of politics. In fact, Europe has not had an inflation problem of any magnitude since the 1970s. What it now faces is deflation - and since the politics of inflation and deflation are very different, the wrong policy choices produce Syrizas. Inflation, after all, is not a general malaise that hurts all members of society equally, but a class-specific tax. Those with assets, particularly paper assets, lose harder and faster than other groups that can pressure the state to accommodate them, which is why under inflation creditors suffer and debtors prosper. Consequently, periods of inflation produce a type of politics where creditor interests come to the fore and the state is forced to retreat. The 1920s were one such period and the 1970s another - which is when Europe, and the euro, began to take their current form. Deflation is different. Rather than creditors losing and debtors benefitting, in a deflation almost everyone loses, regardless of asset class. Consider the choice of whether to work. A worker who decides to take a pay cut to price herself into a job is individually rational. But collectively, if all workers try this, the result is a collapse in con-

sumption. Employers get cheaper labor, to be sure, but also less demand for their products. Their logical individual responses are to cut prices to spur sales - but once again, the aggregate effect of such responses is to lower prices further. This increases real wages at a time when the economy is shrinking, which leads to more layoffs. In such a world, with practically everyone losing, calls ring out for state intervention to stop the bleeding, and eventually, they are heard. It happened in the 1930s, and it is happening once again today. This is what Tsipras and Syriza represent: the moment Europe drifted from ever-deeper and ever-wider open capital markets and institutionalized neoliberalism to a system in which the state comes back to reassert sovereignty over markets. At that point, either democracy trumps markets (which need not be a progressive move, as Syriza’s immediate choice of coalition partners demonstrates) or markets undermine democracy to protect their asset values. Which course European countries choose will be determined in the next few years, but a glance around the continent suggests that such a choice is indeed coming. Greece may have crossed the Rubicon first, but due to its size in the European economy, Spain

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OPINION

may be the game changer. In Spain, Podemos is likely to form a winning left-wing coalition after that country’s general elections this fall, especially after the demonstration effect of Syriza. In Ireland, Sinn Fein is cut from the same anti-austerity cloth and has risen substantially in the polls. Although such parties are often called extreme, it is important to stress that their support bases, regardless of their leader’s dodgy connections, are democratic political forces whose core claims - an end to self-defeating austerity and impoverishing wage policies - echo mainstream social democracy and the recommendations of many prominent economists on both sides of the Atlantic. With regard to debt relief, these parties are merely restating the standard economic case that their countries’ debt overhangs are too big for investment to be resuscitated to levels that would permit high growth. Maturities can be extended indefinitely, but unless growth is restored, the game is over, and not just for Greece. For those who fear Syriza and its left-wing counterparts, it is worth looking at the alternatives on the radical right. From Britain to Hungary, political parties - whose ideology spans the spectrum from the explicitly Nazi (the Golden Dawn in Greece) to the nationalist–populist (the United Kingdom Independence Party and the French National Front) - are busy working to channel public anger in a different direction. Harkening back to Europe’s darkest days, they translate negotiable conflicts over economic policy into non-negotiable conflicts over ethnic identity. They attack European integration

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even more than the left-wing parties, question the democratic rights of existing citizens, and fan the flames of xenophobia toward ethnic minorities and immigrants. If Europe’s ruling elites want to save the European project, and the Euro at the heart of it, they need to start actively engaging with democratic left-wing parties such as Syriza and Podemos rather than shunning them. If they don’t, they will drive some of these parties into volatile left–right alliances, or, if they fail in their mandates, leave the stage open to political forces whose goals will be far more radical than mere debt restructuring and opposition to austerity. What is at stake now is not simply Syriza’s next moves or even a possible “Grexit.” These are symptoms, not causes. The problem is that European authorities, driven by Germany, are enforcing a politics of deflation under a pseudo-gold standard, expecting citizens to vote indefinitely for their own impoverishment in order to save the asset values of creditors. In such a world, both radical left- and right-wing forces can only stand to gain ground across many supposedly stable countries, and quicker than we think. To avoid that fate, the continent’s powerbrokers should make some sort of deal with Syriza now - because what may follow it may be far worse.

* Mark Blyth is the Eastman Professor of Political Economy at Brown University. Cornel Ban is Assistant Professor of Political Science in the Frederick C. Pardee School of Global Studies at Boston University.

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ECONOMIC OUTLOOK

Reasons for the Developed Existence of F.D.I. in Greece and total FDI Inflows by Country of Origin during the period 2003-2013 by Dr. Antonis Zairis*

t is actually a fact that special agencies have been established and are exclusively focused on the attraction of new investors in Greece and the perspectives of serious investments, that will assist the Greek economy on its way to improvement. At this specific purpose, the Greek government has been called to provide their assistance upon special subsidies and laws to new foreign investors. They actually offer significant assistance, analysis, advice and after-care to those investors who want to extend their businesses in Greece. Those services which are offered by those agencies and governmental institutions, also include sourcing of potential partners for joint ventures and various strategic alliances, supporting by this way investors during their implementation stages and provide valuable assistance to their secure licenses (Calomiris, 2011). In advance it has been developed a network that guides in-

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vestors accordingly for all legal and necessary administrative procedures inside Greeceâ&#x20AC;&#x2122;s business environment, upon provision of valuable investment proposal and infrastructure information. What Greek organizations for promotion of foreign direct investments have achieved all those years, is to be dedicated to the support of international investors with excellent services so as to facilitate some new and expanding business activity in the Greek region (Mayer, 2011). Foreign Direct Investments (FDI) have been always considered to be a major part of each country for the development of its economy. Major purpose of each country is to attract foreign investments and by this way to increase its Gross Domestic Product and its exports to other countries. There are actually some basic reasons for all those foreign investors who have chosen the country of Greece so as to expand their businesses.

One of those major factors, it is the economic stability that foreign observers predicted at that time to exist in this country prior to 2009. Greece is actually a member of the European Monetary Union (EMU) and one of the most considerable performing economies inside the European Union. Therefore, Greece has proved to be a hub in the area of south-east Europe and has the ability to offer a healthy and stable business environment. It can also provide great economic consequences to foreign investors and their needs as to the development of their business. Despite the severe economic crisis Greece has been facing since 2010, the countryâ&#x20AC;&#x2122;s performance in attracting foreign investment in 2013 was very satisfactory in comparison with the previous year. Total (gross) capital inflows to the country in 2013 amounted to 3.3 billion Euro, while net inflows reached 1.9 billion Euro (see Table 1).

ECONOMIC OUTLOOK

Table 1: Inflows of FDI in Greece during the period 2003-2013 (in million Euro) 6989

7000

6078

6000 5000 4000

4753 4269

3994

3835 3430

3163

3279

3071

3000

2688

2000

1692

2781 2004

1754

1543

1354

1130

1000

1936

822

501

249

2013: Temporary Data 2012: Revised Data Source: Bank of Greece 2014

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Gross inflows

Key features • T otal (gross) inflows of foreign investment capital, which essentially reflect the real performance of the country in atracting investment, increased by 63.6% in 2013 compared to the previous year. •N et inflows of foreign investment capital during the same year increased significantly, by 43% compared to 2012*, indicating a stabilizing trend despite the intense economic crisis. • The difference between total and net FDI inflows to Greece in 2013 relates primarily to repayments of loans to parent companies, and also to the increase in capital shares of the existingsubsidiaries. • T he rapid promotion of reforms and the reduction of costs of production factors, which was the result of the economic crisis in the country, create significant investment

Net inflows

opportunities. The anticipated commercial development of public property and natural resources (oil, gas) is expected to reinforce Greece’s investment framework. • Greece’s comparative advantages (geopolitical, climatological, historical) that enhance investment in many sectors have not been affected by the economic crisis, and are to be positively developed. * T his method, although not generally accepted, is widely adopted by international statistical practices (“Under the current treatment, it is possible for reinvested earnings to be negative in cases where the direct investment enterprise makes an operating loss. Reinvested earnings are then recorded as a negative income payment and disinvestment in the enterprise. There are claims that this makes little sense

and creates presentational difficulties. However, the negative income can be seen as offsetting a withdrawal of equity in the enterprise, that is the enterprise takes money from the investors, who in turn take the money out of the enterprise”. Source: IMF committee on balance of payments statistics and OECD workshop on International Investment Statistics, Issue Paper 5A, Reinvested Earnings, May 2004).

Investment capital by country of origin Countries with a strong investment presence in Greece in recent years include ‘traditional’ capital exporting countries such as Germany, France, the United Kingdom, Belgium, Luxembourg, the Netherlands, and Italy, while the presence of Cyprus and USA is important as well.

