Committee on Industry, Research and Energy Ordinary meeting
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ITRE European Parliament
Follow its sittingsSpeaker 2
I think we need to be more flexible about needs rather than try to define a lot of subsectors, sub-targets, and be formulaic and programmatic in how we approach them. The best type of industrial policies will most likely come when we allow a lot of discretion for individual managers to decide who is going to get what, but then they are accountable for the allocation of funds they are receiving. So, I would like to see much more of an intervention logic in the proposal going forward. Secondly, on governance, accountability is required both from the giving side and the receiving side. We over-index the discussion on the receiving side to make it clear that those who receive money are going to spend it well.
But successful industrial policy also tends to come when there is accountability for those who make the decision to give the money, because that's when the critical decisions are made. We need to have many more evaluations and learning processes, which support, in my view, an industrial policy that works with much shorter, smaller, and faster-paced projects rather than long projects. And I generally favor what I call the portfolio approach to industrial policy, which is that we shouldn't measure the success of each and every decision and all grants that we give. We should look at the portfolio and see how it is developing. Just as when you look at your pension savings, what's really important is not how each individual part of that pension portfolio is performing.
It's how the portfolio at large is performing. And thirdly, when we get into the part of the ECF, which is much more connected, in the first place, to larger volumes of money and also to grander projects. I think we need to find ways to connect this also to different types of support, reform-based support in countries that are going to receive some of these funds. Thank you very much, Germany.
Speaker 8
Okay. Thank you, Mister Chairman, and thank you for the invitation to be here. I'll start with something very simple. I looked back at history, actually comparing and seeing if the pre-war experience and the interwar period can tell us anything about where we are today and what lessons we can learn. The right.
Speaker 5
The right one. Okay. I think I'm just going to hang on to this. Well, this is going too fast. Well, it's moving right here by itself.
Well, I'm...
Everything is not working.
You just tell us, and we will.
First slide. So.
Speaker 6
Looking back at the 1930s, actually, the lessons—the lessons are the same. We are navigating through a period of raising tariffs, like then. We know that tariffs are a major source of friction in the world economy. And, actually, if we compare what happened then, prior to the 1940s, we had the Commonwealth block and then the Reichsmark block. We actually managed to pull countries together, like towards their own blocks.
Speaker 7
And this happened not because of the geographical distance, but because of direct interests. Right? So, the lesson is that, actually, trade wars don't collapse trade. They just reorganized it into geopolitical blocks. I think this is quite important because nowadays, we are going through exactly the same situation.
Speaker 6
Now the world tends to move towards being more US-centric or China-centric. So, at the moment, there are two big forces. And the pillars of European and Thai prosperity are just degrading. So it's open trade, collective security, and hegemonic stabilization that are currently eroding all this. And we can see the emergence of trade blocs again.
So, countries actually don't choose blocks. They didn't choose blocks for security reasons in the past. Well, actually, they chose blocks for security reasons and not for economic optimality. I think this is quite an important lesson. And there is a recent study which actually showed that the median US block country would benefit from switching to the China block, and vice versa, nowadays if the reasoning was purely economical.
Speaker 7
So, actually, the lesson we could learn is that what needed to be done was more internal market depth. This is something which countries did in the past, in the thirties; they fared much better afterwards. Also, it's very important to have resource security. In the past, it was very important. Nowadays, it's also important when you are talking about critical materials and so on.
And also industrial consolidation. This was extremely important. Without consolidation to get stronger, of course, countries are vulnerable to external changes. Also, no, wait. Waiting for the situation to return to what it was before.
It used to be a wrong approach then. So, even now, Europe needs to act. This is clear. Now, how does this frame the European competitive left fund narratives? Actually, you can change the narrative from a fiscal transfer, which is widely seen nowadays, to an insurance premium against an undesired scenario.
So the reason to set up such a fund is more than to have a fiscal transfer; it is to transition Europe towards something else. It's like it could be used as an insurance premium. Now, moving on to slide number 2. We can actually see we did a study recently. In this study, we compared the EU frontier.
Speaker 6
The EU frontier here is defined by the top three countries in Europe. And we calculated the productivity of different sectors, productivity defined as gross value added per employed person. And we noticed a big change. Actually, it was a break after 2019. Of course, Europe went through a, well, it is actually going through a transition.
Since 2019, we had different shocks like COVID, the Ukraine war, and so on. But actually, what we noticed was that before 2019, the follower countries were the remaining 24 countries for each sector. Those followers were actually growing faster than the frontier countries, which are the top three countries in Europe. Right? So the gap there, as seen in the first graph, was about 0.6.
