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Euro Elections: What Do They Mean for the Future for European Manufacturing?

Posted By Paul Tate, May 28, 2014 at 12:42 PM, in Category: Industrial Policy

Last week, over 40% of the 500 million citizens across the 28-nation European Union voted for their representatives to the European Parliament for the next five years. The results were announced on Sunday. Some called the event ‘an earthquake’!

Why? Because the results showed a massive surge in Eurosceptic and protest votes across the region. Far-right, anti-EU parties swept to unprecedented victories in France, Britain and Denmark and populist candidates gained ground in many countries elsewhere. Overall, around a quarter of all the 751 EU parliamentary seats are now in the hands of Eurosceptic or protest parties. 

A number of key concerns came to the fore in the run up to the vote – increasing bureaucratic interference from Brussels; the perceived loss of national sovereignty and identity; over-zealous expansionism into troubled economies; issues of employment, immigration, and the free flow of labor across the region; and over-regulation at both an industrial and social level.

This Eurosceptic backlash now raises some tough questions for Europe’s leaders about the future direction of European integration. It may also raise some concerns about the future of Europe’s manufacturing industry, the direction European industrial initiatives now need to take, and the cohesion the European manufacturing sector, as a regional industrial community, has striven to achieve so far.

In recent months, Europe’s manufacturing sector has recorded increasingly strong performance. The 18-nation Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 53.4 in April, the tenth successive month of manufacturing growth across the region. In fact all the Eurozone nations recorded manufacturing PMI’s above the 50-growth threshold for the first time since November 2007.

Late last year, the EU also embarked on a broader new 28-nation initiative to boost the contribution of manufacturing from 16% of overall European GDP to 20% by 2020.

Known as the 2020 Industrial Policy Flagship Initiative, it is built around a package of measures focusing on skills development, improving internal market conditions and entrepreneurship, easier access to capital and finance, and investments in innovation -- especially in the fields of advanced manufacturing technologies for clean production, key enabling technologies, bio-based products, sustainable industrial policy and materials, clean vehicles, and smart energy and utility grids.

While this industrial initiative is unlikely to be seriously jeopardized in the short term by the latest electoral results, there is certainly increasing pressure to rethink how the EU goes about its business, how much sway it has over European manufacturing companies at a regulatory level, and where the focus of its growth-promoting industrial investments should be.

For example, in response to the bruising electoral results announced at the weekend, Dutch Prime Minister Mark Rutte responded that perhaps the solution lies in “fewer rules and less fuss from Europe, and focusing Europe on where it can add value to things."

Meanwhile, German Chancellor Angela Merkel, French President Francois Hollande and Italian Prime Minister Matteo Renzi all stressed the need to continue to revive Europe’s economy after the damage wrought by the recession of the 2000’s and the subsequent Euro-crisis. The problem is, they don’t agree on what to do about it.

Merkel believes it’s essential to improve Europe's competitiveness but maintain fiscal discipline. Hollande and Renzi, however, want to soften budget austerity to allow more public investment to boost growth.

British Prime Minister David Cameron, whose UK Conservative Party was knocked back into third place in last week’s European elections, argues that the European Union has simply become “too big, too bossy and too interfering”.

"We need change,” he added. “We need an approach that recognizes that Europe should concentrate on what matters, on growth and jobs, and not try to do so much." Part of this would be to reduce the burden of European legislation on European businesses, including manufacturing.

Of course, it’s perhaps inevitable that with more than 500 million people, a combined GDP of over £18 trillion, 24 languages, 28 international dialing codes, and land borders stretching from the Arctic Circle to the Mediterranean and from the Atlantic coast to the Black Sea, consensus about the way ahead is never going to be easy.

So where does this now leave the future of European manufacturing?

On one hand, the next few months could see increasing pressure from the newly-appointed ranks of Eurosceptics for radical reductions in overburdening EU industrial regulation, legislation and interference across the region’s national business and manufacturing communities. This won’t be easy. Dismantling established legislation takes time and can be a highly complex and politically-sensitive task.

But on the other hand, a re-energized focus on economic and industrial growth, job creation, and innovation could be exactly the stimulant European manufacturing needs as it becomes increasingly recognized as a key growth engine in revitalizing Europe’s fortunes.

Clearly, the aftershocks of last week’s electoral ‘earthquake’ are likely to be felt for some time. The question is: will those tremors help push Europe’s manufacturing sector to new heights in the future, or shatter its regional dreams?

Watch this space.


Category: Industrial Policy
Written by Paul Tate

Paul Tate is Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council. He also directs the Manufacturing Leadership Council's Board of Governors, the Council's annual Critical Issues Agenda, and the Manufacturing Leadership Research Panel. Follow us on Twitter: @MfgExecutive

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