EUROPEANBUSINESSREVIEW

ECONOMIC OUTLOOK

Total FDI inflows by country of origin of capital during the period 2003-2013 (in million Euro)are depicted as follows (Table2,3)

Table 2: Period 2003-2007

Key features

6000

• Investment activity in Greece originates

5000

4570

4972

4377

4000 3000 2025

2000

1332

1602

1257

1000

662

642

536

354

er th

n O

s ru yp

lig

itz er

US A

ly Ita

Fr an

an y

m ite

ce -L ux em Ne b th er la nd s

Total value: 22,328.2 million Euro Source: Bank of Greece 2014

Table 3: Period 2008-2013 10000 9000

8644

8000 7000 6000 5000

4439

4000 3000 1856

2000

1470

1000

1242

890

883 657

520

360

Total value: 20,666 million Euro Source: Bank of Greece 2014

EUROPEANBUSINESSREVIEW

th O

Ita ly

Sp ai n -L ux em b ig u

US A

Be l

an y m

Fr an ce C Un yp ite ru d s Ki ng do Sw m itz er la nd Ne th er la nd s

-1000

-296

primarily from companies from important markets such as the EU. • There is a clear shift in the main countries investing in Greece over the two periods examined above. Germany remains the largest source of FDI to Greece during both periods, but, while in 2003-2007 the UK and France follow shortly as FDI source countries, between 2008- 2013 France ranks second followed by Cyprus and the UK, with Germany now being by far the main FDI source country for Greece. The changes amongst other countries are less important, with Switzerland improving its ranking considerably during the second period, over other EU countries such as Belgium, Luxemburg and Italy. • Although significant, the U.S. presence is still relatively low, which is partly due to the fact that investment activity of U.S. companies is realised in Greece “indirectly” through subsidiaries in other countries, usually in European states. Undoubtedly the relatively low level of investment from the U.S. suggests the existence of significant investment potential which can be activated. •P romising prospects exist in the near future in attracting FDI from Russia and Eastern Europe, the Middle East, other Arab countries and Asia, particularly China, that are mainly interested in the energy, telecommunications, tourism, transport and logistics sectors. Additionally, Diagram No. 1 below is actually a proof of the well-standing position of the Greek economy between some other countries of the European Union in 2006 (Hellenic Statistical Authority, 2013 - Update of the Hellenic Stability and Growth Programme 2006-2009).

ECONOMIC OUTLOOK

Diagram No. 1 : Real GDP Growth Rate in Eurozone (2006) 6

5,5

5,3 4,9

3,9 3,1

3,1

2,9 2,7

2,7 2,2

1,9 1,2

l( f) ga

ly tu

Ita

Po r

(f ) ce

NE Fr an

RO ZO

an y

er G

Ne th

(f ) a

Au st ri

n ai Sp

re e

(f ) la

(f ) Fin

(f ) Ire

rg bu Lu xe m

Diagram No. 1 - Update of the Hellenic Stability and Growth Programme 2006-2009. Source: Hellenic Statistical Authority, 2013

* Vice President at the “Hellenic Retail Business Association”

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COVER STORY

EIB in 2015:

remaining commitment for Greece and priority for youth employment, SME support and ‘Plan Juncker’ by N. Peter Kramer

he European Investment Bank (EIB) is continuing to step up its response to the crisis. In 2014 our reinforced engagement made a real difference to people’s lives in Europe and beyond. Our funding sustained millions of jobs and helped build transport and digital connections, water and electricity networks, schools, hospitals, and social housing. It has helped increase the generation of sustainable energy, and enabled small and medium-sized companies to invest and remain competitive. Financial support and technical expertise provided by the EU Bank has helped hundreds of projects including those that would have otherwise been delayed or never got off the ground”, said Werner Hoyer, EIB President, at a press conference in Brussels on Monday 23 February. Last year the EIB signed loans amounting to EUR 77 billion to support investment across Europe and around the world. Loans to projects in EU Member States came to EUR 69 billion, representing 90 percent of the total. In addition, EUR 3.3 billion of commitments by the European Investment Fund (EIF), which belongs to the EIB Group, leveraged EUR 14 billion of capital to enhance access to finance for small and medium-sized enterprises (SMEs) and midcaps.

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EIB’s SME support largest policy contribution The EIB Group continued to put strong emphasis on enhanced access to finance for SMEs and midcaps. President Hoyer: “In Europe, our SME support remained our largest policy contribution, amounting to EUR 25.5 billion. This is the highest amount ever for the EU Bank. Our SME lending helped create and preserve 3.9 million jobs globally by supporting 290 000 businesses.” Other key priorities were climate action (EUR 19.1 billion), strategic infrastructure (EUR 20.6 billion), and innovation and skills (EUR 14.7 billion).

Programme “Skills and Jobs, Investing for Youth” firmly at the top of EIB’s agenda. The dedicated youth employment programme “Skills and Jobs - Investing for Youth” remained firmly at the top of EIB’s agenda. The EU Bank provided more than EUR 13 billion toward projects capable of generating jobs and improving skills for young people. President Hoyer: “I am very proud that we again exceeded our pledges. This demonstrates our strong commitment to complement Europe’s fight against youth unemployment.” The EU Bank had launched its youth employment programme in July 2013 with an initial

COVER STORY

lending commitment of EUR 6 billion per annum. Within the EU, the largest volume of EIB lending for long-term investment was in Spain (EUR 11.9 billion), followed by Italy (EUR 10.9 billion), France (EUR 8.2 billion), Germany (EUR 7.7 billion), and the UK (EUR 7 billion). The EIB remained committed to countries worst hit by the crisis, providing new lending totalling EUR 1.6 billion in Greece, EUR 1.3 billion in Portugal, and EUR 932 million in Ireland. Outside the EU, the EIB provided loans totalling: EUR 2.5 billion in the candidate and potential candidate countries of south-eastern Europe and the countries of the European Free Trade Association; EUR 1.7 billion in Mediterranean countries; and almost EUR 1.4 billion in Asia and Latin America. It lent EUR 1.2 billion in countries in the EU’s Eastern Neighbourhood, including EUR 940 million in the Ukraine, demonstrating the EU Bank’s commitment to the country’s economy in the face of current challenges. The financial strength of the Bank is reflected in its capital adequacy, which was stable at 26.0 percent at end 2014 compared to 26.1 percent the previous year. The asset quality of the Bank remained strong, with impaired loans at just around 0.2 percent of the portfolio, while liquidity, amounting to EUR 66 billion, continues to be maintained at prudent levels. Total assets at year-end 2014 stood at EUR 542 billion, while own funds increased to EUR 60.6 billion.

EIB supports new Investment Plan for Europe Looking ahead, the EIB Group will – in close partnership with the European Commission – support the new Investment Plan for Europe, the so called ‘Plan Juncker’. At the heart of this initiative lies the European Fund for Strategic Investments (EFSI), which will be set up within the EIB. Its mission is to support and deliver viable projects which provide significant sustainable economic benefits, taking on higher risk where appropriate. President Hoyer: “With the new fund the EU Bank will be able to use its know-how and experience in order to stimulate additional investment, send a strong signal of confidence and improve the competitiveness of the European economy.” The President added: “The initiative marks a very important paradigm shift in the use of limited public funds, away from grants and subsidies towards

loans and guarantees in order to leverage private capital and multiply the effect of the initial funding.” EFSI will be initially endowed with a EUR 16 billion guarantee from the Commission and EUR 5 billion from the EIB’s own resources. EFSI aims to mobilise at least EUR 315 billion in private and public investment within the next three years.

EIB remains strongly committed to financing Greek projects Answering on a question about the EIB position on Greece, President Hoyer answered that ‘“the EIB looks forward to increasing its financing for projects in Greece. As a long term investor institution for the whole EU, the EU Bank does not apply country quotas but evaluates funding opportunities based on the number, nature and quality of the projects that are submitted to it. Accordingly, the EIB cannot predict the amount of lending it will make available for any given country. Subject to this model, the Bank is actively looking for opportunities and proposals for project funding in Greece and to options for increasing its overall level of financial involvement in the country’. He continued saying, ‘the EIB has been and will remain strongly committed to financing projects in Greece.” The EIB Group has a very strong track record of lending in Greece. Since the crisis the EIB has provided funding amounting to over € 11 billion. As of today, outstanding loans (the EIB’s exposure) in Greece amount to over € 16.9bn, equivalent to around 9.4% of Greece’s GDP.

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. The EIB is the largest multilateral lender and borrower in the world. The EIB Group consists of the European Investment Bank (EIB) and the European Investment Fund (EIF). The EIF’s central mission is to support Europe’s SMEs by helping them to access finance with the provision of venture and growth capital, guarantees and microfinance instruments.