So it was double. This is per year. 0.6 per year. After the pandemic, frontier countries are still catching up, but the distance, the space, the pace, is much lower. Now it's only a 0.2 percentage point difference compared to the frontier countries.
Speaker 7
Why did it happen like that? Because of two sectors: agriculture and industry. Now, maybe it's not a coincidence that these sectors are quite energy intensive usually, and the price of energy affected dramatically their competitiveness. But when it comes to industry, for instance, we see that frontier countries actually advanced faster, three times faster than the followers. So, we actually looked at the problem separately, and we identified the followers as being much slower in adopting technology.
This is the root cause. Frontier countries adopted technology, so they substituted capital for labor, whereas follower countries were much slower in doing so. One good thing is about the services. Services are still performing well. There is still convergence to achieve.
Speaker 6
So, from this point of view, it is a good thing. Moving on to the last slide, please. Now, what are the potential avenues for action in the current context? Now we know we have the reports from Draghi, Letta, and so on, which actually give all these actionable directions. But, again, making a comparison with what happened in the thirties and prior to the thirties, we can see nowadays that UAE is the world's largest bloc, but it has the weakest power.
This is according to the EU's own words. And why is it happening? Because of the signal, the single market is fragmented. So, we have services, capital markets, defense, and so on. That's all fragmentation.
So first thing, it's just to unify the single market and to make it function better. And there is a lot of efficiency to begin with there. Second, defense. Defense is already in Europe, doing something about it. More needs to be done.
And also, when it comes to policy trade-offs, this would require some policy trade-offs because there are a lot of financing needs for Europe nowadays, be they related to age-related costs, climate change, and so on. So this is, again, an important issue. And lastly, there is the energy. The energy, I know that Europe is following it actively, but clearly, it needs to find a way to lower energy prices and to increase competitiveness. Thank you.
Speaker 11
So thank you very much. Thank you very much, Mister Chairman, and thanks also for the opportunities to speak here today. I'm a political scientist by profession, not an economist, so my comments will be slightly different. I will focus on the governance of the ECF. And to be exact, I will discuss the issue of flexibility.
Speaker 10
So, the commission says that the ECF must be flexible to deal with unexpected challenges and to decide strategic priorities on an ongoing basis. And that's true, of course. But one question is: how much flexibility is really needed? And another question is: how much flexibility can the commission really handle? So I see a considerable risk that too much flexibility will generate ongoing haggling on priorities and investments that can result from vague, untransparent political compromises.
So, moving on to the next slide here. How flexible is CCF? Well, it's very flexible compared to the current funds. The policy windows are broad and have only indicative budget allocations, so they do not really pin down clear investment priorities. Second, while the ECF has a large variety of aims, there is a shortage of precise criteria and expert-based processes for deciding which projects will actually be funded.
More generally, the fund gives the commission a lot of discretion to decide on important things, such as exceptions to internal market rules or granting funds without open calls. So on all these three points, there is a huge shift compared to the current funds that the ECF is supposed to consolidate. They are much more earmarked for specific targets. They often have more precise criteria and processes for selecting projects, and they generally leave less discretion to the EC. So this raises, I think, three questions: how to decide on priorities, how to pick projects, and, if the commission is going to do all that, how to ensure accountability.
So, next slide, please. So, before moving into my recommendations, I would like to underline the challenge of setting priorities on an ongoing basis. So, I think the ECF will be under great political pressure in the coming years. The commission is already preparing a long list of sectoral initiatives, all of which will need funding. Some of these could clearly take a huge part of the funding in the relevant policy window.
If you look at the CHIPS Act, AI Act, and the contract, they could absorb a large proportion of the window for digital leadership, obviously, not to mention the needs in defense. So, there are a lot of functional needs. Second, all 27 member states will, as always, seek to steer investments to ensure net gains to bring home the bacon and get their piece of the pie, so to speak. And third, big industry will compete and lobby hard for funding, trying to single themselves out as critical for the EU's mission to become more competitive. And finally, the US and China will compete in various ways on subsidies and try to unpick EU unity.
So, I think given these pressures, it will be very difficult to make decisions on an ongoing basis and stick to them. And even if the Commission seeks to centralize its internal decision-making, which I think it does to some extent, there is a risk of continuous haggling among member states, capture by mature industries, and ad hoc responses to geopolitical pressures. So, I think the key issue here is that the EU is a union of states, which means that it doesn't have a strong political center compared to states, making ongoing strategic decision-making extremely difficult. Next slide, please. So, moving on to the recommendations.
