EUROPEAN BUSINESS REVIEW (EBR)

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EUROPEAN BUSINESS SUMMIT 2015

EU Affairs

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Does Cameron have a chance to win the game?

INDEX 06 EDITORIAL Does Cameron have a chance Founder Konstantinos C. Trikoukis

to win the game?

Chairman Athanase Papandropoulos

08 OPINION

Publisher Christos K. Trikoukis

10

And Britain Voted for . . .

Editor in Chief N. Peter Kramer

12 INTERVIEW

Editorial Consultant Anthi Louka Trikouki

Brussels is complicated,

Issue Contributors N. Peter Kramer, Judy Dempsey, Frank-Jürgen Weise, Ankica Paun Jarallah, N. Peter Kramer, Dr. Antonis Zairis , George Zairis, Kapil Chandra, Zane Williams, Eva Paunova, Jan Techau, Yianis Varoufakis, Guo Ping, Pierre Defraigne, Philippe De Buck, Dr. Chiang Been Huang, Richard Dobbs, James Manyika, Jonathan Woetzel, Nikita Gaur, Lisa Coffey, N. Peter Kramer, Joan Clos

but the EU institutions too

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Financial Consultant Theodoros Vlassopoulos

Europe’s economic situation today and the role of QE

22 EU AFFAIRS

Correspondents Brussels, London, New York, Paris, Berlin, Istanbul, Athens, Helsinki, Rome, Prague Public Relations Margarita Mertiri

14 ECONOMY

Europe’s digital revolution

22

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28 SPECIAL REPORT What is needed for Greece’s recovery

38 HEALTHCARE Building on 20 years of success: Future challenges for Taiwan’s National Health Insurance

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40 TRENDS The four global forces breaking all the trends

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Reproduction without official permission of the publisher is strictly forbidden. Every case is taken in compiling the contents of that magazine, but we assume no responsibility for the affects arising therefrom.

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EDITORIAL

Does Cameron have a chance to win the game?

By N. Peter Kramer

D

avid Cameron, the British Prime Minister, has a strong position. His Conservative party recently won a majority in the UK general election, reason to announce that the promised referendum on the UK’s EU membership will take place before the end of 2017.

British voters will have the choice of voting to leave the EU or to stay in. Cameron wants to see substantial changes in the way the European Union functions or rather dysfunctions. He has to convince the other 27 EU leaders to cooperate. Before Cameron meets them all at the next EU Summit in Brussels on June 25 and 26, he plans a tour to all EU capitals.

Cameron started in Berlin. After their talk, German Chancellor Angela Merkel indicated she is willing to go as far as changing the EU treaty in order to keep the UK in the European Union. ‘Wherever there is a will, there is also a way; and this should be our guiding principle’, she told journalists after meeting the UK Prime Minister. Merkel said she has ‘clear hope to see Britain remain in the European Union’ and agreed ‘to cooperate in this process’.

She voiced willingness to grant the UK an opt-out from ‘ever closer Union’. This phrase is contained in the 1957 Treaty of Rome, the EU’s founding charter, but Merkel said it doesn’t reflect contemporary real-

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ity. ‘A Europe of two speeds is effectively our reality today’, she continued. ‘We already have different speeds and I have no problem at all to have this principle of different speeds in the future’.

His next stop was Warsaw, where Polish Prime Minister Eva Kopacz told Cameron that she doesn’t like his ideas about limiting welfare benefits for EU (read: Polish) citizens who work in the UK. But, Poland is, like Britain, in favour of deregulation, ‘withdrawing certain directives, which have no added value’ and of giving national parliaments more say on EU legislation. Recently Poland elected a new President, an MEP of the Law and Justice Party, that cooperates with Cameron’s Conservatives in the ECR group. Later in the year there are national Polish elections, with a chance that the eurocritical Law and Order Party will take over the power in parliament and government. Good for Cameron.

So, the start of Cameron’s tour showed positive perspectives for him. Angela Merkel, EU’s leading lady, often sets the tone for the Council of 28 EU member states. But in the end, all 28 leaders have to agree.

And Cameron probably heard quite well in Paris the remark of French Foreign Minister Laurent Fabius, accusing the British Prime Minister of trying to ‘dismantle’ the EU…

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OPINION

And Britain Voted for . . .

By Judy Dempsey*

What an election!

D

efying the opinion polls, British Prime Minister David Cameron’s Conservative Party has secured another victory after the UK general election on May 7—and with a majority at that.

This could be the great chance for Cameron to reverse what has almost turned into the inevitable: Britain leaving the EU. This may seem counterintuitive. Yet Cameron’s victory means that under his leadership, Britain’s relationship with the EU could be settled once and for all. There is no doubt that he will stick to his promise to hold a referendum on the UK’s EU membership by 2017.

The opposition Labour Party is unlikely to play a serious role in this debate. For this beleaguered party, which was trounced in the election, there is no talk about being a coalition partner with the Conservatives. Nor is there any possibility of postponing an EU referendum, something that Labour at one stage was pondering.

This is a good thing. The festering boil has to be lanced.

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For far too long, successive British governments have fenced with the EU institutions over policies and competences. Looking back, it’s a wonder that Britain ever joined the EU. Yet it was a Conservative prime minister, Edward Heath, who took the UK into the EU’s predecessor in 1973.

Since then, a side from an in/out referendum in 1975, successive British governments have refused to really sell the idea of Europe—let alone have a real debate about Britain’s future, inside or outside the EU. Look how, during this year’s election campaign, the political parties shied away from the issue. With the odd exception, they pretended the EU simply wasn’t there. Instead, it was, understandably, the economy that was the number one issue.

The perception that the economy would be in better hands under Cameron’s chancellor of the exchequer (finance minister), George Osborne, than under any Labour government was what gave Cameron a second tenancy in No. 10 Downing Street, the prime minister’s official London residence.

Getting back to the referendum, whatever disdain some European leaders hold for plebiscites, it is

OPINION important that EU citizens can vote on their country’s future in the union.

Britain’s pending referendum has several implications for Cameron and other EU leaders. The geostrategic considerations of Britain leaving the EU must not be underestimated—and British and EU leaders should spell that out.

Moreover, if EU leaders genuinely want and need Britain to stay in the EU—and if Cameron believes deep down that Britain’s place is inside the EU—then the big question facing the prime minister and his EU counterparts (especially German Chancellor Angela Merkel) is what both sides can give to keep the UK in.

And Cameron, if he believes that Britain should remain in the EU, must campaign for it.

This does not mean pandering to the populist and anti-immigration UK Independence Party (UKIP).

Preliminary results show that UKIP is set to become the third-largest party in terms of votes cast. But those votes won’t be translated into seats: Britain’s electoral system is based on the principle of “first past the post,” in which each constituency is won by the one candidate who receives most votes, and not on proportional representation.

With the kind of support UKIP won, it behooves Cameron to tell the truth about the economic role of immigrants and about the EU. Clearly, the Labour Party is out of the picture when it comes to Europe. The party will now be preoccupied

with its own leadership crisis after Ed Miliband stood down as leader. As for the Liberal Democrats, Cameron’s hapless coalition partner, the election all but wiped them out.

The party that sucked Labour dry and that will be important for the EU debate is the secessionist Scottish National Party (SNP). It won 56 of Scotland’s 59 seats, becoming a powerful voice in the UK’s 650-member House of Commons.

With such a strong SNP, Cameron knows what he is up against: a Scotland that wants far more autonomy from London. Failing that, SNP leader Nicola Sturgeon could use her victory to revive the issue of Scottish independence, which was rejected in a referendum in September 2014. And because the Scots are by and large pro-European, Cameron can ill afford to ignore their politics and their policies.

No wonder Cameron was quick to reach out to the SNP. He promised more autonomy “by implementing as fast as we can the devolution that we rightly promised . . . for Wales and for Scotland.”

It is also time for Cameron to start the debate about the EU and say publicly where he really stands. If he doesn’t exercise this leadership, his European counterparts cannot help him. Brexit could become a self-fulfilling prophecy. *Dempsey is a nonresident senior associate at Carnegie Europe and editor in chief of Strategic Europe.

EUROPEANBUSINESSREVIEW

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OPINION

Better public administration is key to combatting youth unemployment

By Frank-Jürgen Weise and Ankica Paun Jarallah*

T

he impact since 2009 of the EU’s economic and financial crisis on the labour market for young people has been deep and unsettling.

Youth unemployment has risen so significantly that in some EU countries, particularly in southern Europe, one in five young people are not in employment, education or training.

These levels of youth unemployment are disastrous.

That there are so many young people without hope and without prospects is bad enough, but on top of that, there are huge economic and societal costs.

Even if the European economy recovers, many young people will not be able to find a good job.

Yet it is unacceptable that unemployment should be the first labour market experience of young people when they finish their education or training. Europe needs to mobilise all its forces in to combat youth unemployment.

EU leaders have agreed to set up a Youth Guarantee scheme designed to soften the impact of the crisis.

But the high rates of youth unemployment often have deeper roots. They also point to shortcomings and structural weaknesses in such other spheres as

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public administration, education and labour market institutions. The Youth Guarantee’s promise is that all young women and men under the age of 25 will receive a good-quality offer within four months of leaving formal education or becoming unemployed.

But labour market conditions differ around Europe, so fulfilling this promise will require a broad range of measures that must be tailor-made for each country. This implies a significant financial investment by member states that could then be topped up from EU funds. The medium- and long-term benefits of successfully implementing the Youth Guarantee are huge, making these costs the best way to ensure sustainable future growth in Europe.

With last year’s establishment of the European Network of Public Employment Services (PES), we now have a firm basis for co-operation on labour market policies. The aim is to reduce unemployment by increasing employment service efficiency, by fostering exchanges and mutual learning. This will help to improve the functioning of labour markets by better matching jobseekers and employers and by promoting mobility. The PES Network has created

OPINION

a formalised “Benchlearning” system that combines elements of benchmarking and mutual learning.

One of the Network’s major tasks is to enable public employment services in member states to identify optimal strategies for combatting youth unemployment. This is complicated by differences in the level of resources available to national services and by the range of challenges posed by labour markets in the various member states. Sharing experience on successful measures and adapting those measures to fit other national labour markets could be an important first step in developing new solutions to youth unemployment, but this will only be effective if there is a deep understanding of the unique nature of each country’s labour market.

All countries need to prioritise funding for tackling youth unemployment. The EU will top up national spending through the European Social Funding, the European Investment Bank and €6bn included in the Youth Employment Initiative. However, it is vital that public authorities are able to make efficient and effective use of the money. Simply handing out extra cash will not solve the problem. We must help disfavoured countries build structures that are better equipped to tackle youth unemployment.

The Youth Guarantee together with the PES Network will help, but there are a number of issues that must be addressed.

Among the most important is making sure young people get qualifications and skills that meet employers’ demands. This should be done throughout their education and not left until they are already looking for work. To do this, we need to improve educational and training systems to incorporate skills and knowledge that are directly relevant for the labour market. This requires a profound knowledge of national labour market conditions.

Another priority area is the transition from school to employment. We need specialised structures in public administrations to support young people after they finish education. It’s vital they are provided with tailor-made job placements and career counselling covering job opportunities at regional, national and European level. The authorities also need to form a better picture of the generation of young people who are seeking to enter the labour market, so they can respond to specific problems hampering young jobseekers, such as mobility costs or lack of language skills.