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ENERGY SECURITY

Europeâ&#x20AC;&#x2122;s energy security - is the Energy Union the answer? by Annika Hedberg*

The EU has seen a renewed interest in strengthening its common energy policy and promoting energy security. The greatest trigger has been Russiaâ&#x20AC;&#x2122;s unpredictable, aggressive behaviour in Ukraine in the past year. Lack of trust in a long-standing economic partner and concerns about relying on a trade partner that does not adhere to international norms have left their mark.

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hile the EUâ&#x20AC;&#x2122;s energy policy has aimed to secure cheap and sustainable, reliable supplies of energy, its vulnerability is of its own making. The EU-28 import over 53% of their energy. Russia remains an important supplier of crude oil, natural gas and coal to the EU. Many member states have put all their eggs in one basket and rely on Russia for more than 75% of their gas and/or oil imports. The Baltic States also depend on Russia for operation and balancing their electricity network. While the EU has a common energy policy on paper, its implementation has remained weak. European energy security has been undermined by an internal challenge: a patchwork of national mini-markets,

ENERGY SECURITY

and a lack of political cohesion and solidarity. A good example is the member states’ bilateral energy deals with Russia, some favourable at first glance, others conspicuously less so - and which together allow a major supplier to play EU countries against each other. So, this winter again, member states have been paying the price of inaction with fears over gas disruptions. But the momentum seems to be changing. Autumn 2014 saw swift efforts to break the dependency, well exemplified by Lithuania’s gas deal with Norwegian Statoil and Estonia receiving its first gas delivery via regional cooperation. It is widely recognised that with determined action Russia’s role in the EU fuel balances can be reduced to something more manageable. No wonder Energy Union, a concept first advocated by Poland’s former Prime Minister Donald Tusk - now President of the European Council - quickly gained support, although its details remain to be specified. There are high expectations that the “general framework” on Energy Union, which the European Commission will adopt on 25 February, will create the needed basis for action.

Energy Union as a framework for action The value of the ‘Energy Union’ would be in bringing together the different aspects of EU’s energy policy under one umbrella. Indeed, the five dimensions of the Energy Union: 1) ensuring security of supply, 2) completing the internal energy market, 3) reducing European energy demand, 4) decarbonising the energy mix, and 5) promoting research and innovation seem to suggest that the framework will aim to tie these existing objectives together. Measures taken under the Energy Union should bring coherence to all EU policies that have implications for energy security, while contributing to creating more sustainable energy systems and economy. For example, when exploring alternative sources and building new infrastructure, these measures should align with the EU’s climate and energy targets, including the objective to reduce EU’s

emissions by at least 80% by 2050. Diversifying the EU’s energy mix and reducing its dependence on Russian fuels will require using alternative sources of energy within the EU, old and new. While environmental and safety considerations must remain the highest priority, member states should continue to explore possibilities with nuclear power and the potential of unconventional gas. At the same time, producing heat or biogas from waste, combined heat and power systems, and heat-pumps are good examples of solutions that have a great potential for wider uptake across the EU. If the EU were to become a leader in renewable energies, it needs to learn from past mistakes, such as those made in Germany under the Energiewende. The first priority is to create a better transmission grid for integrating existing and new renewables into the electricity network. This would provide an incentive for further investments, increase network security and reliability and enable consumers to better control their energy use. Secondly, member states should cooperate in seeking the best return on investment and stop expensive support schemes in sub-optimal places. More EU coordination is needed with subsidy schemes that have cross-border implications. Thirdly, investments into early-generation renewables should be coupled with supporting the development of innovative, higher performance and lower-cost solutions. With oil and gas prices decreasing, this would provide a perfect opportunity for member states to raise taxes on both, and use the extra revenue to support the transition into a greener, more self-sufficient energy system. Europe needs alternative fuel suppliers from outside the EU. This includes increasing liquefied natural gas (LNG) imports from Algeria, Qatar or Nigeria, increasing gas imports from Norway and exploring the possibility to export shale gas from the US. There is a great potential with the Southern Gas Corridor. Oil and coal are readily available on global markets, and suppliers can be changed swiftly.

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ENERGY SECURITY

Europe needs truly integrated energy markets that will increase efficiency in the transmission, distribution and use of energy, thus improving security of supply. European consumers should be allowed to switch suppliers for gas and electricity, and save money. Further investments are needed in cross-border interconnectors for gas and electricity. Integrating alternative sources and increasing lines of supply would help to ensure that no EU country is left alone in case of disruption. While the EU can provide some financial support for infrastructure projects, including via President Juncker’s investment plan, the key is that national administrations recognise the benefits of collaboration. The EU can no longer afford to have countries such as France oppose the building of interconnectors because neighbouring countries’ renewable electricity would create competition for its domestic market players. Increasing energy efficiency across the EU would not only help to decrease dependency on foreign energy imports, but would also reduce energy costs for consumers and bring down greenhouse gas emissions. The standards for buildings, consumer products and all road vehicles are important tools in promoting greater energy efficiency. At the same time, reaching a global climate deal in Paris at the end of 2015 would further encourage the development of a sustainable European energy system and economy. It is important that Europe’s diplomatic push this year will build on a narrative that shows the benefits of reducing global emissions, fighting climate change locally, securing energy sup-

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plies, promoting wider socio-economic interests and increasing competitiveness – all at the same time. The EU needs a new strategy vis-à-vis Russia. When negotiating fuel deals with Russia, it is in the member states’ interest to collaborate. Exploring a scheme for voluntary common purchasing of gas would be a welcome step in this direction. The EU should bring Russia’s influence over its energy market under check. Russian investments in EU energy infrastructure and implications for security of supply should be analysed and discussed openly. It should not be forgotten that Russia needs the EU, and not only gas and oil revenues. With the decrease in gas and oil prices and the Russian economy in tatters, the need for European investments and knowledge to modernise its economy is greater than ever. While taking the steps to reduce EU’s energy dependency, it can guide Russia to take the right path of action in carrying out needed reforms internally and stopping aggression outside its borders. Energy security is built from within. It starts with having a common vision, objectives, and speaking with a united voice. Hopefully the EU member states have learned from past mistakes and Europe will see a lasting change that will divert all member states from a path of sleepwalking into repeated crises to collaborating on securing EU’s energy supplies. The benefits for the countries themselves, businesses and citizens are up for the taking. * Annika Hedberg is a Senior Policy Analyst at the European Policy Centre (EPC).

EMG Strategic Consulting Ltd. - 64 Princes Court, 88 Brompton Road, Knightsbridge, London SW31ET | United Kingdom www.emgcommunications.co.uk

SPECIAL REPORT

SPECIAL REPORT:

Lessons for the EU by N. Peter Kramer, Editor-in-chief, European Business Review

Once, the European Community was invented to solve economic problems in and between European countries; nowadays it is the European Union itself that is the problem... EBR presents in this Special Report five articles which have in common that the authors respectively present a more or less surprising but anyhow specific view on how the European Union should look at and handle the continuing political and economic crisis. Certainly worth to read, may be worth to practice the suggested proposals.

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SPECIAL REPORT

Europe Has More to Fear than Fear Itself by Jan Techau*

The French foreign policy analyst Dominique Moïsi in 2009 came up with a new set of analytical categories to make sense of the post-9/11 world. In his book The Geopolitics of Emotion, he identified the three basic sentiments of hope, humiliation, and fear as the predominant drivers that shape the geopolitics of the three main regional power centers.

sia, according to Moïsi, was full of hope for a better future and therefore brimming with aspiration and energy. The Arab world was driven mainly by a sense of humiliation and a culture of victimhood and underdevelopment. To the West, Moïsi assigned fear as its main characteristic. Europe and North America looked at Asia’s rise and at Arabia’s radicalization with unease, as both of these regions signified the West’s decline— Asia as the powerhouse of the future, the Arab world as the source of barely understood radical religious and terrorist threats. Yet the West, especially Europe, has even greater problems to face than a fear of external dangers. I did not particularly like Moïsi’s book when it came out. I thought—and still think—that his concept was too big and simplistic to grasp the complexities of the globalized world. It seemed too unrefined an analytical scheme to yield any useful policy recommendations for those who have to make decisions.