I think that the parliament can make a contribution here by pinning down the priority setting and enhancing accountability. And I think my comments mimic Mr. Ericsson's comments here a little bit. On priority setting, I think it's important to specify the ECF's main objectives. Is it productivity and growth, or is it autonomy? Both are there as headline objectives.
And my recommendation would be to make productivity the main aim and the default aim that structures the ECF, and have autonomy as specific exceptions to this main rule, in the shape of constraints on international cooperation, on targeted intervention to enhance autonomy, but really targeted and exceptional. Second, I think the parliament can introduce some earmarking, but it has to be selective, of course, in order not to stifle this fund. And I think it should focus on safeguarding long-term perspectives and weak voices in the decision-making process. So, when I say long-term perspectives, I think, for instance, of research: a weak voice would be SMEs or scale-ups, which, by definition, aren't established here in Brussels and don't have a strong voice. And third, I think you could introduce transparent and expert-based processes for selecting projects.
I'm not saying that it is easy. I'm saying that it would be good to have it. On the accountability side, I think you could consider a process for the legislature to give an impulse to the strategic planning of the fund, and you could perhaps draw inspiration from the strategic programming exercise of the current Horizon Europe. The idea would not be to micromanage, but to enhance transparency on main political choices so that they aren't hidden in technical detail. And finally, of course, you can try to enhance transparency by asking the European Commission to report back on key metrics.
So, these suggestions may, of course, be criticized for stifling decision-making and taking steps back toward the old system. But I think the ECF makes such a huge leap forward in terms of flexibility. So some backtracking wouldn't be too bad. And I think they are needed to manage the governance challenges that I've pointed to. Thank you.
Speaker 13
Thank you very much, and thank you for the opportunity to be here. My name is Philippine Levy. I work at IDDRI, which is the Institute for Sustainable Development and International Relations. And today, I'd like to talk about the risks that can be associated with the ECF, depending on the design, the scope, and the governance of the fund. So, yes.
Speaker 14
So, I have five points, and all my slides are structured in the same way. So, my key takeaway message is at the top and the bottom, the risk that could be associated with this, and some supporting elements in the middle. So, my first point is about the importance of having a definition of competitiveness that may not be the same as my colleague's, which includes autonomy, resilience, and also decarbonization. Of course, I can cite here the Draghi report and talk about the fact that competitiveness comes from three things: innovation, decarbonization, and reducing strategic dependencies. But I can also mention this figure here of the 300 billion that the EU spent on fossil fuel imports in 2025, and also the figure of 208 billion that the EU suffered in economic losses from extreme weather events between 2021 and 2024.
Just to say that decarbonization does make us competitive by reducing our dependency on fossil fuels. And the risk is that if we exclude actions like nature restoration, climate adaptation, and decarbonization from the scope of the ACF, they won't be able to be financed. And all of this also feeds into what the Envy Draft opinion has coined as the definition of competitiveness. My second point is that it's really important to make sure that we know what we want to do with the ECF. Sorry.
The slide isn't clear, so we need to make sure that we have clear objectives and strategic prioritization of sectors and technologies, which is not the case at this point. There's a very broad range of technologies that are included in the ECF for now. But we need to ask the question of what we want this fund to do. Do we want it to support existing industries that are competitive, or do we want to make sure that we identify where there are competitiveness gaps and deficits, and then address these competitive gaps because it is strategic for geopolitical reasons and decarbonization objectives? And here are three points on this slide.
They need to have a prioritization framework and clear objectives. So, to define sectors for which we want to target ECF funds. The second point is about the need to have a coordination mechanism, a steering mechanism, and this could be the coordination competitiveness tool. If it is presented by the commission, it could be something maybe within the governance of the ECF, which I will come to in a minute. And the final point here is the need to define the strategic dependencies and make sure that you are addressing those, but not an overly wide range of dependencies that may not be critical and that could be addressed through other measures than through the funds of the ECF. And the risk, otherwise, is that you will have this dilution of resources and fall behind in the innovation race if you don't have well-defined objectives.
My third point, on this very easy-to-read slide, is about governance and how it works in practice within the ECF. Here is the idea that the ECF needs to be governed in a way that allows for an evidence-based, science-based, and transparent elaboration of the work programs, which will be the key tool through which the ECF is implemented and for which the commission at the moment is holding the pen. So, on this slide, there is also a proposal from the ECF regulation with four elements that I would like to highlight. So the first one is the need to have an evidence-based and science-based process to inform the strategic prioritization. So, this role of informing could be given to the Observatory on Emerging Technologies, which could be placed within the GRC.