Improving public employment services should not be done in isolation. We need strong co-operation between the public and the private sector, bringing together employment services, career guidance providers, education and training institutions, employers and trade unions. Given the extraordinary levels of youth unemployment, it’s particularly important to improve the sometimes difficult relationship between employers and unions. Building trust between social partners could help the search for more flexible solutions to integrate young people into the labour market. The future of millions of young people should not be held back by ideological controversies or political negotiations. Beyond the current crisis, major trends such as the digitalisation of the world of work are beginning to shape our labour markets. By building well-functioning and flexible public structures with experts in the field of youth employment, Europe will be able to face these future labour market challenges successfully. *Frank-Jürgen Weise is the Chairman of the Executive Board of the German Federal Employment Agency and Chair of the Board of the European Network of Public Employment Services - Ankica Paun Jarallah is Director General of the Croatian Employment Service and First Vice Chair of the Board of the European Network of Public Employment Services

EUROPEANBUSINESSREVIEW

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INTERVIEW

Brussels Commissioner Alain Hutchinson (left) with President of the Brussels Region Rudy Vervoort

Brussels is complicated, but the EU institutions too

An interview with Mr. Alain Hutchinson, Brussels Commissioner for Europe

By N. Peter Kramer

A

t the beginning of this year, in its pursuit to strengthen its role as the Capital of Europe, the Government of Brussels’ Capital Region decided to appoint a ‘Brussels Commissioner for Europe and International Organisations’, Alain Hutchinson. Mr Hutchinson calls the initiative to maintain and further develop the direct relations between the regional government, the EU institutions and the numerous other international organisations based in Brussels, only logical after nearly sixty years of European and international presence in Belgium’s capital. Up to now it was the Federal State of Belgium that had the exclusive and official prerogative of representing Brussels interests in its Host Nation Policy. However, after six successive reforms of the Belgium State into a federal state with three regions, the Brussels Capital Region will formally participate in this Host Nation Policy via its own commissioner. Goals will be met by simplifying processes and raising efficiency in issues which Brussels faces as the host region.

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‘Our mission is to welcome all EU institutions and international organisations on Brussels territory and ensure their deployment in harmony with the development of the Brussels Capital Region and the needs of its 1.2 million inhabitants’, according to Hutchinson. Balancing these two sometimes conflicting interests will not always be easy; but as a former Member of the European Parliament he knows ‘Europe’ and as a former regional and local politician the Brussels side of the coin.

Given that EU institutions and international organisations, ranging from NATO to all kinds of NGO’s, count for 17 percent of employment and for 10% of the GDP in the Brussels region, it is clear how important the presence of all these organisations is. But their presence over the years also caused friction with Brussels inhabitants, especially in that part of the city now known as the ‘European Quarter’, aroundRond-point Schuman and Place Luxembourg. Many rows of nice houses in good condition have been pulled down to make way for dull high

INTERVIEW

rise office blocs. Restaurants, bars, shops in the European Quarter are closed for the weekend resulting in empty and deathly silent streets and squares where no sign of life can be found. To bring this part of Brussels back to life is one of the challenges for Commissioner Hutchinson. Born and bred In the Belgian capital, he is optimistic and points to new apartment buildings springing up in the area. The beginning of the return of residents to the European Quarter is visible.

Place Luxembourg: a good example Place Luxembourg, in front of the megalomaniacal buildings of the European Parliament, is more or less the lively entrance of the European Quarter coming from the direction of the historic city center. On ‘Place Lux’ (as it is called by the users) the Parlamentarium is situated, the visitors center of the EP. It took 6 years to build it at a cost of €21million. In 2014 the centre attracted 360.000 visitors and became the 3rdmost visited attraction of Brussels. At the moment the House of European History is in the making. After long deliberations European History will start in 1946; European history before this year is ‘too complicated’ to show, was the conclusion of the EP committee responsible for the preparation. Anyhow, it will bring even more visitors to the area.

‘Place Lux’ is lively and busy during the week, with a peak after 5 pm on Thursday when hundreds of parliamentarians and their staffers are celebrating the end of the workweek and no traffic is possible on the roundabout. However the square doesn’t have the modern contemporary look users and visitors may expect. One of the projects for the Brussels Commissioner is to coordinate a real upgrade: regulations for bars and restaurants, the centre of the square needs a thorough rethink and proper signalisation for the busy traffic is also much needed.

‘Brussels is complicated, but the EU institutions too..’

Mr. Hutchinson agrees that Brussels is a complicated administration, 19 independent municipalities which make up one of Belgium’s regions, Brussels-Capital Region. Nevertheless the agreement is that the Commissioner will act as single point of contact for all EU institutions and international organisations. He will be consulted on any public authorityproject of the region. ‘But’, the Commissioner says, ‘the EU institutions are also complicated. I discovered that there was not much of coordination between them regarding Brussels subjects. They are used to each talking for them themselves with Brussels.’ All the more

reason for him to start a regular high level contact with European CommissionerKristalina Georgieva and the Secretary-Generals of the European Parliament and the European Council around his table. ‘We decided to meet every half a year, next time will be in September; such a high level contact smoothes the way for the civil servants to organise and execute the practical work’.

Important role for Press-Club Brussels Europe ‘Brussels is the largest press centre in the world and currently includes 945 journalists accredited with the European Commission and the European Parliament and approximately 270 accredited members of the “technical press” (cameramen, photographers, etc.), totalling some 1.250 people working in international media in Brussels. During European summits these numbers increase and between 1200 and 1700 journalists apply for accreditation with the Council’, the Commissioner states. ‘Unfortunately a number of media organisations believe that European affairs can be covered just as well from their national desks and seem reluctant to keep their correspondents in Brussels. I think this is a mistake. There is an enormous wealth and variety of first-hand information and contacts on hand here in Brussels. The importance of the Press-Club Brussels-Europe in this matter is unquestionable. Although still very young it must become the global Brussels media hub where not only journalists meet, but where lots of other people gather and can interact: policy makers, business people, diplomats, etc For this reason, the initiative to create a “diplomatic platform” is more than welcome; a forum where the EU is at the heart of the debate, but where the ties with Brussels should be emphasized whenever possible.”

The Expat Welcome Desk Commissioner Hutchinson didn’t want to forget to mention at the end of the interview the Expat Welcome Desk: a free, independent and public serviceoffering assistance with any practical or legal problem to people who settle in the Brussels Capital Region as part of their activities within and around the EU and international organisations.

How to contact the Expat Welcome Desk of the Brussels Commissioner? Call +32 (0) 2 430 6614 or mail info@commissioner.brusselsand ask for an appointment.

EUROPEANBUSINESSREVIEW

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ECONOMIC OUTLOOK

President of the ECB, Mario Draghi

C Europe’s economic situation today and the role of QE

urrently, in 2015, deflation could be described as the biggest economic problem of Europe.

Primarily, according to deflation’sdefinition, the average of the prices of products and services, instead of going up every year, they fall. This phenomenon occurs because citizens suspend purchases, waiting for prices to fall even further (also due to their lower purchasing disposable income), resulting to reduced income in state funds, output gap in the economy and postponementof taking investment initiatives.This, however, implies a deterioration of stagnation in the real economy and the rising of unemployment.

By Dr. Antonis Zairis and George Zairis*

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The president of the European Central Bank (ECB), Mario Draghi, is attempting to change this situation through quantitative easing (QE), i.e. of the monetary policy which is being exercised by the Central Bank, by creating money through the securities market, such as the government bonds. In 2012, Draghi said that “The ECB is ready to do whatever it takes to preserve the euro”. Almost three years later, we could say that Draghihas not breached his words since the euro ‘bore’ the years of the great crisis of the financial sector. However, difficulties still continueinalargescale.

ECONOMIC OUTLOOK

It is also noted that although the quantitative easing reflates the economy, at the same time it also poses inflation expectations dueto the alleged increase in demand (in the US the respective quantitative easing did not cause inflation, possibly because of the competitive functioning of the internal market). But Europe’s time came,sincea quantitative easing was announced in early 2015 by the ECB to be applied from March 2015 to September 2016, with 1.1 trillion Euros believing that with this publication of inflationary money there will be a revival of the demand in weak economies, mainly of the South of the Eurozone, with the most representative example that of Greece.

Before, however, determining the state of the European economy, it is worth noting the political problem of the EU, which although was intended as a voluntary union of equal states, it actually transformed into a relationship between lenders and borrowers.

The lack of inspirational political leadership and the absence of organized strategic plan in conjunction with the implementation of harsh fiscal adjustment programs, led to the worsening of the euro-skepticism climate, particularly in countries of the South and beyond.

Failure also of separation of the circular deficit which requires development measures and of the structural deficit which respectively requires structural measures in combination with false multipliers, further worsened the effects of the austerity policies for the society.

Theun fortunate caseis that the EU’s policy is beingplanned today by a de-nationalized, technocratic elite, which although not elected, albeit, is the one to legislate and plan the future of Europe. It is of course a planwhich did not in any case take consideration of the degree of readiness and maturity of the political, social and economic structure of each new Member State in relation to its historical period of development.

It is an undeniable fact that from the beginning of the financial crisis, in addition to lower interest rates and the reduced liquidity provision by the ECB, the EU has shown an extremely conservative approach in terms of the budget support of the real economy, through an elementary common European exit plan from the crisis.

Perhaps the biggest innovation and the most important development in the economic governance of the Eurozone is the creation of the Banking Union entering its final phase, also after the stress tests of October 2014. For the performance of the overall assessment, exceptional efforts have been made and important resources from all participants have been mobilized, including those of the competent national authorities of the participating Member States, the European Banking Authority (EBA), the ECB and the participating banks. Nevertheless, results were not as fortunate. According to the overall assessment,a lag of 24.6 billion capitals was found in 25 out of 130 participating banks after comparing the solvency indicators, based on the projection of the minimum limits set for the exercise.

EUROPEANBUSINESSREVIEW

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ECONOMIC OUTLOOK

And the question set here is whether the results are representative of stress tests or if the numbers are being “cooked” and thus resultingto the phenomenon of “zombie banks”, i.e. banks, namely, that while,via private-economic criteria,would be bankrupt, Central Bank supports them by providing liquidity in order to avoid closure, without, though, enhancing them in capital so as to start operating again as healthy banks [in the future]. Because if not forced to accept their losses, which means large haircuts for the owners, the Euro zone will continue to be tormented for decades (just like the case in Japan from 1990 on wards). After all, the relative failure of monitoring mechanisms such as the Basel 1 and Basel 2 and also the existence of so many oversight mechanisms, like the latest Single Supervisory Mechanism, in order to preserve the safety and soundness of the European banking system, the strengthening of the financial integration and stability and also the ensuring of continuous supervision are not random.

However, beyond the quantitative easing program, to the improvement of the overall economy of the Eurozone it is possible that a series of events which create a positive climate in both Europe and Greece could also make a contribution.

More specifically: I. The decline in oil pricing. The fact that the Eurozone is a major consumer and importer of energy, has as a resultthe reduction in the price of oil which reduces production costs and in creases the competitiveness of its products 16

EUROPEANBUSINESSREVIEW

II. Discussions on Juncker’s investment program, totaling in 315 billion Euros gives “breath” both in Europe and Greece, as the latter seeks investments of 12-15 billion Euros III. The quantitative easing program mentioned above IV. The prospect of creating a European army, which will upgrade Greecein geopolitical terms and will also bring stability to the region V. The relative depreciation of the European currency in contrast to the dollar, as mentioned above, increases exports, creating a positive impact both in production and employment of the European countries.

In conclusion, the basic principle for solving each problem in any science is first of all to be recognized. Is this maybe Europe’s big mistake? That is, the failure of recognizing its wrong strategy in relation to the European countries of the South which require a different approach, taking into account their cultural and economic particularities.

In this way, the perspective of political unification seems impossible at the moment since what seems to be prevailing is serving interests and manipulating economically weak countries bythe financially strong ones. *Dr. Antonis Zairis is Deputy Vice-President at Hellenic Retailers Association and George Zairis is astudent at the Department of Economics at the National and Kapodistrian University of Athens

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ECONOMIC OUTLOOK

Unearthing performance gains to boost bank value

By Kapil Chandra and Zane Williams*

M

any performance improvements can raise bank valuations. The most powerful may not be the ones you’d expect.At a time of fitful economic growth, banks around the world have lacked one of the most powerful engines for performance and valuation: robust GDP growth in their home economies. That leaves managers scrambling for other ways to improve, largely via cost cutting, growth initiatives, risk-weighted-asset reductions, and portfolio rebalancing. Each of these can have a significant impact on a bank’s health, but they don’t all add value equally. How should a savvy bank executive set priorities?

One way is to gauge the impact of different metrics on bank valuation. We tested more than 60 metrics that banks might use to measure their performance, specifically examining the impact of different levels of performance on the market-to-book ratios of more than 80 European and North American banks.

At the highest level, we found that many things bank executives might expect to affect their valu-

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ation, such as market capitalization, asset size, loan quality, and business mix, actually had only marginal impact once you control for return on equity.

In general, home-country GDP growth and forecast revenue growth can have a real impact on the price-to-book ratio. But they pale in comparison to many measures that contribute to returns on equity (ROE). By measuring the impact of improving ROE by one percentage point through a single measure, while holding all others constant, we found that changes in some components of ROE can drive bigger increases in valuation than others—though it should be noted that the difficulty of doing so may vary substantially.