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But I have to admit that it is hard not to think of the West as the region of fear these days. Except that the dread that appears to govern politics, especially in Europe, is not “above all a reaction to the events and feelings taking place elsewhere,” as Moïsi claimed. Rather, the fear that governs Europe today is a reaction to what happens at home. It is not, as some might assume the fear of immigrants and foreign cultures undermining the values of established nations and majority populations. That anxiety exists, but it is merely a symptom of the bigger problem at hand: good old economic fear. Europe’s real worry is that tomorrow will be less good than today that old age will be a time of poverty, and that one’s children will face a future of hardship. It would be easy to blame the euro crisis for this fear. The crisis has certainly contributed a great deal to the pessimism that prevails in Europe. It has impoverished a large number of people, it has brought states to the brink of collapse, and it has blatantly exposed

SPECIAL REPORT

the weaknesses of the European economic model. In fact, Europe’s troubles started much earlier, and they are not unique to the EU. The United States suffers from the same malaise. Partly, it has to do with systematic public overspending, creating immense debt. Partly, it has to do with unaddressed structural problems in the labor market, in the social and tax systems, and in the field of education. But what’s really eating into the heart of Western societies is the fact that since the late 1980s, populations have grown richer as a whole, but the large middle classes have not participated in this growth. This demographic’s real purchasing power has silently stalled or even declined over the last twenty-five years, while prices have gone up. In Western societies, nothing has created more fear and pessimism than the middleclass squeeze. This is why French economist Thomas Piketty’s book Capital in the Twenty-First Century, no matter how flawed some of its numbers or methods might be, has struck such a chord with so many people. The fear of middle-class decline is the main reason for the successes of France’s National Front, Britain’s anti-EU UK Independence Party, and Germany’s antiimmigration Pegida movement and Alternative for Germany protest party. This economic preoccupation is what drives the movements of Geert Wilders in the Netherlands and of assorted right- and left-wing populists and radicals in countries such as Hungary, Sweden, Austria, Finland, Denmark, Italy, and the Czech Republic. The same fear also lies behind the radicalization of parts of the U.S. political landscape, especially on the Right, and the deeply dysfunctional polarization of U.S. political culture over the last thirty years. The problem is that these economic fears of decline are perfectly compatible with the external worries that Moïsi described in his book, such as globalization, the rise of China, and war in Europe’s neighborhood. And they are even more compatible with issues that stem from mismanaged migration flows, insufficient or failed integration policies, parallel migrant societies, and homegrown extremism. Once the middle classes are affected by these overlapping and mutually reinforcing fears, seismic political shifts aren’t far off. And just as middle-class fear, created by economic anemia and reinforced by other social trends, has an impact on domestic politics, so it also becomes a defining force in foreign policy. Iso-

lationism and protectionism are sure to follow, and often nationalism is, too. European integration becomes harder as self-centered provincialism replaces outward-looking openness. When Europe talks about overcoming its economic woes, economic conservatives are right to say that more fiscal discipline and greater honesty and responsibility are needed. But economic left-wingers are equally right to say that policymakers must not forget about social cohesion, and that the stronger members of society have more of a burden to carry than the weaker ones. If Europe does not get the balance right soon between fiscal rigor and social solidarity, the fears of its middle classes will come true. And with them, the nasty ghosts of Europe’s historical and notorious political instability will rise again. Combine this with foreign policy issues that require a strong, united, and resilient EU, and you have a perfect storm. Europe’s economic and political substance is still strong. Not too much is lost yet. But if Europeans do not address their own fears soon, they will soon learn that they have more to fear than fear itself.

* Jan Techau is Director, Carnegie Europe

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SPECIAL REPORT

Rethinking How Economies Work by Philippe Legrain*

hile many excellent economists have shed light on a wide variety of subjects, we still have only a sketchy grasp of how economies work - and what passes for economic “science” is often bunk. Fortunately, technological progress doesn’t depend on our economic understanding of why it occurs - although it can be stunted by bad policies. Political economy - as it was then called - emerged in the eighteenth century, when the Scottish philosopher Adam Smith pursued “an inquiry into the nature and causes of the wealth of nations.”

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His key insight - that competition between selfish profitseeking producers tends to advance the common good is profound and often true. At the time, political economy was descriptive, analytical and firmly anchored in a political and social context. In the nineteenth century, it was rebadged as the science of economics, akin to a branch of mechanical engineering. In keeping with the science of the time, economies were thought of as gigantic, self-equilibrating machines.

A runaway economy Increasingly, economics ran away with itself. Instead of trying to describe the world as it is, with the economy as a form of human interaction, it imagined a mathematical ideal detached from its social, political and historical context. Assumptions that were not approximately right but completely wrong became doctrine: that people have known, stable, independent and well-ordered preferences; that based on those preferences, they “maximize” rather than operate by rules of thumb and make do.

SPECIAL REPORT

That they know how the economy works and have “rational expectations” about what the future holds, which conforms to a known probability distribution; and that as a result, markets (not least financial ones) are “efficient” and tend towards equilibrium. On the basis of these false assumptions, economists created a fantasy world – that’s fine, lots of people love Harry Potter – and then proceeded to give advice as if the real world was like their fantasy. And people believed them. Which is bonkers. Simplifying (false) assumptions allowed macroeconomists to model economies as if they consisted of an all-seeing, allknowing single representative agent rather than as the complex interaction between many types of agent; to abstract from the financial system altogether; and to ignore the role of particular institutions.

No place for innovation? As a result, mainstream economics has very little to say about how new ideas come about and how they are deployed across the economy – which is a pity considering they are the two main drivers of growth in advanced economies. Because it has no coherent account of innovation, it often misses the point. Immigrants are seen as generic drones who fit into vacancies into the la-

bor market, rather than diverse sparks of new ideas. Free trade purportedly delivers a tiny one-off gain instead of being a stimulus for competitive improvement. Entrepreneurs don’t exist. Likewise, mainstream macroeconomics has no coherent account of how the financial sector interacts with the economy. Standard models ignore it altogether; newer ones tack it on in an ad hoc way. Milton Friedman, a famous American economist, once countered that theories should be judged by their ability to predict events rather than by the realism of their assumptions. On that basis, orthodox economics is a flop. Physics is a wonder-

ful science that told us how to send a man to the moon; economics pretending to be physics is a disaster that led to the crash. The notion that economies are stable and predictable and tend towards a steady state - in effect, a linear forward projection of equilibrium over time - is nonsense.

Economies things

are

complex

Ironically, this neo-classical theory is often advanced by free-marketeers who don’t understand its implications. If this really was an accurate description of how an economy works, a central planner could do the job just as well as the market system. I don’t pretend to know how economies precisely work. I don’t think anyone does. That’s the point. Economies are in fact complex systems that are forever changing in often unpredictable and non-linear ways as a result of the interaction between different economic agents with a limited grasp of how the economy works and little idea of what the future holds.

* Philippe Legrain is an independent thinker and communicator who has also practical experience of policymaking at the highest level. From February 2011 to February 2014, he was independent economic adviser to the President of the European Commission and head of the team that provides the president with strategic policy advice. ** Editor’s note: The above text is adapted from European Spring: Why Our Economies and Politics are in a Mess – and How to Put Them Right by Philippe Legrain, CB Creative Books (April 24, 2014)

EUROPEANBUSINESSREVIEW

SPECIAL REPORT

How Europe can learn from sports industry successes by Daniel Dalton*

s a new elected member of the European Parliament and as a former professional cricket player and grassroots coach, I hold a deep passion for how sports can change lives, bring communities together and crucially be a successful example of how Europe can lead the world in a highly competitive industry. Throughout the past several years, the sports sector has continued to grow rapidly whilst its economic impact is often overlooked. Yet sport is one of those very rare and precious industries in the EU, dynamic, competitive, rapidly growing and a sector in which foreign markets are clamoring to buy our products and indeed invest in. Just a glance at the economic overview of the sports sector is highly impressive. Overall it is estimated that the sector makes up 2% of the EU

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global GDP, while the total employment generated by sports activities is 7.3 million, which is equivalent to 3.5% of total EU employment. The Commission itself issued a report last year highlighting that sport in total produces a massive € 294bn contribution to EU gross value added, concluding that “the sector is considered a significant driver of growth.” These are truly remarkable figures and what is more, huge growth rates are expected in the sector over the coming years. Whilst the sports sector itself is booming, the knock-on effects to the wider economy are also keenly felt. It is estimated that for every new job created within the industry, a further 0.65 new jobs are made in related industries outside the supply chain. Construction, tourism and retail sectors especially benefit as a knock on effect of the