Then it informs the role of prioritization that could be given to the strategic stakeholder board, which, together with thematic platforms for each policy window of the ECF, could co-develop the work programs. And what is key here is that there are independent experts sitting on these boards, in these instances. And the final point here is that you have this mechanism that integrates the feedback from what works and what doesn't work, and the lessons learned, in a regular way that is integrated within the governance of the ECF. The risk, otherwise, is that you would not be able to have something transparent, and the incumbent players would keep drawing all the resources, as has been said before as well. Now, moving on to my fourth point.
Here, the main point is the idea that there's a limited amount of money within the ECF, and I am looking specifically at the clean transition and industrial decarbonization window with the 26,000,000,000 on the table over seven years, which you can compare to the figure that has been estimated for the climate investment gap, which is 400,000,000,000 per year. And so, this means that we really need to make sure that we get the most out of this money, that we use it in the most efficient way. So here, I want to highlight the importance of targeting which instruments you're using depending on the development phase of projects. And for instance, using instruments like loans, sorry. It's like subsidies, grants, maybe for the early stage of projects, but also using instruments like debts and guarantees for later stages of projects, especially relevant for cleantech projects, and also using the leverage effect of Invest EU.
Otherwise, there's a risk that you will not be able to crowd in private investment and will not have the benefits for cross-border projects. Final point here, that is not directly linked to the ECF itself but is also important to keep in mind: the importance of maintaining a high level of ambition in the upcoming ETS emission trading system reform because the €26,000,000,000 that I just mentioned for the clean transition and industrial decarbonization window is linked to this innovation fund, which already exists and amounts to €41,000,000,000. And the revenues from the fund come from ETS revenues. And so, if you lower the ambition in the ETS reform, then you'll simply have less money to finance decarbonization projects. Those were all my thoughts.
Thank you very much.
Yvan Verougstraete
Much. Thank you very much. Last but not least, I think we have online Mr. Agion. Do you hear us?
So can you hear me?
Yes.
Speaker 15
Sir. Can you hear me? Yes. Very good. Thank you so much.
Thanks for inviting me. It's a great honor to be addressing the European Parliament. Can you show my slides, maybe? Can someone show my slides? Okay.
Thank you very much. So, my name is Philippe Aguil, and I am a researcher at the Collège de France in Paris, in Fontainebleau, and at the London School of Economics in London. And I teach in all three places. I would like to start with the—let me close the door one second. I would like to start by showing this picture, which was produced by a colleague of mine called Antonin Bergeau, who is with me at the Collège de France and also a professor at Husson.
This shows the evolution of the Euro Area per capita GDP since 1890 compared to the US per capita GDP. And you can see, of course, that there was a big fall in the Euro Area per capita GDP relative to the US due to the Second World War, where a lot of capital stock was destroyed in Europe, and also there was not much innovation going on then. But then you can see that between 1945 and the mid-1980s, we were catching up with the US. We caught up first because we rebuilt our capital stock a lot thanks to the Marshall Plan, but also because the high level of education in Europe allowed us to catch up with the technological revolution that took place in the US in the 1920s. I mean the electricity and internal combustion engine revolution.
So, between 1945 and 1985, we had a significant catching-up growth. But starting in the mid-1980s to early 1990s, you see that the per capita GDP of the Euro Area is declining compared to the US per capita GDP. In fact, we had already alerted on this with the pro D and the SAPI report. Do you remember the SAPI report? I was already in the SAPI commission then.
We rang the alarm bell, but not much happened. Okay? And again, Draggy is knocking at the same door with the report. Okay. So, what happened?
And you can see it goes beyond. Can you pass the next slide, please? The next one. Here, you can see; particularly, I would like you to focus on the right-hand figure. It shows high-technology patents in various regions. You can see the red is the US.
The green is Europe, where you see a decline, and the blue is China. And so, China is emerging when it comes to high-tech patents, whereas Europe is declining, and the US is still above everybody. Can we move to the next slide? What is really worrisome is that Europe has failed to achieve breakthrough innovation since the 1980s. We remain stuck in mid-tech incremental innovation.
We didn't do enough breakthrough innovations, unlike the US and China. And this is all the more worrisome, all the more striking, that if you look at the origin of ideas of patents in disruptive technology in this figure, which shows the papers that gave rise to the disruptive innovation, you see additive manufacturing, blockchain, computer vision, genome editing, hydrogen storage, self-driving vehicles; to a large extent, they cite European papers. So despite the fact that European research is, I think, still underfunded, we manage in Europe to produce very good research that leads to breakthrough innovation. But the European breakthrough innovations are not done in Europe. They are done in the US and now in China, not in Europe.
So, this is really the big drama that we are facing in Europe. Okay? Look. Can we move to the next slide? You see, just to give you an idea, if you look at the top five patenting firms in the US versus Europe.