When considering which performance improvements to pursue, we found that the relationships between a bank’s performance relative to peers and valuation varied substantially. Some improvements had consistent impact on market-to-book ratios, while others did so only if a bank was at the top of the industry or getting out of the bottom.

ECONOMIC OUTLOOK

Improvements to some metrics boost valuation for all banks Performance in two areas improved ROE regardless of a bank’s ranking relative to peers. First, we found improving the size of the deposit base relative to assets to be a uniformly powerful metric; a bigger deposit base routinely results in a higher valuation.

The data show that this is a very reliable driver of an improved market-to-book ratio.

A second powerful factor that drives bank valuations is the ratio of risk-weighted assets to total assets. A reduction in this ratio generates large and consistent benefits. What banks achieve here will have a much bigger impact on their valuation than any other action.

The clear implication is that banks should work continually to improve these ratios and periodically relaunch programs that deliver ongoing incremental improvements.

Improvements to other metrics boost valuation for the best and worst performers Several performance improvements can have a substantial effect depending on current levels of performance.The scale of the valuation gain they offer is minimal unless a bank is either very strong or very weak at them. Banks that fall at either end of the performance ranking can improve their position relative to peers by focusing on three areas: fee income, revenue growth, and efficiency ratio.

The biggest gain to market-to-book valuation, even for banks in the top decile of performance, comes from finding ways to improve the ratio of fee income to total assets. Those that perform in the bottom third of rankings on this measure can also take advantage of an opportunity of similar scale. However, banks that fall in the area in between the top and bottom find little added valuation benefit from boosting relative performance incrementally. Although a bank CEO might aspire to top-decile status, it is likely that this would require a major shift in strategy and take substantial time to achieve.

Relative improvement to peers in revenue growth can also boost the valuation of a top performer. But for

most banks, as long as the growth forecast isn’t negative, there isn’t much benefit to be found here—unless revenue growth can be pushed above 8 percent.

Finally, top performers that improve the cost-to-income ratio, also known as the efficiency ratio, also see a boost to valuation. Here the data show a pronounced benefit from not being in the worst-performing 30 percent of banks. However, for those above that level, there isn’t much of an impact until banks reach the top decile, where the efficiency ratio is below 50 percent.

Some improvements boost valuation only for laggards Two other factors—the ratios of loan-loss provisions to revenue and equity to risk-weighted assets—only confer valuation advantages for banks if they currently lag well behind their peers. Above-average or outstanding performance provides a marginal uplift to a bank’s rating.

Banks only benefit from improving their loan-loss-provisions-to-revenue ratio when they’re among the worst performers, that is, in the lowest decile. Once the loan-loss provision is less than 10 percent of revenue, further improvements may well be healthy for the bank’s profit-and-loss statement, but the benefit with respect to the price-to-book valuation is minimal. The value from improving the ratio of equity to risk-weighted assets is similarly minimal once banks reach the average level of performance (with the ratio below about 12 percent). Further gains don’t offer much potential to improve the market-to-book ratio. *Kapil Chandra is a principal in McKinsey’s London office, and Zane Williams is a senior expert in the New York office. The authors wish to thank Sapna Sharma for her contribution to this article.

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Europe’s digital revolution

By Eva Paunova*

The Digital Single Market is our chance to compete with the US on knowledge and innovation, writes Eva Paunova.

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emember 2005 when Madonna sampled a 1979 hit song by ABBA? ‘Hung Up’, I believe it was called. She managed to score a chart topper by adding an electro beat to an already familiar melody, making it fit for dance floors and sweet-16 birthday parties the world over.

Fast forward ten years and replace Madonna with Vice-President Ansip: Introducing the European Digital Single Market Strategy will turn the EU’s single market into the dance floor of tomorrow. It will give Europe that extra edge to (finally) become the key player in the global digital economy.

Almost half a year ‘in development’ and a few ‘inevitable’ leaks later, the European Commission’s strategy on the Digital Single Market has finally been officially unveiled. A long awaited moment, no doubt,

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for critics to start picking it apart for perceived flaws in its data protection or copyright frameworks, to just name a few, while failing to see the bigger picture. If I were to describe the DSM with one word, it would be: Opportunity - our second chance to be the driving force of the digital revolution, and to compete with the US on knowledge and innovation.

The DSM strategy that was published today (6 May) is both extensive and ambitious; its many components essential and interconnected - the DSM would be untenable without their proper functioning and interoperability. It is proof, if any was ever needed, of how technology has become an integral part of our private and business lives.

To make full use of these new circumstances, coordinated action is needed at EU level. Obviously, the DSM is not and should not be about punishing certain companies. Citizens and businesses are the beneficiaries of the digital economy, not its collateral. Let me pinpoint three elements of the DSM strategy that I find particularly noteworthy: E-Commerce. At a time when Europe is still recovering from the latest economic crisis, we expect the

EU AFFAIRS new strategy to cause some major ripples. The completion of the DSM is expected to add over EUR 415 billion annually to European GDP and create nearly 3.8 million new jobs. Turning these figures into reality would of course be amazing. Exploiting the full potential of cross-border e-commerce will be crucial to meet these targets. In Europe, making an online purchase from another Member State has always been a rather complicated process and, in many cases, outright impossible in a bizarre case of ‘what you see is what you cannot get’. This current situation is extremely damaging, especially for SMEs - only 7% of them operate across borders. I therefore welcome the Commission’s commitment to put forward an amended proposal by the end of 2015 for a harmonised set of rules and regulations for online purchases of digital content, and uphold EU-wide mandatory contractual rights for the domestic and cross-border sales of goods.

Cross-border parcel delivery, geo-blocking, and copyright. E-Commerce will never fulfil its potential without an efficient and cost-conscious parcel delivery service, doing away with unjustified geo-blocking and introducing a modernised copyright framework.

The Commission has taken this into account and included proposals on all three in the final document.

On parcel deliveries we can expect measures that will

improve price transparency and enhance regulatory oversight. The removal of unjustified geo-blocking would mean that the practice of restricting access to websites, services or content on the basis of location will soon be a thing of the past. Finally, the new copyright framework should ensure cross-border access to legally purchased online services. Frankly, I live for the day when I’ll be able to watch House of Cards in my hometown Sofia, using my Belgian Netflix subscription.

E-government. But how can one expect businesses to go digital or be digital by default, if our own governments are nowhere near being able to join them?

Without e-government the DSM would be like jamming a CD into a cassette-player, a good idea in a wholly unsuitable environment. One of the things I want to see in Europe is the ‘Once-Only’ principle in action. Right now, public administrations across the EU re-use information in only 48% of cases. If we were to implement this principle we could generate annual net savings of around EUR 5 billion by 2017.

That is why I am looking forward to the launch of the ‘Once-Only’ principle pilot for businesses and citizens, which will be outlined in the new e-government action plan for 2015-2020. The plan foresees full interconnectivity for public registers by 2017 and a complete transition to e-procurement, followed by establishing a ‘Single Digital Gateway’ for member states.

The Commission’s proposal on the DSM has laid out its key priorities and I, as a Member of the European Parliament, am looking forward to working on the legislative proposals to follow. But what is more important is the clear awareness of EU Commissioners and officials that the world we live in is digital by default, that there is an on-going change in people’s mind-sets and that all of us need to start thinking digitally and embrace the fifth freedom of the EU single market. We need a holistic approach in order to achieve our goals and secure Europe’s place as a global economic leader. Most of all, Europe has to become a place where we all enjoy the highest quality of life, both offline and online.

*Eva Paunova is a Bulgarian MEP in the EPP group, and member of the Committee on the Internal Market and Consumer Protection. **First published at Euractiv.com

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The European Strategy Ingredient List

By Jan Techau*

It is a very good thing that Federica Mogherini, the EU’s foreign policy chief, together with the member states and the European Commission, is conducting a review process that is ultimately meant to lead to a comprehensive EU foreign policy strategy.

This exercise is overdue, despite the loathing many have for such debates, both inside and outside the EU. At a minimum, the review could provide the still-nascent European External Action Service (EEAS) with more of a sense of direction and purpose, which would be great progress.

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n October 2014, Carnegie Europe published a strategy memo that outlined the core elements of a new EU foreign policy strategy. But back in early 2012, Carnegie provided another guideline on strategy, the Strategic Europe Yardstick. In that article, I tried to identify the characteristics that make a foreign policy plan strategic.

On April 21, 2015, Mogherini and some of her closest aides will present their charted course of action toward a new EU foreign policy strategy to experts and analysts in Brussels. On this occasion, I want to republish a shortened version of the 2012 article here. It should serve both as an orientation to those who will be in charge of compiling the new strategy and as a possible standard against which any outcome could be measured. The yardstick is far from perfect, but it might help stimulate the debate that Europe so desperately needs on its foreign policy.

What, then, are the quintessential ingredients that Europe needs? There are ten characteristics that make EU foreign policy strategic.

Ambitious: Any policy must clearly reflect the ambition to craft a political outcome, be it change in

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a counterpart’s behavior, an altered political environment, or a very concrete, measurable result. This might sound banal, but too often EU papers are unclear or fuzzy about the willingness to influence others. Merely maintaining the status quo will not do for a strategic player. Without a credible show of political willpower, no strategy will be taken seriously.

Unified: Players in international affairs are usually unitary actors, such as nation states or NGOs. The EU is clearly not a single unified body, but it aspires to act and be perceived as if it were one in foreign policy. Herein lies the crux of EU foreign policy making. No European nation is powerful enough to make a difference in the world unilaterally. Nations are obsessed about their national sovereignty, but the more they try to protect it, the more they risk losing it altogether. Sovereignty transfers in the field of foreign policy are especially painful, and governments therefore postpone them until the very last moment.

The powerful embodiment of this attitude is the national veto power every EU member state holds

EU AFFAIRS in foreign policy. Being both disruptive and protective (unanimity is the most effective way to protect minorities), the veto symbolizes the member states’ ambiguity toward a more unified approach. In the end, however, the veto itself does not seem to be the decisive obstacle to a more unified EU foreign policy approach. Unity is easier to find when members share key interests—and are aware of them.

Interest-based: Interests are not to be confused with ambitions or goals. One can have interests without being particularly ambitious about them and without breaking them down into more concrete goals. One can even have interests without knowing about them.

This is why one of the key qualities of any European leader is the ability to make the EU’s shared interests visible.

This is more important in foreign policy than in any other field of European integration, as foreign policy, unlike almost any other area, cannot be monetized—compromise can’t easily be bought. The first of two big political transformations that EU leaders and institutions need to make is to publicly identify shared interests among all countries. Recent EU leaders have been very weak at creating such visibility— beyond general talk about all the good things that are generally desirable.

Goals-based: Interests alone are not sufficient to make a policy strategic. A strategy provides the big picture, but it must also be workable and turned into operations. For that, interests need to be broken down into concrete policy goals. This is the second big political transformation EU strategists must accomplish.

Goals are the tangible, countable, measurable outcomes that fill a strategy with life. They can be reached only through practical measures, for example as the result of a regulatory incentive, in the course of negotiations, or as an outcome of a civilian or military operation. A strategy will remain mere theory if it can’t also be defined at this tactical level.

In addition, as part of the policy planning process,

carefully selecting concrete goals based on a defined strategy is a great reality check on the strategy itself.

Grand strategists, absorbed by their macrolevel view, sometimes forget this.

Prioritized: One easy and much-practiced way of creating consensus among the 28 EU member states is to create endless wish lists comprising every single interest and goal one might think of. Everyone can add their own national or even personal pet projects, and all projects appear equally important, so everybody can say yes to the plan. Such a list is, of course, worthless for the creation of a meaningful strategy.

Strategy is essentially about choice. Means are limited, so ends need to be prioritized, not cataloged. Prioritizing interests and goals is one of the most difficult tasks in any decisionmaking environment. This is where the strategy-making process often fails, even if all other elements are in place. Planners often can’t bring themselves to pick the options that rank higher from the collection of worthy and desirable issues. A good planning process can help to weigh interests against each other. In the end, however, someone needs to make a decision. For prioritizing, leadership is key.