SPECIAL REPORT

sports industries success. Sports stadiums, facilities and projects are built or maintained every year, such as the 2012 Olympic Stadium in London which regenerated Stratford and turned it from one of the poorest areas of London to a place which is now experiencing rapid growth. Sports tourism is also a lucrative and growing industry. Every year, between 12 to 15 million international trips are made worldwide for the purpose of watching sport events and with its world leading sports brands, Europe is the prime destination for foreign visitors. The growth rate of sports tourism alone is expected to be a minimum of 6 % a year for the coming year, a huge source of growth and new jobs. We can also learn from the sports industry on how it continually innovates and improves. By its very nature, sports is a ferociously competitive business and it is the â&#x20AC;&#x153;need to succeedâ&#x20AC;? which drives innovation for new products and designs, often meaning working closely with other sectors, such as the electronic and aerospace industries to produce new technologies. Sport has developed enormously in just thirty years, since the days of Bjorn Borg, who won over a generation of fans by using a simple wooden racket to the Roger Federer era of today, who himself uses a racket consisting of technology originally designed for use on an airplane. This continued dynamism and ability to mix with other sectors is frankly, in stark contrast to many other EU industries across the spectrum and we can learn from it. Socially, the effects on how sport benefits both young and old are widely stated but are worth repeating. Children who are involved in sport are far less likely to be obese and we know through science that those who start there life actively, are more likely to grow up living healthier lives, significantly lowering the risks of serious diseases. Socially, sports unites people from different backgrounds, forging lifelong, meaningful friendships and I know firsthand from my time volunteering with Project Umubano, a charity which works with disadvantaged children in rural Rwanda how sport unites people of different faiths, cultures and promotes understanding. Sport also plays a part in our society beyond the benefits of creating a healthier lifestyle and stronger economy. It is also a huge cultural success so often a buzzword across these institutions, and arguably our biggest. People all across the globe

tune in to watch our elite sports teams and if you travel to the deepest depths of sub-Saharan Africa, cities across Asia, remote villages of the Amazonia, more than likely you will find young and old wearing the stripes of Manchester United, Real Madrid, AC Milan and others. This is powerful and indeed when the word Europe is mentioned in many places around the world, the image conjured is of fanatical sports spectators supporting their heroes. Yet, beyond the glamour of elite sports, and the successes highlighted above, I know, as a cricket coach, that the secret to a thriving sports sector is investment in grassroots sport. It is therefore vital we continue to invest in the grassroots and help those hardworking, dedicated local volunteers who are the heartbeat of the sporting success we currently enjoy in Europe. Supporting and protecting public funding for grassroots sports is not only the right thing to do because of the health and wellbeing of those we represent but also because it is a sound investment in our economy and a way to promote our values across the world. That means ensuring we help local communities take full advantage of the funding possibilities at national and European level, promote access to safe and first class facilities whilst also championing the value of sport, so often forgotten about as a serious global industry. A fit body and a fit economy can go hand in hand to create new jobs and growth in the coming years.

* Daniel Dalton is an MEP (European Conservatives and Reformists Group) from the United Kingdom. **First published at Euractiv.com

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SPECIAL REPORT

A European approach to corporate tax by Mario Mariniello*

hen a crowd of angry Americans threw 45 tons of tea into Boston harbor in 1773, their concern was the under-enforcement of the principle of ‘no-taxation without representation’ – that governments should not impose fiscal obligations on their citizens without them having a saying on it. More than two centuries later, some European Union member states might feel they have concerns of the same nature. The recent ‘tax-sweetener’ stateaid cases against Ireland for its agreements with Apple, Luxembourg with Amazon and Fiat, and the Netherlands with Starbucks have created momentum for those that believe that the European Commission should act to ensure that European countries coordinate their fiscal policies and possibly converge to harmonized corporate tax levels. Countries that use aggressive fiscal policies to attract foreign investors feel under threat of losing their fiscal autonomy. State aid rules however have little to do with convergence of fiscal policies, and the Commission has never said that this should ultimately be the outcome of its investigations. The idea of state aid control is not to prevent free-riding as such. In the current framework, like it or not, it is legitimate for countries to offer advantageous conditions to investors seeking a cheap foothold

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in Europe from which to serve the entire single market. But state aid is illegal whenever such a policy is discriminatory in the sense that other companies, be they European or not, cannot access the same treatment. But the impact of tax-sweetener cases could be broader than obliging member states to recover illegal state aid. On January 17, the Commissioners for Competition, Ms Vestager, and for Economic Affairs, Mr. Moscovici, vowed to ‘put the EU tax house in order’. With the aim of increasing transparency and preventing tax avoidance, they promised to revive the Commission’s proposal for a common consolidated corporate tax base – in other words, a common methodology to calculate and allocate multinational companies’ taxable incomes to member states. This would be most welcome (the initiative could even have a new acronym, such as Tax Union Base for Enterprises, or TUBE, to distinguish it for previous attempts). The single market is seen as the key to the reignition of European growth. This requires crossborder competition and harmonised regulatory frameworks. At a time when Europe desperately needs to revive investment, a harmonised taxbase system would greatly enhance Europe’s ability to attract FDI. There is an extensive eco-

SPECIAL REPORT

nomic literature suggesting that corporate tax can have a significant effect on investment location decisions. However, when other business environment factors such as bureaucracy and regulatory uncertainty are taken into account, tax becomes much less important. An efficient system in which companies can anticipate more easily how much it will cost to locate their investment in multiple European countries would make Europe as whole more attractive, regardless of corporate tax levels. The tax sweetener scandals have created an appetite for coordination that the Commission would be smart to exploit. Even Vice President Katainen has recently stressed that a common tax base proposal would help capital union. The drive for more coordination can easily dwindle as time passes and member states that oppose tax-base harmonization might succeed in stalling the process, as has happened since the project was launched in 2001. The Commission should therefore assess the reasons why some member states oppose the project. Concerns might be economic, because countries fear gradual loss of their fiscal autonomy and perceive tax-base harmonisation as a backdoor to fiscal convergence. Or they might be purely strategic: that a common methodology and enhanced transparency would reduce their leeway to hide illegal state aid that

attracts foreign investors. The Commission can address the first concern through a clear public commitment that implicit tax harmonisation will never be an objective. There are good economic reasons why a degree of tax competition between jurisdictions can be good: it disciplines countries’ fiscal strategies, for example, and reduces the risk of protectionist measures. In the US, states are not bound by a common corporate tax policy. There are also good political reasons: the democratic backing for the EU institutions is too feeble to meet the ‘no taxation without representation’ principle. And institutional constraints: the Treaty explicitly forbids tax harmonisation. Meanwhile, countries’ concerns that do not have an economic nature should be put under the spotlight. This would make it difficult for opponents of tax-base harmonisation to justify retaining their murky systems in order to circumvent state aid rules.

* Mario Mariniello joined the Brussels based think tank Bruegel in October 2012. From 2007 to 2012, Mario was a member of the Chief Economist Team at DG-Competition, European Commission. He holds a Ph.D. in Industrial Organisation from the European University Institute of Fiesole (Florence) and a M.Sc. in Economics from CORIPE (Turin).

EUROPEANBUSINESSREVIEW

SPECIAL REPORT

Europe must listen to its people by Elio Di Rupo*

Imposing reforms that are sometimes considered humiliating is the best way to jeopardize the construction of Europe, and plant the seeds of social devastation, populism and extremism, writes Elio Di Rupo.

ast month, Greek citizens voted en masse for Syriza. This is a cry of hope for a fairer society and a clear rejection of the austerity policy implemented by the European Union and supported by Antonis Samaras. Whether the European right wants it or not, and despite all of its efforts against the left during the Greek electoral campaign, the victory of Alexis Tsipras’ party is a political event that everyone must respect, including those in Europe. It also sends a strong message to the European institutions: austerity policies are a social, economic, democratic and above all human failure. Alexis Tsipras is the new Prime Minister of Greece. His colleagues at the European Council will have to both welcome and work with him; this is in the interest of Greek citizens as well as Europeans. The challenge now involves getting Greece back on its feet and keeping it in the Eurozone, rebuilding the trust of the Greek people and demonstrating that another Europe is possible.

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A few months ago, I told the Belgian Parliament that if we helped Greece, it would be to see the country live rather than see it die. The solution required here may not be reminiscent of the bloodletting used during the Middle Ages as a way to cure illnesses. I have been saying this for years on behalf of my party: European solidarity may not be mean financial support contingent on the introduction of reforms that create more poverty and unemployment and rob an entire generation of a better future. When Syriza secured its victory, representatives of the right thought it essential to point out that Greece would have to continue its reforms at all costs, even under Tsipras’ government. This indicates a deep contempt for democracy and the Greek people, who made a sovereign choice. It also illustrates a disregard for reality, as Greece’s social and economic situation is disastrous. The number of Greeks threatened by poverty has more than doubled in five years, rising from 20% in 2008 to over 44% in 2013. Responsibility shared, including by Europe.