In the US, they are not at all the same nowadays as they were 25 years ago because it's a new firm. They have created destruction in the US. You see, new technologies, new firms, and the leaders of today are not the same as the leaders of 25 years ago. And they are into high-tech, be it IT, AI, or biotech; the leaders are there. Okay?
Now, if you look in Europe, the leaders, the five top patenting firms in Europe nowadays, are essentially the same as they were in 2000, and they are stuck in mid-tech. So, over the past 20 years, patenting and R&D in the US moved from mid-tech to high-tech, and that's why you have different firms. Whereas in Europe, you are stuck in mid-tech, and you have the same firms. So, what do we do about it? Can we move to the next slide?
So what happened is that between 1945 and 1985, we were growing essentially by catching up through capital deepening. We rebuilt our capital stock thanks to the Marshall Plan, and we adopted US technologies thanks to our high education level. Can we move to the next slide? So now the big challenge is to move from catching up to breakthrough high-tech innovation in Europe. What do we need for that?
Next slide. And then you get into the Draghi report. But you have the Draghi report, the letter report, and the report of Bocconi to the School of Economics. What they tell you is that first, you need a single market. Why a single market?
Because it will give you higher returns if you innovate. And also, it means more competition, and we know that competition is a big driver of breakthrough frontier innovation. So, that's the first thing that you need. And we don't have a single market in Europe because, you know, each country has its own regulation in addition to European regulation, the gold plating practice. And we know how hard it is to cope with this gold-plating.
But we also need a well-founded and well-governed basic research system. We have the ERC. Fortunately, the ERC has been maintained. There was a big danger that the ERC would be emptied of what he had been doing. Fortunately, ERC has been secured, but I think we should extend ERC because we need long-term research funding where people can take risks.
There is insufficient risk-taking in Europe. We should be able to fail. If I want to generate breakthrough innovation, I need to create the possibility for people to fail and take high risks. So you need ten years of research funding. So, I would like an extended European Research Council that could also finance labs, not only individual projects, but research labs like we did with LabX, the Laboratoire d'Excellence in France.
We should extend that. So, I think we should make ERC even more independent, more autonomous, and with an enlarged budget that would allow ERC to finance labs, which would be very crucial. They have, you know, in the US, they are right. There is an ecosystem to finance long-term research. We don't have enough of it in Europe.
The second thing is that we need an adequate financial ecosystem. We don't have enough risk-taking for startups. Venture capital is very important. We don't have enough venture capital in Europe. Risk-taking in larger companies requires institutional investors, pension funds, and mutual funds, except in Sweden, which has really made big steps there.
We don't have enough institutional investors to encourage breakthrough innovation in larger companies. And we also miss, and then you discuss that it is a smartly designed industrial policy, which is pro-competition. In the name of competition policy in Europe, we precluded any form of sectoral state aid, and we were against any form of industrial policy. But we have DARPA in the US, the Defense Advanced Research Projects Agency, or DARPA Energy. Those are ways to reconcile industry policy and competition policy.
Money comes from the ministry. You have missions to fulfill. But then the team leaders, who are chosen for a period of three to five years and come from academia or industry, can elicit competing projects. And so, you have a top-down part and a bottom-up part, and it's a very competition-friendly way to do industrial policy. We don't have anything in Europe that approaches DARPA.
The European Innovation Council is very good. It is nothing like DARPA. The report of the Bocconi School shows very clearly why the European Innovation Council falls very short of being a DARPA. So we need to install DARPA. Of course, defense and AI are obvious areas.
A green transition, maybe in biotech. We need to have that part in Europe. We need to have a way. And you see, what's very interesting is that in the US, they found ways to reconcile industrial policy and competition policy. Also, in China, in their own way, there is competition.
They provide subsidies to competing firms. They do what I call artistic competition. So, in their own way, they have competition in industrial policy. And in Europe, in the name of competition policy, we precluded industrial policy. So, I think we also need to have this.
So, what is needed is the dragging report. Of course, we know that very little of it has been implemented so far. And my view is that it's a coalition of the willing that will make it. We need countries that want to move to move together. And Europe should help other countries to join, and everybody should be able to join.
For example, if a few countries want to establish a unified market for high-tech, they should do it. If they want to create John Dahpa, they should do it. If they want to create a joint institutional investor, they should do it. But it should not be; you see, the idea is to align on the max and not to align on the mean. And I very much hope that countries, by the way, the UK, are very willing.
We have to conclude slowly.
Thank you.
Thank you.
So much.