Long-term: Foreign affairs is the policy field least susceptible to long-term planning. Much of the work is crisis management and coping with breaking news and unexpected developments. But contrary to common belief, this makes long-term planning even more important. Not because a plan can realistically predict the myriad of unforeseeable, but because its mere creation and existence give everyone involved a sense of purpose—and a reservoir of tools and instruments to draw from in an emergency.

But long-term planning also delivers two other indispensable elements of strategy. First, it forces decisionmakers to address the long-term needs of the communities they serve, countering the inherent tendency of politics to primarily focus on instant gratification and quick returns.

Second, it requires officials to think about the sustainability of their action. Can a chosen strategy be kept up long enough to deliver the desired results? What reactions will it provoke? What unintended side effects could emerge? Only these extrapolations will insert a sense of responsibility beyond the here and now. Which is exactly what strategy is all about.

Realistic: The question behind foreign policy realism is primarily one of having the correct assessment of one’s own power. Do the resolve, skills, and resources match the defined interests and goals? Without such a sober analysis of the relationship between means and ends, a plan will never be strategic. Instead, it will end up being merely declaratory politics, devoid of any chance of realization, except by accident, and seriously undermining the credibility of its author.

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The EU has often been criticized for its grandiose foreign policy rhetoric, which it is regularly unable to match in action. For the most part, this criticism is legitimate. There is one main reason that the union’s credibility as a foreign policy player has not been completely destroyed: there is an enormous potential for real impact. The EU actually has a lot to offer. It just rarely chooses to bring its potential power to bear. For a start-up, that is acceptable for a short time. But it is not enough for an actor to become a mature strategic player.

Holistic: The EU’s foreign affairs apparatus is about as incohesive as it can possibly get. The instruments created by the Lisbon Treaty, most notably the European External Action Service, have so far failed to create a streamlined, holistic approach to external relations. The European Commission still holds the development, trade, enlargement, and neighborhood policy portfolios, with little interest to share them with anyone, least of all the EEAS. The EU Council did not reduce its parallel structures for external relations after the EEAS was created. Several barely connected situation centers and crisis management cells exist.

The division of labor and the reporting lines between all these entities are not always clear. The level of trust is low. And none of this is unusual.

Similar divisions, often with long traditions, exist in almost every member state. However, at the EU level, where it is already difficult enough to coordinate 28 member states and where the resources of the institutions are so scarce to begin with, such internal strife and disorder is deadly.

Strategy needs cohesion. A development policy is incomplete without being tightly fitted into trade policies, environmental policy, and security considerations. A diplomatic initiative will remain toothless without the full weight of defense, trade, human rights, and perhaps investment policies behind it. Strategy alone can’t force all players and all tools to act as one. But strategy must at least make policymakers think about all these elements in concert.

Predictable: Any foreign policy actor interested in peaceful relations with allies and partners must create a transparent strategy with predictable actions.

Predictability is the secret currency of international diplomacy. If not well coordinated with friends and counterparts, strategies can infuse others with fear and create an aura of unreliability around any actor in the international arena.

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Admittedly, multiplayer undertakings, such as strategy making by 28 nations, offer few elements of real surprise to outside observers. Neither can anything be held secret among member states for very long, nor will such a large number of players ever allow a revolution to happen in their foreign relations. Still, EU transparency should be the result of a deliberately transparent procedure, not just of mere happenstance. Far exceeding the positive symbol this would set, it would be a trust-building exercise par excellence.

Values-based: Theorizing between realists and idealists in foreign policy is as old as history itself.

At least for open, democratic, liberal societies, this division is becoming increasingly meaningless. Security and survival cannot be achieved without the interest-based use of power. And openness and democracy can’t exist without strong adherence to fundamental values and principles.

The second of these maxims is especially true for the EU. With 28 individual players around the table, all bringing with them different histories, geographies, traditions, mentalities, necessities, and worries, values become disproportionately important for the political entity’s survival. Not only must the EU itself embody something fundamentally good and valuable for its citizens, it must also actively— but not naively—support such values abroad.

An EU foreign policy strategy that is oblivious to such fundamental insight will be sustainable neither internally nor externally. Democracies need poetry. It’s the creed they want to live by. Europe, fragile as it has been throughout its history, needs it even more.

The ten elements listed above should serve as a yardstick in the debate about strategic foreign policy in Europe. They suggest a way to measure the “strategicness” of the EU’s foreign policy thinking and doing. Taken together, these ten factors constitute a test against which future EU foreign policy documents, speeches, and projects can be assessed.

It is, admittedly, an ambitious test. But for Europe, with its vast possibilities, its pressing needs, its enormous potential power, and its huge regional and global responsibilities, the standard by which the union measures itself must, by definition, be a high one.

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European Business Summit 2015

E

uropean Business Review, also this year media partner of EBS, selected, for its traditional EBR special, five interesting performances during the Summit. Philippe De Buck (former President European Business) and Guo Ping (Dep. Chairman and Rotating President of Huawei Technologies) both had strong advice for Europe. De Buck urged to transform the economy to make it more succesful for companies and for their employees; Guo Ping told to contribute more on the development of Industry System 4.0 to bring Europe back in a leading position in technologies.

Pierre Defraigne (Executive Director of Madariaga-College of Europe Foundation) gave a strong warning about the transatlantic trade negotiations; his advice was to put TTIP on hold and to look first in the direction of China and Russia, ‘Europe is not only a transatlantic power but also a Eurasian one’.

Very interesting was Greece’s Minister of Finance who told his audience that in his country there is the need to restore investments and faith, both decimated by seven years of debt’s deflation (20082015). But how can this be done, he asked. How can we restore investments and faith in line with disengagement speed?

EBR moderated the expert session organised by the Region of North Aegean (Greece), with the theme: what are the chances borders and peripheral regions might have? Four experts with different backgrounds tried to give an answer to this question.

N. Peter Kramer Editor-in-chief EBR

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What is needed for Greece’s recovery

By Yianis Varoufakis*

There is the need to restore investments and faith, both decimated by seven years of debt’s deflation (2008-2015).

But how can this be done? How can we restore investments and faith in line with disengagement speed?

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magine a Development Bank that leverages guarantees consisting of funds that the state will retain after the privatizations and other assets as well (e.g. real estate) with their value easily being reinforced (and providing additional guarantees) through reform of property rights. Imagine that this connects the EIB, the “Juncker plan” etc. with the Greek private sector. Privatization suddenly is being relieved of all relations based on sellouts and is becominga part of an ambitious development partnership of the public and private sector.

In addition, imagine a Bad Bank which helps the banks to get rid of the legacy of the non-performing mortgage loans and decongests their financial networking. In collaboration with the virtuous effect of the Development Bank, credit and investment flows will flood the hitherto barren areas of the Greek economy, so in the end of the process to help the Bad Bank to make a profit and be turned

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into... a “GoodBank”.

The next piece of the puzzle is of course related to the real economy.

Products’ market The government is considering the possibility of: • Liberalizing the gas market.

• Considering the model of the French bilateral agreements for the regulation of the industry of production and distribution of electric energy (without, though, privatizing the existing electricity production company).

• Releasing the product specifications (e.g.of dairy products and non-prescription medicines).

• Simplifying the licensing of businesses (in close cooperation with the World Bank).

• Legislating the inclusion of all discounts on invoices of retail trade (for limiting the oligopolistic power of supermarkets towards local suppliers).

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• Strengthening the Competition Committee by equipping it with its own budget and ability to raise revenue.

• Early retirements.

• Consolidation of smaller funds.

Labor market Recent calculations show thatundeclared work is one third of the total employed labor. If one adds to this figure the fact that fewer than 10% of the unemployed workers sometimes receive any unemployment allowance, it is obvious that the Greek labor market is more liberated than most other European labor markets. Further limitations to the protection of workers will have no positive impact on high-quality employees, who willcertainly be damaged and forced to compete against competitors who hire undeclared workers.

In a few words, the labor market needs an adjustment for formalizing the undeclared workforce with positive externalities on pension assets and revenues of the state. That is why most employers’ organizations in Greece are in favor of a new legislation for collective bargaining and higher minimum wages. For this purpose, the Government has already begun a fruitful dialogue with the International Labor Office (ILO) to shape the appropriate legislation.

Pension scheme When the 2012 haircut (PSI) was concluded, pension funds lost 26 billion Euros. They also lost one third of the contributions due to the collapse of the declared paid employment. Shortly afterwards, pensions were slashed up to 44% in the private sector and up to 48% in the public sector. As a consequence, the average pensioner in Greece is just one euro away of the official poverty line defined by the 60% of the median income.

It is obvious that only a return to a growth with abundant labor supply may make viable again the pension system and any attempt of cutting pensions now for balancing their accounting records will lead to more unprivileged people and to another cycle of debt deflation.

Of course, this does not mean that we should not reform the system while we expect to return to growth.

Growth Can one imagine Greece recoveringdynamically as a result to these measures? Absolutely! In a world of very low yields, Greece will be seen as an ideal opportunity for investments, causing a steady foreign direct investment flow.

As overly negative expectations are being turned into positive, the problem will be to restrain the “irrational enthusiasm.” The danger then would be to repeat the invasion of capital of the pre-2008 era which led to a growth of speculation funded by debts.

To assure that this time things will be different, Greecewill need to reform its social economy and its political system. The creation of a new growth bubble is not the growth model of our government.

Democratic governance reforms During the cycle of the Greek development which was based in debts, capital flows were being directed from the commercial banks in consumerismfrenzy and from the state in an orgy of illicit supplies and general waste. This time will be different.

The new Development Bank will take the lead in targeting scarce local raw materials in selected productive investments by new companies, IT companies which use local domestic human capital, small and medium-sized enterprises which are being active in organic agricultural products, export-oriented pharmaceutical companies, attractants of the international film industry at Greek sites, education programs that leverage the Greek intellectual production and the unparalleled historical monuments etc.

Meanwhile, the supervisory authorities will monitor carefully the commercial lending practices while a debt brake will prevent our government from giving in bad old habits, ensuring that our state is not going to slide back to primary deficits. Cartels, non-competitive pricing practices, the without reasonclosed professions and bureaucracy, which traditionally had made the state the number one public enemy, will soon discover that our government is their worst enemy.

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Let us imagine for a moment the effects of announcement of such an agreement for the financial, fiscal and insurance ecosystem of Greece: With the banks’ shares to be projected in the heavens, losses of our state from the recapitalization will be eliminated as its participation these shares will be overestimated and the pension funds will be out again in the markets coming from the dividends of the Development Bank and the contributions from the recently legalized employees.

Suddenly the society which was mired in debt and deflation and remained “un-reformed”by a reforms’ agenda which was rejected by the majority, will begin to be corrected and, thus, ready to adopt - as its own- the reforms we all try to agree on, So, my question is the following: What do you ladies and gentlemen believe is in the interest of Europe? What would help Europe to be integrated in the future?

A Greek and European failure in the implementation of this program that will lead us all in an uncharted territory?Or the successful implementation of our program? I leave it up to you to decide.

For my part, I will conclude with what I consider the triptych of the dangerous myths which put the Eurozone and Greece at huge risk.

1. A Greek exit from the Eurozone could be good for the Eurozoneand for Greece as well.

2. Greece does not have enough [money] during the last five years and insists to compel other countries, some of them poorer than itself to pay for its squandering.

3. The Greek new government has not negotiated in good faith, has not offered serious recommendations to the institutions and has no credible plan to help the Greek economy stand on its feet among the Eurozone.

resemble to the Golden Rule of the interwar period: A hard currency and fixed rate regime which rejects economies burdened with the largest adjustment obligation. After the realization of this will floodour hearts and minds, it will be only a matter of time before the Eurozonewill be fragmented with huge costs for each European nation. As for Greece, an enforce ment to exit [the Eurozone] will lead to making even poor eranother million of Greeks - as if the current poverty crisis is not enough!

2. The idea that Greece has not done enough for consolidatingits public finances is nonsense. As we have seen, no economy has been stabilized more in a period of peace during the last three centuries. Moreover, Greece has a primary surplus and the new Greek government has been committed tolessen the deficit which will guarantee that it will not slide into a primary deficit. Thus, the claim that the Greek State requires loans to pay salaries and pensions is simply wrong.

3. The Greek government insists, at least from the Eurogroup’s agreement of February 20th 2015, on the immediate implementation of a number of important reforms. With joy I certify that much progress has been made in Brussels in this area.