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Supporters of austerity are mistaken in their stubborn dedication to this ideology. They risk adding a democratic crisis on top of an economic and social crisis. Just think about all of the political crises that have mounted up over the past few years, in addition to the financial crisis. We must not run the risk of losing all support for the European project. Europe must be built with the people rather than against them. The people of Europe need a more united, more social, more democratic and more environmentally friendly Europe to be able to build a better future. Europe’s citizens ask that the European Union protect and support them. Imposing reforms that are sometimes considered humiliating is the best way to jeopardize the construction of Europe and plant the seeds of social devastation, populism and extremism. Remember that in addition to Syriza’s victory and New Democracy’s failure, a neo-Nazi party came third in the election. Alexis Tsipras’ victory has aroused the hopes of immense numbers of people. However, Greece’s new Prime Minister cannot single-handedly reverse Europe’s neoliberal failure. Everyone who welcomes his victory must help. Every contribution to a new, fairer and more united Europe is welcome. As the natural representative of the working classes, the Party of European Socialists, and the European left in general, must further promote this message of hope and recovery, which must apply to all countries in Europe. At the European Council, I was able to gauge the ideological imprisonment suffered by Europe and could

see how every attempt to shore up the European social model is thwarted. The same words are always used: ‘reforms’, ‘liberalization’, and so on. Talking about the social consequences of the crisis, the social partners and social protection, for example, is considered by some to be a provocation. However, the real issue here is knowing how to protect and strengthen worker and consumer rights, rather than reducing or abolishing them. The real issue is not finding out how to get rid of essential public services but rather how to promote public investment to save schools, hospitals and accessible transport. The real issue is not limited to trust in the markets but also focuses on how to control finance to avoid further abuse. There is no miracle cure, and this also applies to austerity. Jean-Claude Juncker had declared that he was leading the ‘last-chance Commission’. Many now see Alexis Tsipras’ victory as a sign of change. First and foremost, we all need to unite to show how another Europe is vital for all Europeans. Together with others in Europe, the Socialist Party will continue the mobilization and to fight for a fairer, more democratic, more environmentally friendly and more united Union.

* Elio Di Rupo is the leader of the Parti Socialiste (the Belgian francophone Socialist Party) and a former Prime Minister of Belgium. **First published at Euractiv.com

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A need for UN to redefine its role by Martin Banks

The bitter conflict in Ukraine and elsewhere underlines the urgent need for the UN to return to its traditional peacekeeping role and “full international” dialogue. That is the keynote message to emerge from an international meeting to mark the 70th anniversary of the historic Yalta conference. alta-45: Past, Present, Future” was dedicated to the landmark meeting of the leaders of the “anti-Hitler coalition” - Joseph Stalin, Franklin Roosevelt and Winston Churchill. It was held to coincide with the conference when the “Big Three” met from February 4-11 1945 to map out Europe’s post WW2 future.

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Οnce again, the Crimean resort of Yalta and the Livadiya Palace, the old summer palace of the tsars, was the venue. Over the course of that seven day meeting 70 years ago the three war leaders made plans for the final defeat and fate of Germany, making key decisions which would shape world history for rest of the 20th century and beyond. Peace and

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reconciliation was also the theme of the 2015 conference, organised by the International Association of Peace Funds, Civil Society Development Foundation and Foundation for Historical Outlook. The two-day international forum was attended by 130 political scientists, politicians and civil leaders from 23 countries and covered 25 presentations, provoking lively and evidencebased debates. Sergey Naryshkin, Speaker of the Russian parliamentary lower house, urged the West to “stop using Crimea as a cause for confrontation” adding, “I hope international discussions like this will contribute to a better mutual understanding and our Western partners will finally stop using Crimea as a cause for confrontation.” Naryshkin, also head of the Russian Historical Society, said only an “open and fair” dialogue could bring the current “spiral of mistrust” in Europe to an end and “stop provocations and unilateral actions.” He said, “The only way out of this spiral of mistrust is to launch an open and fair dialogue on the true pressing problems and real rather than alleged threats to European security

and also stop provocations and unilateral actions.” Other speakers at the scientific conference included Tatjana Zdanoka, a Latvian MEP for the Greens Party, who said, “The postwar generation must fight for the historical truth although I have to say that this struggle is becoming more and more tough.” Further contribution came from Alain Guyot, of French civil society group Le Roue-Europe who cautioned that, with “war at the doors of Europe” the “valuable” contribution of such events “must not stop here”. His call for an international “conference for peace” was partly echoed in the wording of a resolution overwhelmingly adopted by participants. This states that the far reaching decisions reached seven decades ago by Churchill, Roosevelt and Stalin had established a “reliable and robust architecture”, based on the leading world powers’ influence. This accord had become an important landmark in diplomatic history and the “ultimate point” of the allies’ cooperation during WW2. Tellingly, it goes on to add, however, that the post-WW2 system of international relations, as well

as European security structure, had since been “destroyed.” The focus of the forum was on those processes that had “stimulated” this collapse and “overall tension in international relations.” In light of this, the resolution therefore calls for a return to the “dominant peacekeeping role of the United Nations, full international dialogue and rejection of a unipolar world model.” It also condemns “attempts to revive ideas of Nazism of any kind”, underlines the “timeliness and significance” of the post war alliance and calls for an annual international “Day of Honour” in recognition of this, possibly on 25 April,the day, in 1945, when Soviet and American troops met at the River Elbe, near Torgau in Germany marking an important step toward the end of the war. This contact between the Soviets, advancing from the East, and the Americans, advancing from the West, meant that the two powers had effectively cut Germany in two. The international community, says the resolution, should “in the spirit of Yalta” additionally strive for

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“earnest collaboration and constructive dialogue.” Before the meeting in 1945, it had already been decided that Germany would be divided up into zones to be occupied and administered by the Soviet Union, the United States, Britain and France. It had also been agreed that once the Allied forces entered Germany, the German war machine and military would be disassembled. At their historic meeting, the Allied leaders agreed that their only obligation to Germany was to provide the bare minimum to ensure the country’s population could survive following the defeat. These provisions seemed to reflect that important lessons had been learnt from the end of the First World War – that defeating, punishing and then abandoning Germany would likely lead to long term resentment and reprisals. Prior to the conference, Roosevelt and Churchill agreed to meet in Malta for preliminary discussions, and as Churchill famously declared in his message to the U.S President “No more let us falter!

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From Malta to Yalta! Let nobody alter!” Anatoly Karpov, President of the International Peace Foundations Association (IPFA), said that, given the 70th anniversary, last week’s conference in Yalta was particularly timely, adding, “The agreements of 1945 became a good example of interaction between the three great powers in pursuing peaceful coexistence.” He added, “’The world has experienced a lot of changes since then, including the growth of nationalism and disruption of national states.” The 1945 Yalta conference probably represented the high-water mark of Allied wartime collaboration and, in recognition of this, a monument to the three world leaders was unveiled front of the Livadia Palace at the close of “Yalta-45: Past, Present, Future.” The monument, entitled ‘The Big Three’, is a ten-ton statue and the work of Russian sculptor Zurab Tsereteli. It is a fitting memorial to those highly historic events back in February 1945.

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Taiwanese entrepreneurs take advantage of Turkey’s booming economy by N. Peter Kramer

few months ago, in the upscale Istinye Park shopping center in Istanbul, a large crowd and extensive media presence were drawn to the first day of a special event showcasing a variety of technological product from Taiwan. The happening was organised by the Taiwanese Trade Center in Istanbul. 43 Taiwanese firms that included Acer, ASUSTeK Computers and HTC displayed fitness equipment, home appliances and information and communications technology (ICT) products such as laptops, smartphones and tablets. The showed items were all winners of the Taiwan Excellence Award, created by the Taiwanese Ministry of Economic Affairs to recognise and encourage the production of innovative, value- added merchandise. ‘In Turkey, many businesspeople and manufacturers are very familiar with Taiwanese brands, but the average consumer isn’t’, says Patty Yen, director of the Taiwan Trade Center in Istanbul.’ Therefore the event has been designed to increase consumer awareness of Taiwanese brands in Turkey; while highlighting the innovative design and superb quality of the products’. She points out that a variety of marketing campaigns have been arranged in recent years to promote Taiwanese brands in the country, adding that the positive feedback from local people at the Istinye Park event was very encouraging. ‘We are optimistic

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about Taiwanese products gaining increasing acceptance in Turkey’s consumer market’, Ms Yen says. The number of Taiwanese-run companies in Turkey has risen due to the dynamic growth in the emerging market economy of the country. Over the years a number of Taiwanese companies have set up shop in Turkey by establishing marketing offices, production facilities or joint ventures with local partners. ASUSTeK Computers, trading under the name ASUS in Turkey, is one such a firm, having started selling goods in the country through a local agent already in 1989. In 2005 the electronic giant set up marketing and after-sales service offices in both Ankara and Istanbul. ‘Given Turkey’s rising per capita income and the growing spending power of its consumers we are intent on developing our business in this market’, says Kevin Li, ASUS’ regional director for Western Europe and Turkey. In terms of its consumption culture and affinity for ICT products, Li finds Turkey quite westernised. Its potential as an emerging market is high, and the competition between all the major brands in the country is fierce. Still, with its wide range of electronic products and 25 years of experience in marketing development and distribution, ASUS has established a strong presence in Turkey. It is the biggest supplier of graphic cards and motherboards in the country, and one of the top three vendors of desktop and laptop computers.