Yvan Verougstraete
Thank you very much for your passionate words. It was contagious. So, thank you very much for that. Thank you to the five of you for your remarks. And I propose now we pass to the reporters and shadow reporters, starting with Mr.
Eller.
Christian Ehler
Thank you. I have 5 questions. But first of all, I would like to thank all the experts. We have been carefully reading your intervention, and you will see a lot of that coming in the proposal. My first question, interestingly, the European Commission, and you had been referring to that, does not define what competitiveness is in a competitiveness fund.
And what is your recommendation in terms of that? Is that a competitiveness fund? Or is it a resilience fund or a sovereignty instrument? There is a lot of interpretation. My second question is hidden in the structure and methodology of the program.
There are two instruments. One is subsidies, and one is Invest EU. Given that, in real terms, the 137 of the fourth pillar will be fixed and not flexible, they go to space and defense. We talk about 100 billion. So the question is, in terms of choices, do we choose industry subsidies going either into industries, and interestingly, infrastructures are also mentioned?
Or do we talk about investee use? Do we talk about the derisking of investment? And what gives better leverage? My second or third question is: the commission brings together more or less 14 existing programs. Seldomly, it's mentioned that we are referring to the four windows, but underneath, there are more than 60 objectives and instruments.
So, we have even more than in the old programs. Doesn't that run the risk of fragmentation? And how would you prioritize that? My third question is that the governance of the ECF is an interesting matter. The commission will be advised by an obscure strategic stakeholder board, and its member states commission more or less incumbents.
Don't you think that it will drive us even more in the direction or lock us deeper into the mid-tech trap? Because it will be incumbent on industries to address or even design the program. So, is that not kind of a problem which drives us in the opposite direction that Mr. Aguilent had been advising us? Last question: the link to Horizon Europe is a fairly new approach. Given that this is very much an incumbent-driven program, and if that would be by industry policy, matters now defy innovation, wouldn't that drive an even further innovation program?
And that's another €100,000,000,000, equivalent to the €100,000,000 in real reality available for the ECF. Wouldn't that drive even more, especially in the innovation part of the MFF, into the midterm deadlock with incumbent subsidies and not into the new sectors, be it in decarbonization or in the digital sector? And my last question is: the ECF aims to capture fast-moving sectors like the digital sector. So the innovation cycles happen in less than three years, often in less than a year. But the commission proposes a structure which even takes longer than the historical working program structure, where we go from the idea to the call within two to two and a half years.
Now we go into the annual budget clauses of n minus two, and then in the third year. So, in a way, shouldn't we go, either in the Horizon program, which is connected to this question, or also in the ECF, to a more ARPA-like model, which would mean that the Commission and Council have to give up a say on specific calls; they would define the direction. They have an overriding right. But then we would move much more towards an ARPA stakeholder industry incumbent-driven model. Thank you very much.
Thank you. Mister Nika, please.
Dan Nica
What do we see on a daily basis? We see the factories closing and businesses becoming less competitive on a daily basis. That's what we are seeing. We've had the action plan, different projects, and plans full of good intentions. But it has been very pricey, and we have paid a heavy price in terms of competitiveness.
We've seen job losses and a loss of credibility, and the Competitiveness Fund is trying to remedy the situation. That's a good start. The €600,000,000,000 is going to be used to boost the competitiveness of European industry. But let's be clear, Draghi talks about €800,000,000,000, and we've been talking about €100,000,000,000 over a seven-year period. So, in the absence of a package that has these very clear measures on unjustified imports, for example, which do undermine competitiveness and constitute a form of unfair competition when faced with all of that.
I'd like to ask a question to our guests. I think it's right to stimulate competitiveness; no doubt about that. But if the funds allocated to that are insufficient, then surely we need something specific. We need swift implementation of this kind of plan that will really take the pressure off the European Commission, which may lack sufficient staffing levels to be able to put this in place. It's going to take many years to really launch a project, to evaluate it, and to think about what we need to have something much more agile and quick to implement.
That's certainly the question I'm asking, anyway. And what about the strategy itself? I think the funds are insufficient, the €600 billion; well, I think even that would be too little for Germany alone, let alone the European Union as a whole. So, what should we do with the money that is available? We need to make sure that we focus on strategic industries, that we have a focus on European industry, and then we can really respond to what is going on at a global level.
Well, I think all of that needs to be tied and packed into one single package that's quick to implement and really does the job it's set out to do. So if you reread the Draghi report, you will take away from that that if you want to be competitive and if you want to survive in European industry, it is just not going to happen unless the package is implemented right away.
Jana Nagyová
Thank you, Chair. Thank you very much to all experts and the other speakers. I would just like to add some additional questions. The history of Europe is full of subsidies. You know?