Eventually, the program which you kindly gave me the opportunity to present to you today puts forward an invested driven recovery plan which is based on multi-planar socio-economic reforms which promote freedom, justice, shared prosperity and the idea that democracy can turn a vicious circle into a virtuous one.

In 2010, our failures have cost Europe enough. If we succeed together with this program, a different process can unfold with Greece being the messenger of good things which will happen throughout Europe.

None of the above is correct.

1. A Greek failure even in the beginning is being controlled by an active ECB, will leave the Eurozone to

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*Yianis Varoufakisis Greek Minister of Finance and Professor of Economics

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Innovation as a stimulus for Regional Growth

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t is a fact that Cohesion policy for 2014-2020 adopts a new approach towards the necessity to address the needs that the economic crisis emerged. The new agenda aims at bridging the gap between public infrastructures and private investments, stimulating employment and supporting implementation of best practices. Opportunities are laying both for the private and public sector but concrete steps are needed to be taken.

Juncker’s plan, together with the new financial instruments – JESSICA, JEREMIE, etc. - are shifting focus from subsidies to loans and guarantees;from public investments to public-privatepartnerships.

It is the end of an era. But for some countries –especially those in crisis- this change comes in a very bad timing. If financing infrastructures was already a hard job for Regions with small population, deficient connectivity and long distanced from the European capitals, now it becomes something more than a challenge: It becomes almost impossible.

They will have to compete with other European Regions and prove that their proposal is worth to be financed and can be sufficiently profitable to attract private investors to implement it.

What are the chances borders and peripheral regions might have? To answer to this question the Region of North Aegean (Greece) organised anexclusive event in the framework of the “European Business Summit (EBS) 2015” - held in Brussels on May 7- under the title: “Innovation as a stimulus for Regional Growth”. Speakers were invited from the private sector –Mr. Hans Hack, Head of Financial Services at FTI Consulting, the institutions – Mr. Luiz De Mello,OECD’s Deputy Director for Public Governance and Territorial Development and the Regions –Mrs. Eleni Marianou, Secretary General of CPMR. The Region was represented by the Executive Secretary, Mr. Nikos Kostopoulos. The discussion was moderated by Mr. N. Peter Kramer, editor-in-chief of the European Business Review magazine.

All speakers agreed that change of mentality is maybe the most important factor when it comes to attracting private funds in public investments. Mentality can be seen at the reduction of red tape, tax reliefs and special agreements or even flexibility in

the final agreement. At the same time it was underlined that availability of public funding and available infrastructure can be also important factors in investors’ decision.

Luiz de Mello and Hans Hack encouraged all European Regions to become more extrovert, improve their direct contacts with Institutions and Development Banks and exploit the opportunities that Juncker’s plan is now offering.

EleniMarianou on the other side stressed the danger for isolated and not so developed Regions to become even more marginalized–compressed between the competition from other Regions and their lack of potentials for investors that would make their area attractive for them.

The need to sustain a level of public investments dedicated to these Regions is absolutely necessary Mrs.Marianou concluded. Mr.Kostopoulos also pointed that Regions like North Aegean sometimes create adistorted view, as due to the touristic period they are sometimes seen as paradises on earth, but reality is long distanced from that.

Concluding the meeting, Mr. N. Peter Kramer summarized three axes for a Region to successfully attract private funds: reduce of red tape, extrovert approach from the administration and public funding for securing or supplementing the investment. *The Greek Region of North Aegean established recently a representation office in Brussels, in Rond-Point Schuman,14, 1040 Bruxellesnorthaegean_eu@pvaigaiou.gov.gr

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Building a Broader Industry Ecosystem for Europe 4.0

By Guo Ping*

I am very happy to discuss Europe 4.0 and imagine what Europe will look like in the future. I would like to share Huawei’s views on Industry 4.0, a strategic initiative that will support Europe 4.0. Over the last ten years, the focus of digitisation has been on the service sector. Indeed, Internet has reshaped banking, retail, and many other sectors.

I

n the future, the focus of digitization will shift to industries such as manufacturing. This is no doubt a huge opportunity for Europe. I believe that, enabled by Industry 4.0, Europe’s strong manufacturing sector will continue to lead the world in the digital era. Industry 4.0 will develop at three layers: equipment, infrastructure, and applications. I would like to share my views on Europe’s Industry 4.0 and discuss how Huawei can contribute to this initiative at these three layers.

First, Europe should step up its efforts to make equipment smart and consolidate its leading position in manufacturing.

Europe already has a solid foundation in equipment manufacturing. Certain developing countries have also seen rapid developments in their manufacturing sectors. However, the high-end equipment that

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their companies use still comes from Europe. European companies should therefore focus on going smart to consolidate their leadership in this field.

Simply put, making equipment smart means installing sensors in a variety of industry and household devices, equipping these devices with operating systems and software, and then connecting them to networks. The commercial value of this move will be enormous.In industrial scenarios, there is even greater potential to make equipment smart. Let me give you an example. Smart equipment in a chemical factory will be able to detect polluted water, dust, exhaust gas, and other hazards in real time. This will help protect employee health, avoid accidents and waste, and ensure effective management.

Here is another example. With smart power grids, equipment will be able to analyse supply and demand, and identify and report problems immediately. This will help avoid the huge waste and social

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impact caused by regional power failures. You see, making equipment smart will create incredible socio-economic value. In this regard, Huawei can supply highly adaptive network access modules and device operating systems for European equipment. This will efficiently connect Europe’s unconnected equipment to the Internet.

Second, Europe should continue to lead the world in next-generation communications standards, in order to create a functioning digital infrastructure for Industry 4.0.

Today, the 4G standards advocated by Europe are very popular globally. I believe that it has the capacity to – and should continue to – lead global next-generation communications standards to adapt to the development of Industry 4.0.Communications are no longer limited to people-to-people connections – they now include connections between people and things, and between things and things. Over the next ten years, connections will focus on things and things, especially in mobile scenarios. With regard to communications infrastructure, we need to consider the surging demand for connections, capacity, and traffic. Existing technologies cannot meet this demand, so we must move towards 5G. We believe that 5G can support 100 billion connections, a user data rate as high as 10 Gbit/s, and an ultra-low latency of 1 millisecond. This means that all industry needs will be satisfied, and that the transportation, manufacturing, and energy sectors will be efficiently connected. Then, a digital Europe will come into being.

Actually, many organizations such as METIS and 5GPPP have been established in Europe to drive 5G development. Huawei has invested heavily in 5G and has actively participated in the EU’s 5G initiatives.

Not long ago, we established the 5GVIA tested in Munich, Germany. Today I am happy to announce the establishment of our new European Research Institute. The institute will be located in Leuven, Belgium.

It will coordinate the work of the 18 R&D sites in eight European countries and will contribute to boosting 5G research and Horizon 2020 research objectives.

We hope that our vertical industry partners can further support 5G initiatives to put 5G standards into commercial use and create an environment conducive to innovation.

Thirdly, we expect European companies to achieve greater success through collaboration at the application layer.

The application layer is where the value of Industry 4.0 resides. It is also where European companies will face challenges during their transformation. To enable Industry 4.0, they will need to make full use of their data assets. As its automotive, energy, machinery, and equipment companies complete their digital restructuring, I believe that Europe will build strong application development capabilities within these vertical industries.

Yet, challenges remain because user demand is always changing. Today, most drivers trust the quality of European cars. In the future, however, they will probably raise new concerns: Can European cars provide higher levels of safety? Can services like assisted driving and adjustable insurance be provided?

To bring in innovative ideas and integrate resources from a broader industry ecosystem, European companies should open up, collaborate more with other industry players around the world, and turn competition into cooperation.Europe needs to develop leading vertical industry apps, and bring them to the global market.For a long time, Huawei has worked closely with Europe’s software developers and operational technology providers to build a healthy industry ecosystem.

At this year’s CeBIT, we signed an MoU with Fraunhofer on joint research and development of Industry 4.0 scenarios. We also signed an agreement with SAP on Industry 4.0 cooperation to deliver ICT solutions for transportation, oil and gas, manufacturing, and other sectors.

To conclude, Industry 4.0 will be a huge and complex ecosystem that relies on information made available in real time through networks. To realize Industry 4.0, all stakeholders must form alliances and work together. This includes equipment manufacturers, ICT solutions providers, research institutes, and governments.

We will leverage our leading ICT solutions such as mobile broadband, Big Data, and cloud computing to innovate jointly with our European partners. We believe that we can contribute greatly to the development of Industry 4.0, and help this continent become a leading market and leading supplier. *Guo Ping is Deputy Chairman & Rotating CEO of Huawei Technologies.

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SPECIAL REPORT

Seven questions and three recommendations about TTIP

By Pierre Defraigne*

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he European Business Summit is probably the ideal place to express dissenting views on TTIP, since in many ways it is the gathering of the two real contracting parties to TTIP: Business Europe and its counterpart the AmCham. In my opinion TTIP is currently too big to fly.

Let me raise some questions about the feasibility of TTIP which to me, after nine rounds of negotiations, looks more and more like Howard Hughes’ famous sea plane, the Spruce Goose, which was so big and heavy that it took off, but never flew, and since 1947, has become a tourist attraction in Minnville, Oregon.

The first question is about growth and jobs, which has been the mantra of the past seven years in the EU, so far without success. Can TTIP provide a solution? The most likely answer is this: ‘we don’t know’! The trade-growth relationship is indeed complex and it goes both ways. Trade liberalisation exerts a long-term transformative function, but for large economies, such as the EU and US, domestic

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demand in the short term matters more. Today, the redistribution factor has become as central as competitiveness in the pursuit of growth. IMF and OECD studies have confirmed the deflationary character of growing inequalities.

In Europe, the eurozone recovery is blocked by the debt overhang and the credit crunch. Without debt mutualisation and restructuring, there won’t be a recovery. In America, the excessive concentration of wealth and income inhibits growth, and transatlantic trade will suffer as a result.

And precisely, not only will TTIP-led growth be modest (0.5% over 10 years from the end of the negotiations), but it won’t benefit all member states equally: there will be losers and winners. Divergence within the eurozone, whose stability is already undermined, will worsen and inequalities within countries will rise. But, contrary to the US, the EU still has no central budget for coping with divergences across states, whilst national solidarity systems are put under stress by tax competition, another key

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fault-line of EU governance, which does not exist in America.

The second question is about the method. Is trade negotiation - by definition a very secretive process the right way to build what Trade Commissioner De Gucht called a “transatlantic internal market”, considering the highly political character of the harmonisation of norms, regulatory cooperation and ISDS? Suspicion is harming the negotiations, and talks of ‘myths’, or ‘orchestrated disinformation’ from the Commission are very defensive tactics.

Thirdly, why should the EU negotiate a transatlantic market with the US while it has not yet completed its own single market in key strategic sectors such as energy, telecommunications, digital, financial services and the defence industry? All previous FTAs, concluded by the EU have been negotiated with weaker partners, but the US, because it is united, is stronger than the 28 member states of the EU put together. The asymmetry here is blatant and the high professionalism of DG Trade negotiators will not suffice to redress the systemic imbalance between the two partners. And what about the risk of having two international currencies competing over the same internal market? Another source for TTIP-scepticism!

Fourthly, by the way, is the EU negotiating with the US or with the twelve TPP trade bloc countries?

Doesn’t this aggravate the asymmetry? Do European companies realise that they will eventually be competing on the US market, not only with the US, but against Chilean, New Zealand and Vietnamese firms?

The fifth question – and here we are entering into the systemic and geopolitical dimensions of TTIP – is what impact an EU-US coalition, within the WTO, would have on the multilateral trading system. We were the architects of the Bretton-Woods system.

Should we take the responsibility of undermining it further, instead of shoring it up? More than ever, our multipolar world calls for a multilateral system of governance.

The last question stems from Hilary Clinton’s definition of TTIP as an ‘economic NATO’. Who is then the enemy? If it is China, we are then no longer talking ‘peace and love’ but rather ‘trade and war’. Well, I would strongly advise against containing China through trade for three reasons: The West and Beijing both share the responsibility for “China’s peaceful rise”. For the prosperity and stability of the world, we should not isolate China.

China is not Soviet Russia; it has the capacity to answer back. It has the people, the money and the longterm vision. And above all, China has the largest and fastest growing domestic market in the world, and the CCP intends to use that growth to climb up the technology ladder and develop their own norms.

