ERT study: EU - last globally in R&D allocations

The European Union allocates too few funds for research and development, approximately 2.27% of the Community's Gross Domestic Product, than its global competitors (China - 2.40% of GDP, the USA - 3.45% and South Korea - 4.81 %), it is stated in the European Round Table (ERT) Vision Paper, a document recently published on the website of the respective organization that represents the interests of companies from the European community block.

The cited document also notes the existence of a significant difference in economic growth between the EU and the US in the last 15 years. While the European Union maintained a counterproductive austerity policy from a macroeconomic point of view, which decreased investments, its competitors invested more actively, say ERT specialists.

ERT chairman Jean-Francois vanm Boxmeer, former CEO of Heineken International, said, according to the Euractiv website: "If you look at the difference in the rate of growth between the US and Europe and we project that over another 10 years, we could become economically irrelevant and we could become a kind of nice museum for visitors to a place that is no longer thriving'.

Jacob Wallenberg, ERT member and chairman of Investor AB, told the quoted source: "We have a real problem: Europe lacks a sense of urgency that we consider so important."

As an example, he pointed to the Australian Strategic Policy Institute's technology monitoring tool, which targets technologically important companies. Out of 44 technologies, China leads in 37, while the US ranks second, which upsets ERT members, who believe a greater focus on economic growth and a more integrated EU internal market is needed.

The paper published by ERT states: "The European Commission must lead a comprehensive program to shape a common market across all policy areas, including energy, digitalisation, capital, environment and defence". At the same time, ERT wants the Community Executive to be more proactive in "compelling EU member states to urgently remove illegal or unreasonable obstacles" from the internal market. In addition, the Commission should focus more on harmonizing and simplifying rules instead of constantly issuing new ones.

European industry representatives are calling on the Commission to provide more incentives for new EU investment, along the lines of the Inflation Reduction Act (IRA) in the US.

Jean-Francois van Boxmeer also told the quoted source: "Like the IRA, we need to invest money in these infrastructure projects that are needed in Europe, especially in electrification." He criticized the European approach, which he described as "wasted money on small local initiatives" at member state level.

The current way EU states can subsidize their industries through relaxed state aid rules gives member states like Germany an advantage because they have much more financial power than smaller, poorer member states.

In fact, Germany is the main beneficiary of the relaxation of state aid rules, receiving almost half of all state aid approved from February 2022, according to European Commission data presented by the cited source.

ERT's vision paper also points to structural problems at EU level. The companies' representatives argue that the EU should increase its budget to finance European investments and that decision-making processes by Brussels should be simplified, for example in tax matters, where the EU can only decide with the unanimous agreement of member states.

According to ERT, another way to increase investments would be the consolidation and integration of European capital markets. According to ERT members, a better integrated and more liquid European capital market would lead to more venture capital, which could then help solve part of the EU's innovation and growth problem.

In the run-up to next year's European elections, ERT intends to present additional and more detailed plans to strengthen European competitiveness, plans that will later be put on the table of the new composition of the European Commission.