If something doesn't work, we need to add extra subsidies. But it seems that the problem is not always only insufficient resources. I have two questions. First relates to competitiveness because Draghi's report makes it clear that Europe has a massive gap in scale-up capital. We excel in research, but we lose our champions when they need to commercialize.
Looking at the proposed structure of the ECF, do you see sufficient de-risking mechanisms, such as guarantees, that will actually attract institutional investors like pension funds, etc.? And the second question, since the ECF is intended to serve as an instrument to enhance the competitiveness of Europe as a whole, and given that many member states from Central and Eastern Europe, but not only, have achieved only very limited success in the 14 programs that currently constitute the ECF, this situation should not be interpreted as a lack of capable entrepreneurs or researchers. Rather, it largely reflects administrative barriers, including complex and costly application procedures, language barriers, insufficient advisory support, and excessive discretion in the interpretation of criteria by implementing agencies of the commission. In this context, I do believe that some points will help not only Central and Eastern European countries, which are lagging behind, to increase the access rate, but also all of Europe. And the points were: this is a proposal, and my question will be, what do you think about this?
First, to introduce a simplified and more accessible call for applicants. Second, to ensure guaranteed advisory support for first-time applicants. Third, to provide targeted technical assistance to member states aimed at capacity building. And the fourth, last, is to strengthen geographical balance with consortia, including, where appropriate, the introduction of time-limited national envelopes. Thank you.
Yvan Verougstraete
Thank you very much. In the absence of Mister Coase, I imagine I will be the next guy who will speak in French for renewal.
Thank you. Thank you very much indeed for your contributions that have thrown some light on our discussions, and thank you for the passion and the energy that you brought to your statements. The competitive fund is a key in our arsenal when it comes to getting the European economy back on the rails in the face of American and Chinese competition, as you have shown. So we can offset the weakness of the capital markets, support research and development innovation, and create an adequate framework in order to promote the installation of industries as our competitors are doing, and ensure the deployment and development of innovative companies so that they can be international players, thus shoring up our strategic autonomy. But of course, it's not going to be enough.
As has been said, although the sum seems impressive, it's limited when it comes to offsetting the unfair competition of those who prioritize things such as "drill, baby, drill" without caring about the indirect costs or those who produce dangerous products for our health. So it's not going to be the solution, although it's an essential one when it comes to ensuring Europe's economic success, as a prerequisite for it to play its role. The ECF has to be effective. The €234,000,000,000 have to be spent optimally so that we can give priority to excellence and quality, while ensuring that European enterprises benefiting from the fund remain in Europe. So, I've got three questions for you.
I don't want to repeat the questions already raised. Firstly, what do you think about European preferences? Second question: how would you define the notion of competitiveness that should serve as a compass when it comes to investments, or how we should go about investment? And the third question, a little bit provocative on my part, given the limited amounts: should we not be concentrating on one objective? I think we all agree.
I think we all agree that we have a problem when it comes to energy pricing. I imagine it will not be the case. But just imagine that the fund is entirely dedicated to closing the gap and ensuring that European energy, decarbonized European energy, is competitive, so that we can close this competitiveness gap vis-à-vis our competitors. Let me give the floor.
Benedetta Scuderi
Yes. Thank you so much. Thank you, Chair. Thank you to all the speakers for the very interesting contributions and the passion, again, that you put into this subject. Also, thank you to all the rapporteurs and the shadows for the work that we are all doing on this file, which I truly agree is an extremely important file for the future of Europe.
And we have a great responsibility to deal with it in the best way. So, just to get to the point on the questions. I have a few questions about the governance. I agree. At the moment, we have quite broad policy windows with very small earmarks and a lot of capability from the commission, after the approval of the fund, to decide where and how the projects will be funded, what will be funded, and where the money is going to go.
So I have a more general question for all the speakers, which is: how do you foresee a more comprehensive governance system where we also have, maybe, foresight from the parliament, but also the inclusion of different stakeholders, as you were also saying about experts being included and the necessity of having this? How can this work, and how can we project this in a situation where we do not want to make it overcomplicated, but we want to make it fair and have good governance that is actually putting the money where it should go? I have a specific question on governance for Mr. John Jabboring. Sorry for the mispronunciation. I'm very bad at names.
So, what kind of award criteria would you foresee for the selection of projects? And how do you evaluate the indicative budget allocation between policy windows, considering the wide and concentrated sectors of themes? I have another point and a question on fossil and non-fossil investments. So I completely agree with the analysis done by Eidri on how much money is going now into fossil imports, how much damage we have to pay for climate-related events, and the climate investment gap we have. So we have a big responsibility that the ECF money is going into investments that are looking at the future, the climate transition, and decarbonization, and not at fossil investments.