China has the capability to respond by promoting an Asian trade and currency bloc - despite the strategic tensions on its islands and borders - which would split and fragment the global economy, and lead to a dangerous East-West confrontation.

I’ll stop here and conclude with three recommendations: 1. Don’t stop TTIP negotiations, suspend them and open them up to a coalition of the willing – including China – using open plurilateralism as a pragmatic proxy for multilateralism.

2. Tackle the redistribution issue both in the US and the EU as the missing priority of the economic policy agenda. In the EU, this means a transfer union for the eurozone, corporate tax harmonisation and a drastic strengthening of the EU-28 globalisation adjustment fund. If Europe does not do its homework with regard to internal cohesion, it will soon stop being a global trade player.

3. Remember that geography matters, too. Europe is not just an Atlantic power; it is also a Eurasian one.

The best way to strengthen the Atlantic partnership is through common EU defence within NATO, and the best way to play the Eurasian card and to contribute to the stabilisation and prosperity of Russia and Central Asia is to respond to Xi Jingping’s twin offer of a free trade area with China, and a Eurasian infrastructure and Silk Road trade deal.

*Pierre Defraigne is Executive Director of the Madariaga-College of Europe Foundation. **First published at Euractiv.com

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The competitiveness of Europe is the priority

By Philippe De Buck*

S

peaking not long ago to students in Taipei, I remembered how in my youth all the toys coming from China were “Made in Taiwan”.

Then in the 1980s I witnessed the economic and industrial turnaround that upscaled the Taiwanese economy. The government’s policy was focused on technology, research and development, engineering, manufacturing and human resources. It fostered new companies and attracted foreign investments, so Taiwan became one of the Far East’s “four dragons”, along with South Korea, Singapore and Hong Kong, and is now is one of the world’s top 20 industrialised countries.

For Europe, there are lessons to be learned from Taiwan. When there is the political will that stems from consensus among economic and social actors on what to achieve, and when there is a consistent and a well-defined roadmap, delivery is possible.

The competitiveness of a country is manageable.

Back in the days of the European Convention in 2002-2003, I and a number of others successfully advocated adding “competitive” to Article 3 of the Treaty on European Union to describe our “social market economy”. This adjective wasn’t there at the beginning, and its addition meant that going forward the EU and national decision-makers would be bound by the TEU to add this factor. In other words, no proposal should be made nor any EU decision taken without looking at its impact on competitiveness.

This concept can be defined in different ways. The one I used when talking to students in Taiwan came from the Business Dictionary: “Competitiveness is the ability of a firm or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them.”

Are European companies competitive? The EU is the largest trading bloc in the world and includes strong global companies in sectors like automobiles, chemicals, engineering, food, luxury goods,

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construction, banking, insurance, and design. They represent a very dense network of small, medium and large companies that are world market leaders, and as companies can no longer trade without investing abroad, European companies are unsurprisingly by far the biggest investors worldwide.

That’s a good place to start, but business people know that success is never a given. To “meet the quality standards at competitive prices with an adequate return”, as the definition put it, needs constant effort and a never-ending push on all the components that determine competitiveness. An equal effort must be undertaken by the EU and its national leaders. They claim their aim is to create better conditions for growth and jobs, so now they must shape policies that are conducive to increased competitiveness.

To strengthen European companies’ global position, the EU’s integration process has to be deepened, not weakened. The size of a company depends on the size of its domestic market; a Belgian mid-size company, for instance, is on average five times smaller than its German equivalent. After three years of existence a new company in the U.S. is three times bigger than in Europe. Why? Because the breeding ground of a company is its domestic market. The larger that market the bigger are the companies.

Companies cannot be competitive in the global marketplace without a strong local basis, so therefore they look for a more integrated single market and a robust single currency. These are advantages currently enjoyed by the U.S., where the states in the Union compete with each other but share a currency and an integrated market regulated by the federal government.

There are undisputable reasons for investigating the European economy more closely than ever. To begin with the strengths to be built on: The European Union’s 505m citizens mean that if it were a single country it would be the third most populous one after China and India. With a GDP of almost €15

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trillion, Europe outperforms all other economies, and is the world’s largest trading bloc as an importer and exporter of goods and services, with a single market that is both quantitatively and qualitatively the most important. And despite the financial crisis and the current exchange volatility, the credibility of the euro and the ECB were maintained.

A comprehensive competitiveness agenda can secure our position in the world and create new opportunities, and should consist of these basic factors: finance, energy and people.

The financial means to support business depends on the strength of the banking sector. European companies, and in particular, SMEs depend more on bank lending than on equity finance. Manufacturing industry complains about insufficient access to financing, but banks argue that the new capital requirements are restricting their lending activities, as does the tightening of the risk management.

The EU’s banking union will, it is hoped, strengthen the banks by reducing their fragmentation. Banks do not require over-regulating, and they should certainly be given greater incentives to participate more in economic development.

Energy is crucial to industrial competitiveness. Securing energy supplies at a comparatively affordable price level must be a top priority for Europe. The U.S. is today more attractive for investments in energy intensive industries thanks to its much cheaper energy as a result of the shale ‘revolution’. This will last for long time, so making the EU competitive in the energy field is a difficult nut to crack. It touches on the energy mix, on the creation of a genuinely interconnected energy market, on a focused effort to improve energy efficiency, and on a balanced and targeted climate policy.

All this will need huge investment: new power plants, more renewable sources of energy, and smart distribution grids. There are already fierce public debates around nuclear energy, climate policy, shale gas exploration, and the cost of renewables, and these are discussions that political leaders should conduct openly and transparently.

The greatest challenge of all is ensuring the supply of people with the right skills. How can the gap be closed between Europe’s million or more vacancies in science, technology, engineering and mathematics related jobs and the supply of graduates and qualified personnel? Closer cooperation between businesses, schools and universities and governments is badly needed, and together they should be looking at more effective educational and vocational training systems.

These factors alone are not enough. Framework conditions must be “business friendly”, which raises the question of whether all the regulations decided at

the European and national level are useful and smart?

The Juncker Commission’s agenda is that regulations should be based on impact assessments to “think small” first in order to help SMEs to “think big”.

The EU also needs to streamline trade policy with an offensive strategy to open foreign markets and secure investments abroad. The WTO Trade Facilitation accord in Bali in 2013 that was finally accepted by all WTO members is a real breakthrough. Europe should continue to negotiate bilateral trade and investment agreements with important economies, including the U.S. The much-debated Transatlantic Trade and Investments Partnership (TTIP) negotiations should press ahead; not to dominate world trade but truly open our markets to each other and to strengthen bilateral economic relations. This will create growth and jobs because the greatest beneficiaries will be the SMEs that are the sole source of new jobs. Encouragingly, the European Economic and Social Committee has moved from strong opposition to an opinion fostering constructive support from all stakeholders. The emotional objections to TTIP show just how difficult it can be in a time of crisis to gather a majority behind a competitiveness agenda. Opinion leaders have their own views, but translating them into a broad agreement takes something more.

We in the European Union have the tools to reach a broad consensus, and the ‘Grand Coalition’ of Left and Right in the European Parliament could yield a political accord on an effective competitiveness agenda. The same kind of agreement also needs to be reached between the employers and the trade unions. John Monks, the former leader of the European trade unions, insists that “Social Europe is far from dead”. Accepting this will help to broaden the European discussion on how to transform the economy and make it successful both for companies and their employees. Without social acceptance of the need to reform on a basis of competitive and united policies, the EU will suffer from permanent euro-scepticism.

*Philippe De Buck is Member of the European Economic and Social Committee (EESC) former President of Business Europe and now President of Belgian Business for Europe

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HEALTHCARE

Building on 20 years of success: Future challenges for Taiwan’s National Health Insurance

By Dr. Chiang Been Huang*

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aiwan’s National Health Insurance system is globally renowned for providing citizens with easy access to high-quality medical services.

Over 99 percent of the population is enrolled in the single-payer NHI, while around 93 percent of the country’s health care providers participate. Basic premiums, which are shared among the insured, employer and government, are calculated on the basis of monthly salary and a set premium scale.

Those qualifying as disadvantaged can have their premiums and copayments subsidized or waived if necessary. As the NHI has achieved universal

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coverage at an affordable cost, health care is not a financial burden for the public. These factors contribute to a system satisfaction rate of about 80 percent.

But this healthy state of affairs was not achieved overnight. Since its launch in 1995, the NHI has faced funding challenges. Although the system was in the black for the first four years, rising user demand led to budgetary shortfalls, spurring the ROC government to set about implementing system wide fiscal and structural reforms.

HEALTHCARE

By 2013, the second-generation NHI was in place and oversight of the system tasked to the newly formed NHI Administration under the Ministry of Health and Welfare. A key component of this change was the levying of a 2 percent supplementary premium on capital gains and unearned income—a measure contributing to the NHI’s newfound financial strength.

Another step contributing to the success of the NHI was the adoption of the latest information technologies. These initiatives streamlined procedures and improved services, paving the way toward greater organizational efficiency and reduced administrative costs. The integrated circuit card is one of the most visible signs of IT innovation employed by the NHI. Issued to all system users, it functions as a link between patients and health care providers, enabling the latter to quickly and securely access the former’s recent medical records. The smartcard is also an invaluable tool in managing the spread of highly communicable diseases such as SARS. It allows monitoring of the infected, as well as accurate modeling of the dynamics and control of such outbreaks.

information security, also allows the NHIA to analyze trends and generate statistics. Going forward, decreasing birth rates and rapidly aging populations are the order of the day. Taiwan is no exception to these global trends and its shrinking youth demographic will have to shoulder a greater financial burden. In estimating future demand for health care, the factor of aging must be taken into account. In 2014, the senior population in Taiwan stood at 11.95 percent, and it is estimated it will exceed 20 percent in 2025 and 40 percent in 2060.

Because Taiwan has a low birth rate and extended life expectancy, it will soon have the fastest aging population in the world. This is to result in a shrinking income tax base, placing even greater pressure on NHI funding to meet outlays associated with caring for the rising number of elderly. Looking at ways of improving public health and slowing the rate of aging are two of the most important challenges facing the NHI in the 21st century and beyond.

As time is of the essence when it comes to dealing with medical issues and prescribing the correct medicines in a cost-effective manner, the NHI established in 2013 PharmaCloud—a cloud-based database of patient pharmaceutical records accessible by health care providers. This undertaking has minimized the incidence of script duplication and over-prescription, as well as the risk of harmful drug interactions.

Buoyed by the cost and efficiency benefits of PharmaCloud, the NHI launched My Health Bank in 2014.

The database allows users to access in less than 10 minutes their full medical data from the past year.

These include records like hospital admissions, medical costs, outpatient visits and prescriptions. By easing access to personal records, it is hoped users will become more aware of their health and develop an appreciation of the need to lead healthier lifestyles.

Equally significant is the use of an automated system for processing hospital claims and reimbursements. This contributes to the NHI’s administration costs of 1.07 percent of medical expenditures, the lowest in the world. The sizeable database of claims, which boasts leading-edge, internationally certified

*Dr. Chiang Been Huang is Minister of Health and Welfare Republic of China (Taiwan)

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TRENDS

The four global forces breaking all the trends

By Richard Dobbs, James Manyika, and Jonathan Woetzel*

T

he world economy’s operating system is being rewritten. In this excerpt from the new book “No Ordinary Disruption”, its authors explain the trends reshaping the world and why leaders must adjust to a new reality.In the Industrial Revolution of the late 18th and early 19th centuries, one new force changed everything. Today our world is undergoing an even more dramatic transition due to the confluence of four fundamental disruptive forces—any of which would rank among the greatest changes the global economy has ever seen.

Compared with the Industrial Revolution, we estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact. Although we all know that these disruptions are happening, most of us fail to comprehend their full magnitude and the second-and third-order effects that will result. Much as waves can amplify one another, these trends are gaining strength, magnitude, and influence as they interact with, coincide with, and feed upon one another. Together, these four fundamental disruptive trends are producing monumental change.