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Another Taiwanese company that has been achieving success in the market is Yang Ming Marine Transport Corporation. It began direct shipping services between East and Southeast Asia and Turkey in 2004, reducing delivery times from about one month via transshipment routes to just one week. Originally the company entered the Turkish market in 1995 by partnering with shipping agent Egekont Container Transport, which is based in the large Mediterranean port of Izmir. In 2009 the two firms formed the joint venture Yang Ming Anatolia Shipping Agency in order to foster closer cooperation. ‘By providing reliable services and employing local workers who understand Turkish business practices and culture, we have managed to win customer trust and secure our position in the market’, says Yang Ming Anatolia managing director Wang Yong-kai. Turkey has registered impressive economic growth in recent years, and various government stimulus programmes have produced a steady increase in exports and imports. Yang Ming Anatolia is seeing a ten percent annual rise in sales, and Yang Ming Marine plans to increase its fleet of 96 container vessels by an additional 15 ships in view of the growing volume of trade. This development of convenient shipping links has helped Taiwanese manufacturers of large products such as home appliances and machinery expand their operations in Turkey. TECO Electric and Machinery Co, which has sold industrial motors through a local agent since 2003, established a sales office Istanbul in 2013 to further develop the business. Andy Liu, director of TECO Elektrik Turkey A.S., says that demand for his company’s industrial motors has increased as a result of Turkey’s strong economic performance and the numerous public infrastructure projects under way in the country. TECO Elektrik hopes to expand sales of its industrial motors from Turkey’s traditional industries like cement and mining to the growing electric vehicle and wind turbine sectors. It also plans to increase its business in home appliances such as air conditioners amid a surge in housing development projects. There are also examples of successful businesses that were developed as a result of collaboration between Turkish and Taiwanese entrepreneurs. David Yu established the Linfer Group in Istanbul as a joint venture with a local distributor in 1992. Linfer has now 20 retail outlets around the country. ‘The amount of time we have been in the market and the lasting relationships we have built with our customers have helped us grow our business’, Yu says. ‘Low priced mainland

China products can’t compete against our extensive product lines and excellent after-sales service’. Yu imports auto body parts into Turkey from about 100 Taiwanese suppliers. He claims that his customers know the difference between Taiwan-made products and those produced in mainland China. ‘The strict quality control of Taiwanese manufacturers ensures reliability. We hardly ever hear any complaints from our clients’. Realising the enormous potential of Turkey’s developing industries, Tommy Lin set up Limac in Istanbul in 2003 to produce artificial leather using raw materials imported from Taiwan. Now he has two factories and two sales outlets in the country. ‘There are potential benefits as well as risks of course when operating in an emerging market’, Lin notes. ‘Turkey is experiencing rising domestic consumption, as evidenced by its thriving shopping areas. At the same time, constant changes in state or local laws are causing fluctuations in market conditions.’ Limac’s capacity to manufacture smallvolume runs of faux leather with different patterns has allowed it to stay in business when others have failed. Gema Wang is a foreign trade consultant with Yuksel, Turkey’s top supplier of satellite TV equipment under its proprietary names Next and NextStar. Ms Wang encourages Taiwanese electronic companies to set up production lines in Turkey to take advantage of the country’s booming domestic demand and its strategic location. ‘Taiwanese manufacturers need to demonstrate perseverance and an adventurous spirit if they want to achieve sales growth. I would like to see a complete supply chain built here that can compete with mainland China and South Korea’. Sharon Chang chair of the Turkey Taiwan Chamber of Commerce echoes Gema Wang regarding the benefits of Turkey’s unique geographic location, pointing out that the country is used as a regional hub by many multinationals to manage their efforts in neighbouring markets. “Inevitably, there are a lot of difficulties to be ironed out in the process of developing new customers and markets’, Chang says. ‘I takes time and patience!.

(With thanks to Taiwan Review)

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Arctic energy: The new geopolitical hotspot? By Shebonti Ray Dadwal*

he Arctic nations – Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States – have generally managed to overcome contentious issues amicably, thereby ensuring that the region remains largely peaceful. However, things may be changing now. In fact, according to the UK-based consultant group Polarisk, 2015 may see the Arctic emerging as a “geopolitical flashpoint”. On December 26, 2014, Russian President Vladimir Putin signed a new military doctrine for the country. While focusing on the perceived threat emanating from the expansion of NATO, it also mentioned the need to strengthen ties with nonWestern nations like China and India. More importantly, the doctrine also mentions the need

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for Russia to extend its influence in the Arctic region. To this end, Russia has embarked on a spate of port construction projects across the Arctic, and is upgrading its other military capabilities in the region. This includes construction of a year-round airbase in the New Siberian Islands archipelago, over and above 13 additional airfields and 10 air-defence radar stations. This is not the first time Russia has displayed a more muscular stance vis-à-vis the Arctic. A year earlier, Putin accused the U.S. attempting to change the strategic balance by pushing for NATO’s further eastward expansion, and had also referred to the danger of a militarisation of the Arctic. However, it appears the claims of the Nordic states that havein turn galvanised Russia into fur-

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thering its claims on the Arctic. Putin announced that Moscow would soon submit an application to the UN Commission on the Limits of the Continental Shelf (CLCS) for an expansion of its Arctic borders by 1.2 million square kilometres in March 2015. It is ostensibly on the basis of the Russian research expedition, Arktica, in 2007 wherein Russian scientists were the first to descend to the seabed beneath the North Pole, after which they planted a Russian flag. The objective of the expedition was to strengthen Russia’s 2001 claim to the Mendeleev Ridge, Alpha Ridge and Lomonosov Ridge based on their supposed linkage to the Siberian shelf. Although the other Arctic nations objected strenuously to such claims, if it succeeds, Russia will be able to gain access to the natural gas and oil reserves therein, and position itself to take part in any future trade through the opening of the northern sea route. This is a far cry from Moscow’s earlier cooperative stance in the Arctic. Despite being the strongest power in the Arctic, Russia was ready and willing to cooperate with other Arctic and non-Arctic states to develop the region’s vast energy resources. According to the U.S. Energy Information Administration (EIA), the Arctic comprises some 22% of the world’s undiscovered oil and natural gas reserves.

But recently, following the Crimean conflict and the subsequent imposition of sanctions on Russia by the U.S. and some EU states, and the recent drop in the price of oil - the source of much of Russia’s revenue - Moscow is getting ready to defend what it sees as its turf. This follows a series of actions by its Arctic neighbours. In mid-December 2014 Denmark, together with Greenland filed a submission to the Arctic Commission on the Limits and the Continental Shelf (CLCS), claiming ownership of around 900,000 square kilometers of the continental shelf in the Arctic Ocean. In so doing, Denmark will become the first country to attempt to claim outright ownership of the North Pole. Canada too has made overlapping claims to the North Pole and large swathes of the territory. On the other hand, Canadian Prime Minister Stephen Harper is likely to use Denmark’s claim to reaffirm his stance on Arctic sovereignty in the run-up to the 2015 elections, while Russia too will be submitting its claims at the end of March. In fact, in December 2012, Canada, along with the U.S., signed two agreements that aim to expand bilateral military training, security and defence operations in the region. The intention is to jointly prepare for any real or perceived threats and to work towards establishing a North American Arctic foreign policy.

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Norway too has been moving troops and equipment to the region, and has relocated its coastguard headquarters further north, while basing its largest active army unit above the Arctic Circle. No doubt, the recent moves by several Arctic nations are in response to Russia’s Crimean adventure. However, given that much of the Arctic nations’ interest in the region is due to the vast energy potential therein, which according to the U.S. Energy Information Administration (EIA), holds some 22% of the world’s undiscovered oil and natural gas, the need to control the resources in what may be the last frontier of the traditional energy reserves may also have something to do with it. Yet, over the last few months, with oil - and overall energy - prices, falling, will the Arctic energy riches be viable? After all, energy production in the region is the most expensive in the world, with production costs per barrel costing around $78 on average. And in fact, Russia’s former prime minister and current foreign minister Yevgeny Primakov was recently quoted as saying that the country should not rush to exploit Arctic offshore oil, as Russia has cheaper options to produce oil (presumably in Siberia). Some experts have even predicted a slowdown in exploration in the region.