1. Beyond Shanghai: The age of urbanization The first trend is the shifting of the locus of economic activity and dynamism to emerging markets like China and to cities within those markets. These emerging markets are going through simultaneous industrial and urban revolutions, shifting the center of the world economy east and south at a speed never before witnessed. As recently as 2000, 95

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percent of the Fortune Global 500—the world’s largest international companies including Airbus, IBM, Nestlé, Shell, and The Coca-Cola Company, to name a few—were headquartered in developed economies. By 2025, when China will be home to more large companies than either the United States or Europe, we expect nearly half of the world’s large companies—defined as those with revenue of $1 billion or more—to be headquartered in emerging markets. “Over the years, people in our headquarters, in Frankfurt, started complaining to me, ‘We don’t see you much around here anymore,’” said Josef Ackermann, the former chief executive officer of Deutsche Bank. “Well, there was a reason why: growth has moved elsewhere—to Asia, Latin America, the Middle East.”

Perhaps equally important, the locus of economic activity is shifting within these markets. The global urban population has been rising by an average of 65 million people annually during the past three decades, the equivalent of adding seven Chicagos a year, every year. Nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets—95 percent of them small-and medium-size cities that many Western executives may not even have heard of and couldn’t point to on a map.1 Yes, Mumbai, Dubai, and Shanghai are familiar. But what about Hsinchu, in northern Taiwan?

Brazil’s Santa Catarina state, halfway between São Paulo and the Uruguayan border? Or Tianjin, a city that lies around 120 kilometers southeast of Beijing? In 2010, we estimated that the GDP of Tianjin

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was around $130 billion, making it around the same size as Stockholm, the capital of Sweden. By 2025, we estimate that the GDP of Tianjin will be around $625 billion—approximately that of all of Sweden.

2. The tip of the iceberg: Accelerating technological change The second disruptive force is the acceleration in the scope, scale, and economic impact of technology.

Technology—from the printing press to the steam engine and the Internet—has always been a great force in overturning the status quo. The difference today is the sheer ubiquity of technology in our lives and the speed of change. It took more than 50 years after the telephone was invented until half of American homes had one. It took radio 38 years to attract 50 million listeners. But Facebook attracted 6 million users in its first year and that number multiplied 100 times over the next five years. China’s mobile textand voice-messaging service WeChat has 300 million users, more than the entire adult population of the United States. Accelerated adoption invites accelerated innovation. In 2009, two years after the iPhone’s launch, developers had created around 150,000 applications. By 2014, that number had hit 1.2 million, and users had downloaded more than 75 billion total apps, more than ten for every person on the planet. As fast as innovation has multiplied and spread in recent years, it is poised to change and grow at an exponential speed beyond the power of human intuition to anticipate.

Processing power and connectivity are only part of the story. Their impact is multiplied by the concomitant data revolution, which places unprecedented amounts of information in the hands of consumers and businesses alike, and the proliferation of technology-enabled business models, from online retail platforms like Alibaba to car-hailing apps like Uber.

Thanks to these mutually amplifying forces, more and more people will enjoy a golden age of gadgetry, of instant communication, and of apparently boundless information. Technology offers the promise of economic progress for billions in emerging economies at a speed that would have been unimaginable without the mobile Internet. Twenty years ago, less than 3 percent of the world’s population had a mobile phone; now two-thirds of the world’s population has one, and one-third of all humans are able to communicate on the Internet.2 Technology allows businesses such as WhatsApp to start and gain scale with stunning speed while using little capital.

Entrepreneurs and start-ups now frequently enjoy advantages over large, established businesses. The furious pace of technological adoption and innovation is shortening the life cycle of companies and forcing executives to make decisions and commit resources much more quickly.

3. Getting old isn’t what it used to be: Responding to the challenges of an aging world The human population is getting older. Fertility is falling, and the world’s population is graying dramatically. While aging has been evident in developed economies for some time—Japan and Russia have seen their populations decline over the past few years— the demographic deficit is now spreading to China and soon will reach Latin America. For the first time in human history, aging could mean that the planet’s population will plateau in most of the world. Thirty years ago, only a small share of the global population lived in the few countries with fertility rates substantially below those needed to replace each generation—2.1 children per woman. But by 2013, about 60 percent of the world’s population lived in countries with fertility rates below the replacement rate. This is a sea change. The European Commission expects that by 2060, Germany’s population will shrink by one-fifth, and the number of people of working age will fall from 54 million in 2010 to 36 million in 2060, a level that is forecast to be less than France’s. China’s labor force peaked in 2012, due to income-driven demographic trends. In Thailand, the fertility rate has fallen from 5 in the 1970s to 1.4 today. A smaller workforce will place a greater onus on productivity for driving growth and may cause us to rethink the economy’s potential. Caring for large numbers of elderly people will put severe pressure on government finances.

4. Trade, people, finance, and data: Greater global connections The final disruptive force is the degree to which the world is much more connected through trade and through movements in capital, people, and information (data and communication)—what we call “flows.”

Trade and finance have long been part of the globalization story but, in recent decades, there’s been a significant shift. Instead of a series of lines connecting major trading hubs in Europe and North America, the global trading system has expanded into a complex, intricate, sprawling web. Asia is becoming

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the world’s largest trading region. “South–south” flows between emerging markets have doubled their share of global trade over the past decade.

The volume of trade between China and Africa rose from $9 billion in 2000 to $211 billion in 2012. Global capital flows expanded 25 times between 1980 and 2007. More than one billion people crossed borders in 2009, over five times the number in 1980. These three types of connections all paused during the global recession of 2008 and have recovered only slowly since. But the links forged by technology have marched on uninterrupted and with increasing speed, ushering in a dynamic new phase of globalization, creating unmatched opportunities, and fomenting unexpected volatility.

Resetting intuition These four disruptions gathered pace, grew in scale, and started collectively to have a material impact on the world economy around the turn of the 21st century. Today, they are disrupting long-established patterns in virtually every market and every sector of the world economy—indeed, in every aspect of our lives. Everywhere we look, they are causing trends to break down, to break up, or simply to break. The fact that all four are happening at the same time means that our world is changing radically from the one in which many of us grew up, prospered, and formed the intuitions that are so vital to our decision making.

This can play havoc with forecasts and pro forma plans that were made simply by extrapolating recent experience into the near and distant future. Many of the assumptions, tendencies, and habits that had long proved so reliable have suddenly lost much of their resonance. We’ve never had more data and advice at our fingertips—literally. The iPhone or the Samsung Galaxy contains far more information and processing power than the original supercomputer.

Yet we work in a world in which even, perhaps especially, professional forecasters are routinely caught unawares. That’s partly because intuition still underpins much of our decision making.

Our intuition has been formed by a set of experiences and ideas about how things worked during a time when changes were incremental and somewhat predictable. Globalization benefited the well-established and well connected, opening up new markets with relative ease. Labor markets functioned quite reliably. Resource prices fell. But that’s not how things are working now—and it’s not how they are

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likely to work in the future. If we look at the world through a rearview mirror and make decisions on the basis of the intuition built on our experience, we could well be wrong. In the new world, executives, policy makers, and individuals all need to scrutinize their intuitions from first principles and boldly reset them if necessary. This is especially true for organizations that have enjoyed great success.

While it is full of opportunities, this era is deeply unsettling. And there is a great deal of work to be done. We need to realize that much of what we think we know about how the world works is wrong; to get a handle on the disruptive forces transforming the global economy; to identify the long-standing trends that are breaking; to develop the courage and foresight to clear the intellectual decks and prepare to respond. These lessons apply as much to policy makers as to business executives, and the process of resetting your internal navigation system can’t begin soon enough.

There is an urgent imperative to adjust to these new realities. Yet, for all the ingenuity, inventiveness, and imagination of the human race, we tend to be slow to adapt to change. There is a powerful human tendency to want the future to look much like the recent past. On these shoals, huge corporate vessels have repeatedly foundered. Revisiting our assumptions about the world we live in—and doing nothing—will leave many of us highly vulnerable.

Gaining a clear-eyed perspective on how to negotiate the changing landscape will help us prepare to succeed.

*Richard Dobbs is a director of the McKinsey Global Institute and a director in McKinsey’s London office, James Manyika is a director of the McKinsey Global Institute and a director in the San Francisco office, and Jonathan Woetzel is a director of the McKinsey Global Institute and a director in the Shanghai office. **This article is an edited excerpt from No Ordinary Disruption: The Four Global Forces Breaking All the Trends, published by PublicAffairs.

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Results of the Erasmus Generation Survey

By Nikita Gaur* Think Tank Think Young and Bureau Burson-Marsteller recently released the results for the Erasmus Generation Survey which they carried outlate last year, as part of the Europe Decides Initiative. The aim of the survey was to find out what the young people of Europe think about the European Union. ThinkYoung is a think-tank for young people who recognised the lack of young people’s voices within EU decision making and as a result was extremely interested in analysing this issue. With the news becoming more populated with the latest about young unemployment and much more, it would be interesting to see how the youth actually feel about what the EU is doing to support their future. Are they are even aware or interested in what is happening within the EU?

T

he main aspects looked at included young people’s opinions on the future of European policies, where the EU should act more and if they care about the direction Europe is taking.

1500 millennials were surveyed across the EU, here are some of the results: • 63% of young people surveyed believe their vote makes a difference • 36% feel that politics are not interesting enough to concern them • Millennials’ priorities for the next 5 years: 59% say growth and jobs, 28% climate change and the environment, 21% fighting against corruption • To encourage young participation by allowing voting online • 66% have a positive view of the EU • Best achievements of the EU include respect of people’s fundamental freedoms and rights • The EU should promote more entrepreneurship • 65% believe that European politics are not interested in the views of young people The results convey that the youth of today are still interested in what is happening within the EU, however, they do not believe that the EU is concerned with their thoughts and opinions. We want this to change, by encouraging voting online, promoting entrepreneurship and taking into account the views of younger generations, the young people of today

and tomorrow may become more active within the EU. The results are later going to be presented to the European Commission, the presidents of the European Council and the European Parliament, members of the European Parliament, representatives of the civil society and think tanks and leading European media.

By presenting these results to such people we hope that this will make an impact and change the way young people view the EU so that 100% of the youth think positively about Europe and know that European politics are interested in what they have to say.

For the full results please visit: http://www.generationerasmus.com/ Facebook: https://www.facebook.com/thinkyoung Twitter: https://twitter.com/ThinkYoungTW LinkedIn: https: //www.linkedin.com/company/thinkyoung Instagram: www.instagram.com/thinkyoungoffice/ *Journalist Nikita Gaur is media officer of think tank Think Young

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Top 9 Hashtag Strategies: To Boost your Online Marketing Campaign

By Lisa Coffey*

I

dentity-Crisis would be the most appropriate words to express the feeling of a hashtag (#), if it had possessed the ability-to-feel!Yes! Life for this modest metadata-tag would have been pretty confusing!Most of the time, Hashtag (#) is mistaken for either a pound sign or a number sign. It even possesses an eerie similarity to the sharp musical note as well as an ancient Asian Symbol which describes

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an early land distribution system.

Sometimes even the content-marketers are pretty confused too! They know they need to utilize them, but they are not sure about the finest approach. As an essential element of social along with content marketing-dais such as Facebook, Twitter, Pinterest, Instagram, Google+ and Tumblr, hashtags signify vital ways of digital communication and marketing.

TRENDS

What’s a hashtag-campaign?

Any individual or a company selects a specific hashtag (very unique one) and requests followers to Tweet as well as post snaps using those hashtags.

Such campaigns usually encourage mutual-relationships among company and customer. Company offers various giveaways, discounts as well as an opportunity to the client to notice his/her own post on the website of the company.

And as a return-favor, the client has the motivation to boldly energize the company’s exposure. And it’s a win-win situation for all!Now is it that simple? Nope, it’s not as simple as it sounds!The article talks about the top 9 hashtag strategies that will certainly help you to boost your online marketing campaigns:

1) Make Your Own Hashtag: Both big as well as small brands prefer to make their own hashtags for various reasons. Hashtags are a huge way to create-a-buzz around any marketing campaign. For instance, #letsdolunch was a campaign launched by Domino’s Pizza to encourage followers-to-tweet and once the tweets crossed 86,000 score, Domino’s dropped the rates by lower than half, that day between 11 am to 3 pm.

Events offer best opportunities to create discussions around hashtags. Honor-your- event with a classic hashtag way prior to the actual event-date.

This way you’d be able to get necessary content as well as discussion regarding your event way before its commencement.Be creative! Utilize hashtags for Twitter-Chats. Request a business-expert to respond to tweeted queries put by your followers. Using hashtags, you can even start a Twitter-game. It’s a smart way to engage people with your brand.

2) Hunt for business-specific discussions: Connect to hashtags such as #smallbiz or #SMB and access resources, advice as well as up-to-date news about your surrounding businesses. Then tunein more often for an instant update.In case you wish for a more precise discussion, then search hashtags by topic. For instance, the #sales hashtag comes with tons of small sales-related content. Or head to the #entrepreneurs or #startups hashtag to access the motivating profiles.And in case you wish for tips to meet compatible entrepreneurs, opt for the

#networking hashtag, to access information as well as advice on how to make connections.

3) Simple and Consistent hashtags: When creating hashtags, it’s vital to keep in mind a couple of thumb rules. 1st your tags should be straight and simple. Do not craft a complex and long hashtag.

Complicated hashtags are not that search-friendly or commonly used, so as a result your tweet will disappear quickly. And 2nd do not attach your tweets with excessive and unnecessary hashtags. Reserve it to at-most 2 hashtags per single tweet. More than that would read like distressed marketing and would surely lose followers speedily.

4) Use hashtag to systematize social-dashboards: Among the most fitting ways to remain on pinnacle of the relevant hashtags is to assign easily available columns in your social-dashboard. So whether you use TweetDeck or HootSuite, you can set up columns via search-term, social-network, hashtag or Twitter-list.

5) Use Capital Letters whenever necessary: Take lesson from Susan Boyle’s case (#susanalbumparty case). Though it’s quite annoying sometimes to hold the shift-key down while you type, however, instead of “#NowThatcherIsDead”, “Now_Thatcher_Is_ Dead” would certainly have cleared-up the confusion.

And although hashtags are not case-sensitive, however, that doesn’t mean that the message shouldn’t be clear to the followers.

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6) Queries with very specific replies: Please don’t repeat the #McDStories blunder! Don’t ever ask any way-too-open-ended hashtag-themed query and if you do – then be prepared to receive a sea of obscene-replies. When you’re creating your tag, first enquire yourself – how a layman would respond to you particular theme! Just rephrase out a distinct theme, in case you think your initial thoughts can probably invite a potent social-media-disaster.

7) Piggybacking on a trend: One more way of using hashtags effectively is cashing-in on the latest trending theme. Instead of providing your users an easier way to navigate such as with cataloging, this tactic is exclusively planned to augment traffic as well as attention to your particular social-media-profile. Twitter exhibits ‘trending’ hashtags as the most followed hashtags presently being discussed. And in case you wish to hop on the worldwide-discussion then you need to post something significant and relevant along with that ‘trending’ hashtag. Surely, you will grab some social user’s attention that are seeking for information and updates on the ‘trending’ theme and in case they find your post appropriate, your existing followers will perceive you as up-to-date as well as relevant.

8) Campaign and Brand Hashtags: Campaign and brand hashtags are the specific tags which one makes for his/her own business. Then they use these to endorse their brand as well as promotions.

For example: KitKat created a brand-hashtag and used their tagline as #HaveABreak. Now they, time and again, use it on all of their social-sites right from Google+ to Twitter. Their followers are aware about their brand-hashtag and they utilize it to connect to the Social-KitKat-Community.

Tips on how to use campaign and brand specific tags: Maintain your brand-hashtag, as unique and consistent as possible and employ it on each of your social-media-sites.

Create campaign-hashtags to stir more understanding about your marketing and promotional efforts.

Keep the brand-hashtags comparatively short, so that it’s easy for your consumers to spell and 46

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remember it.

Constantly monitor your campaign and brand hashtags to answer people following them.

9) Content-Hashtags: Content-hashtags are the tags which you employ in your post-content. These differ from branded tags and aren’t used to identify your brand and promotion. These aren’t even trending or greatly popular.

These simply are common hashtags which are relevant to your post-content. The very purpose of content-hashtags is to perk-up the SEO of your particular posts. These make your updates being viewed by your clients who either are looking for or using the hashtag-keywords.

Tips on how to use content-hashtags: Search for content-hashtags by seeking out which tags are being utilized by your competitors, your followers as well as your product-partners.Connect with people employing relevant content-hashtags, whether it’s a Facebook ‘Like’, a Twitter ‘retweet’ or an Instagram ‘comment’. Never spam your post-content with tons of content-hashtags as this won’t inspire trust in your prospective client and would surely display you as a ‘Sales-guy’.

Although hashtags can’t be considered as a magical-course to generate utmost inbound traffic, however, when appropriately researched as well as executed, these can prove to be a very handy tool of your Social-Media-arsenal. The need is to correctly recognize the diverse applications related to the hashtags, utilize them accurately and persistently monitor by following up your progress as well as regulating your promotional-campaign accordingly.

* Lisa Coffey presents ideas to empower companies to make evolutionary leaps in their go to market strategies and helps entrepreneurs catapult their small business into the 21st century. A free spirit, residing in Salt Lake City, Utah., she has been a writer since 5 years with over 500 published articles.

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EVENTS

4G is a Success; 5G is in the making.

Is Huawei’s 4.5G the short term bridge?

By N. Peter Kramer*

F

rom 1G to the more recently deployed 3G and 4G, with each new generation of communications networks systems connectivity becomes more prominent in our lives. And although 4G is not even used by a small percentage of the world (for instance Brussels, the capital of Europe, is just about to introduce it) a dream called 5G is already born.

The rapidly growing demand for digital products and services is vastly multiplying the amounts of data flowing through networks worldwide. This expansion is predicted to continue exponentially in the near future. Mobile traffic is expected to grow by up to 1000 times over the next decade, and this will have a tremendous impact on the underlying network infrastructure. There will be over 6 billion smartphone subscriptions by 2020, and over 90% of the population over 6 years old will have a mobile phone, says a mobility report of the Swedish technology giant Ericsson.

An expert explained the development this way: ‘4G was designed for improving capacity, user

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data-rates, spectrum usage and latency with respect to 3G. 5G is more an evolution of mobile broadband. It will be a key enabler of the future digital world, the next generation of ubiquitous ultra-high broadband infrastructure that will support the transformation of processes in all economic sectors and the growing consumer market demand’.

This evolution means that in the (near?) future also European society and economy will strongly rely on 5G infrastructure. The impact will go beyond existing wireless access networks with the aim for communication services, reachable everywhere, all the time, and faster. 5G is also a challenge for the European IGT sector.

Mobile World Congress Barcelona 2015 During Mobile World Congress in Barcelona (beginning of March), the European Commissioner for Digital Economy and Society Günther Oettinger urged the 5G Private Public Partnership (5G PPP) to increase the efforts for a serious development of 5G. The EU’s wish is that the Europe regains its

EVENTS

pole position in the next generation of communications network systems connectivity after it lost the race on 4G. It became clear in Barcelona that not all 5G PPP partners are thinking in the same way about the working up call of the commissioner. For instance big players in the field, Qualcomm, Huawei and Orange, showed in public a rather different view on the future, the speed and the necessarity of 5G. Qualcomm’s CEO Steve Mollenkopf called for the benefits of 4G (LTE) to be fully maximised to protect R&D and deployment investments. ‘The debate is when do we call it 5G’, he said. ‘There is still a lot to do. The biggest challenge we face with 5G is the extreme number of use cases. There will be many new methods for billions of devices to connect and to interact’. ‘Let’s enjoy 4G and not rush to 5G’, Orange CEO Stephane Richard said in Barcelona. ‘The IoT will become the internet of everything with the advent of 5G. However he believes there is no rush: ‘4G is a success, let’s enjoy it. We shouldn’t jump too fast.’

In a reaction, Ken Hu, Huawei’s rotating CEO, stressed the benefits of 5G over LTE. He claimed that LTE cannot support the thousands of connections needed for the Internet of Things (IoT) services. ‘5G will be capable of connecting 100 billion of devices which will be very valuable for industrial applications’. As an indication of Huawei’s keenness to move forward, the company confirmed it had already developed a new air interface for 5G. Hu said that 5G would have a virtualised architecture leading to a single physical network providing support for a multitude of different apps.

‘4.5G’ to bridge the gap between 4G and 5G But the expectations are that 5G will not be operational before 2020 the earliest. Therefore Huawei is promising a ‘4.5G’ mobile networking solution by 2016. It would be aimed at bridging the gap between 4G and 5G: 4.5G is the natural evolution of 4G. It offers enhancements to meet new services, in particular to meet the growth of the Internet of Things (IoT). The 4.5G tech includes prospective 5G features like low latency and virtualisation.

During MWC the three upcoming main trends

tippedto take place within the next 5 years, could benefit of 4.5G. These trends revolve around redefining visual experience, building a better connected world over cellular Internet of Things (IoT) and realising Industry 4.0 to accelerate mobile network evolution.

The first trend is that visual experience will undergo a transition from HD video to virtual reality. Users could watch sports matches or even shop for things through virtual reality headsets and carry it like they do with their smartphones. Companies like Oculus have already created the first mobile VR headset while other social networking platforms like Facebook would also provide VR applications. 4.5G will present a platform for experiences of VR for users Cellular IoT is the second trend. The industry has been used to M2M communication over short ranges technologies like Bluetooth, but which will not end there. 4.5G will introduce more connections which will mainly be devices like smart meters and wearable user devices connecting to the cellular network.

4.5G will make cellular IoT a reality.

The third trend is the transformation of industrial automation through the enabling of communication between factory machines and equipments. Short latency will mainly benefit interaction between machines. Cyber systems can realise control over factory machines and industry equipments through the support of wireless connections. 4.5G network will enable cooperation of cyber systems in real time so they can execute real time monitoring of industrial processes.

Huawei’s time frame of 4.5G predicts that the first 4.5G services will be launched around 2016. 4.5G represents than a next 5 year network evolution to smoothly prepare for the migration towards 5G around 2010. *The annual Mobile World Congress in Barcelona (beginning of March) is considered to be the largest event in the calendar of the global telecommunications industry. EBR’s editor-in-chief N. Peter Kramer was, as a special guest of Huawei Technologies, among the more than 85.000 visitors. On EBR’s website www.europeanbusinessreview. eu you can find his webdossier ‘Digital, data and the day after tomorrow’.

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Building better cities

By Joan Clos*

I

n the economic history of humanity, urbanization has always been an accelerator of growth and development. The proximity of all the factors of production that occurs in the urban settings boosts efficiency because there are lower transaction costs; bigger, closer markets; and a natural tendency to form high-value areas of specialization. Indeed, it seems that no economy in the world to date has become prosperous without becoming urban.

We are, of course, in the midst of massive urbanization. Already 55 percent of the world’s population lives in cities and this figure is likely to reach 70 to 75 percent in the next 30 or 35 years. That presents a challenge: what kind of urbanization will nurture sustainable growth?

In my view, there are three areas that we need to address to ensure prosperous urbanization. First is the issue of adequate rules and regulations. Second is having a carefully thought-out urban design.

And third is putting into place a financial plan that ensures adequate funding. When you analyze how cities create value and how economies of agglomeration or urbanization are created, it’s clear that you cannot succeed without addressing every one of these areas in parallel.

In the first instance, it’s evident that the cities that generate the most value are those with the strongest legal frameworks; that is, the ones that have clear, intelligent rules that are consistently enforced. A productive city is an outcome of the rule of law. Why? Because no one wants to invest in a place where their property could be seized or their rights abridged.

Just as important is the physical plan or design,

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an area that has been neglected since the Second World War. This lack of attention has resulted in a lot of cities, especially in the emerging world, that are congested, polluted, and just not very pleasant.

And that undermines the urban economy because people are less willing to invest in them. It’s especially important to address design early on because if you don’t, it is very difficult to do so once the city is established. Social and political issues emerge and it becomes a very complex and expensive process.

Finally, a financial plan must also be put into place from the start. Urbanization generates a lot of value and, if managed well, should finance itself. But that only happens if you have a very rigorous plan. You need a plan for expenditures and maintenance and a plan for income. Urbanization must be supported by policy at the national level that leaves enough revenue with the city to sustain itself rather than siphoning it all off for other purposes.

If all three of these issues are addressed, urbanization can begin to produce financial outcomes immediately. Initially, the construction phase becomes a source of employment. Later, the economies of agglomeration kick in and there’s a continuous process of increased productivity.

I am optimistic. We are still in the middle of the process. We can still address the future of urbanization in a way that can guarantee a better future for all.

*Joan Clos is the executive director of the United Nations Human Settlements Programme and former mayor of Barcelona.