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However, Russia’s minister of Natural Resources and Environment of Russia Sergei Donskoy has said suspension of geological exploration on the Arctic Shelf will have negative impact on the entire industry. According to him, if Russia suspends its exploratory work in the Arctic, it will impede the country’s technological developments, similar to the suspension of such work in the 1990s which set Russia back as an energy giant for several years. Moreover, having signed a multi-billion dollar deal with China in 2014, as well as seeking to establish itself as a major supplier to other Asian countries, including India, Russia needs access to as much energy as it can. With the opening up of the Arctic due to global warming and the expected rush for competing claims, Russia needs to establish its claims on a region where it feels it has an advantage. With the U.S. soon taking over the chairmanship of the Arctic Council, and given that most of the other members of the Council are NATO members, Russia’s actions in the region may be seen as way of hedging its bets.

* Shebonti Ray Dadwal Research Fellow at the Institute for Defence Studies and Analyses, New Delhi

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RIEAS PROFILE

The Research Institute for European and American Studies, Greece (RIEAS) www.rieas.gr

he Research Institute for European and American Studies (RIEAS) was founded in 2006 in Athens, Greece as a non-profit research institute established under Greek Law. RIEAS is autonomous organization. Its activities and views are independent of any public or private bodies, and the Institute is not allied to any political party, denominational group or ideological movement. RIEAS promotes the understanding of International Security. Special attention is devoted to intelligence analysis, counterterrorism, de-radicalization, extremism, illegal migration, law enforcement and internal security, crisis management, infrastructure security and safety, as well as policy making on national and international levels. RIEAS seeks to achieve this objective through research, dissemination and close interaction with policy makers and stakeholders at all levels. The Institute maintains the most extensive library and documentation centre in Greece on security and crisis management. RIEAS is an institute with an international focus: young analysts, journalists, military personnel as well as academicians are frequently invited to give lectures and to take part in seminars. RIEAS maintains regular contact with other major research institutes throughout Europe, the United States, Canada, the Middle East, Russia and Southeast Asia. RIEAS has published 168 Research Papers and regularly briefs diplomats, government officials, academicians and journalists on its research projects and results. RIEAS, as a Partner of a consortium with five partners (Northern Ireland-UK, Spain, Germany, Bulgaria, and Israel), participated in and completed

successfully a two year (2009-2011) EU-FP7 research project titled: SAFE COMMS on â&#x20AC;&#x153;Counter-terrorism Crisis Communication Strategies for Recovery and Continuity.â&#x20AC;? RIEAS is the founder of the European Intelligence Academy (EIA), Mediterranean Council for Intelligence Studies (MCIS), established the Greek Chapter in the International Association of Law Enforcement Intelligence Analysts (IALEIA) and is affiliated with the International Association for Intelligence Education (IAFIE). Since 2013, RIEAS is the publisher of the Journal of Mediterranean and Balkan Intelligence (JMBI).

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Our makers town and the makers movement By Criseida Martl nez Marco*

Make, create, invent. Those are the pillars of a movement that is getting more and more followers around the world. From decorative items to exclusive garments, building and recycling are part of a revolution that crosses all continents.

he Maker Movement is a phenomenon which gives us more creative, interactive and mostly cheaper products. The Maker Movement is the new wave of entrepreneurs and start-ups and it has been made possible thanks in part to technological advances. Through Internet, fans and experts found the perfect place to meet, socialize and share knowledge and tools. This trend may be the result of a hobby, an excuse to produce according to the imagination or an idea to save money. It doesnâ&#x20AC;&#x2122;t matter if you follow in the foot steps of someone successful or pave your own path, the most important is that you do it yourself and try to follow your own rules. However, what is a maker? They are experts in different fields of Do-It-Yourself techniques and em-

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powered by Internet & crowd funding. The maker is a person that uses tools and technology to build products. Makers can be hobbyists or professionals, who apply cutting edge technologies to traditional things. From 3D printing to robotics, from wearable technology to new ICT, the makers are the innovators that fit perfectly with the European business and cultural success stories. According to Dale Dougherty, the precursor of the movement and founder of Make magazine, the success of the movement has been characterised by the willingness to engage with objects in a different manner, moving away from being merely a consumer. Dougherty also outlined the role that Maker Faire and Makerspaces play in the exchange of ideas and in the creation of a sense of

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community, alongside their role in satisfying the demand for affordable access to industrial tools and shared workspaces. Indeed, the Maker Faire are a series of events in which thousands of innovators create products and network to share experiences, tips and create potential partnerships for the future. After various researches and events in the fields of entrepreneurship, education and EU enlargement the results have shown a necessity to foster entrepreneurial and STEM education around Europe. ThinkYoung, the first think tank for young people is actively involved in researching about these themes and has realised that one of the ways to achieve this is by promoting the Maker Movement. As a result, ThinkYoung, in collaboration with Martens Center for European Studies, is proud to be hosting the first #MakersTown in Brussels. The MakersTown will be a village with different thematic areas, where the Makers will showcase the most recent and innovative projects to the public using stands, workshops, and audiovisual studies. It will take place on July 2nd and 3rd at the AutoWorld Cinquantenaire Museum, which is the best example of Europe’s successful industrial past, and will serve as a house for Makers who will shape Europe’s entrepreneurial, industrial, and technologically successful future. Open and bold panel discussions will take place, putting together start uppers of the Maker’s Movement, business leaders and European politicians in order to facilitate interaction and exchange of ideas between young innovators, entrepreneurs, investors, academia and policy makers. The aim is to establish a competitive annual Fair in Brussels bringing together young entrepreneurs looking for investors and venture capital and by doing so get visibility to entrepreneurs, start-ups and makers and influence the process of decision making at European level through concrete policy recommendations. Making is a fantastic way to engage many young innovators, but it’s only the first step toward an even greater revolution. ThinkYoung wants to be one of the promoters for this innovative movement and the MakersTown is just the first of many steps for fostering entrepreneurial education in Europe.

* Criseida Martínez Marco is Communications Officer of Think Tank Think Young

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Burgenland hosts Congress of Association of European Journalists by N. Peter Kramer *

o other region in Central Europe offers as many contrasts and differences as Burgenland, Austria’s most eastern region, bordered by Hungary, Slovakia and Slovenia. Here the foothills of the Alps flow into the steppes of the Eastern European plains and you find a mixture of various cultures, religions, traditions, costumes, recipes and plants; united in a peaceful and fruitful manner. The Association of European Journalist chose Burgenland for its 43rd annual congress and general assembly 2014, in the little city of Neusiedl, on the lake with the same name. The Congress opened with an address by Laszlo Nagy, one of the organisers of the Pan European Picknick at Sompronpuszta (Hungary), close to the Neusiedl Lake in August 1989; a defining moment in the lead-up to the collapse of the Iron Curtain. Mr Nagy said the organisers of the picknick never had thought it would be so easy and that it would lead to the fall of the Berlin Wall within months.

Burgenland’s success story: cross border cooperation and EU funds Burgenland, once Austria’s poorest region, is now a model region because of a clever use of EU funds and border crossing cooperation in Central Europe. In 2014 it has become self-sufficient in energy-consumption by using renewables like wind-energy and biofuel. Harald Ladich, from Regional Management Burgenland, explained how the region profited from EU-funds when Burgenland became Austria’s only ‘Target Nr 1’ region. When Hungary joined the EU in 2004 a wide crossborder-cooperation began. Austrian companies opened subsidiaries over the border to make use of lower wages there and conquer new markets. Matyas Firtl, member of the Hun-

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garian Parliament for Fidesz for the Sopron region, explained how Hungary used EU-funds for projects in infrastructure and tourism. He gave examples if crossborder cooperation in schools, transport and tourism.

AEJ Resolution on safety of journalists and dangers of impunity The AEJ Annual General Assembly passed a Resolution, condemning as unacceptable the high number of violent attacks against journalists, acts of arbitrary harassment and interference, and other attacks against media freedom and freedom of expression in European countries. The AEJ reminded the governments in Europe in particular of their obligation to take the necessary measures to protect journalists from all forms of attacks and threats and to ensure that crimes against journalists are swiftly and effectively investigated and prosecuted and the perpetrators are brought to justice.

Otmar Lahodynsky AEJ International’s New President After an AEJ Int. Presidency of four years (2010-2014) Eileen Dunne (Ireland) stepped down. The General Assembly elected unanimously the Austrian journalist Otmar Lahodynsky as her successor. As new Vice-President William Horsley (UK) was elected; he will also continue his succesful activities as AEJ Special Representative for Media Freedom.

* N. Peter Kramer was from 2004 till 2014 AEJ’s International Secretary-General and Special Representative to the EU in Brussels.