How will we do this? Finally, to all the speakers, I really believe, as has been said a few times, the money is not that much, but we need to make the best of it. So how do we make sure that we have a multiplier effect of this money? How do we make sure that the money we are investing is not going to something that would be finding investments anyway, but that we are investing in something needed for European competitiveness, social and environmental justice, and, most of all, something that would not have seen investment otherwise? Also, in this scheme, how are we making sure that we take everyone on board, including workers and, of course, SMEs that need to play a big role because of the significant growth they contribute to our economy?
Thank you so much.
Yvan Verougstraete
Thank you very much. And this was the last intervention of our first round. I propose that now the experts can give some answers to all those questions. Perhaps we could start the other way around, if it's okay with you, starting then with Mr. Aguilen, and going up the list to Mr.
Ericsson. Minutes for you, sir. Aguilen.
Speaker 15
In fact, you know, I don't have much to say. I mean, I think I agree with most of what has been said. I don't have much to comment. If there was a specific question, I would answer, but I think, otherwise, I pretty much, you know, agree with all that has been said. So, I don't have much to add.
Yvan Verougstraete
Yes. Thank you very much. Then we can pass, and we do not hesitate to jump in if you have something to add to the discussion. I will go back then to Mrs. Levy, please.
Speaker 14
Thank you. A lot of great questions, and I don't have the answer to all of them, of course. But maybe on the definition of competitiveness, I've cited some figures, and there are a lot of other figures that you could cite, of course, on this topic and on making sure that you include those in the way that you are addressing it in the long term. So, I'm not going to repeat what I already said, but I think that it does make sense to define it in a broader way than just competitive, to at least include the resilience aspect and have this long-term vision. Maybe just to touch also on the idea of how we may approach the fossil fuel investment idea.
As you know, this discussion is also linked to a wider discussion around the multi-annual financial framework, where there is also a discussion on spending targets, which are discussed within the performance regulation. And here, I think it's interesting to have the discussion around whether it would be more interesting to have earmarking rather than these spending targets because the methodology is done exempted. So, you're calculating how much you spent, and there is a lot to be said about how this methodology works. So also making sure that you are earmarking here towards climate investment, decarbonization, and clean tech investments. And maybe just a final point on the link to Horizon Europe and the difference between incumbent programs and, sorry, the scale-up challenge.
Also, on this, I'm sure you know there's a lot of literature on this as well, tied to a wider economic context of how Europe is perceived in terms of having more constraints. And so I think here it would be interesting to have this approach on how you make sure that you have it, sorry. I'm getting lost in my notes. Yes. Sorry.
So, on the scale of challenge, this idea that the EU is perceived as more bureaucratic and more fragmented. And I just wanted to point out maybe two things: in terms of cleantech investments, this is also where there was the most VC growth in recent years after the announcement of the Green Industrial Plan, which is also something interesting to keep in mind. And then also the fact that, for clean tech companies specifically, they can be particularly capital-intensive and have high technological and regulatory risks. So, this is also why they take longer to reach the market, and they have this longer valley of death period. So, something that could be interesting here is making sure that different instruments—so your Horizon, mention Europe was mentioned, the Innovation Fund was mentioned, and how the ECF fits into all of this—and how you support projects that also have maybe higher TRLs, how they make it past this first stage, for example, in the Innovation Fund.
At the moment, it is quite focused on this innovation stage. So maybe it could make sense to also look at the later stages of deployment. And here, maybe it could also make sense to look at supporting not only CapEx, but also supporting OpEx, which at the moment is not something that EU funds do. And on the European preference, it is a very heated debate at the moment, also linked to other files that will be presented soon, hopefully. And here, I just want to say a few things: for the European preference debates, it is necessary to make sure that you target the parts of the value chain where there is a strategic dependency and where it needs to be targeted.
I would also argue that local content requirements need to go hand in hand with low carbon content requirements, which is something that is in the Industrial Accelerator Act leaks that we have seen so far. I would also maybe just like to have this idea around asking ourselves if we're trading the green premium for the security premium and the cost of these measures, and whether we're ready to take into account the cost of these premiums. And just a final point, which also links to the idea of coordination between the different files and of having maybe a tool like the competitiveness coordination tool or something else, but this steering mechanism that allows for the articulation between how we define European preference within the competitiveness fund, but also how we define it in other files. So, for example, the IAA and making sure that the sectors that we address, that we define as strategic, are the same and are at least coherent throughout these different files. I'm just going to say one word quickly: if I, or maybe later.
Quickly, if I have time, because at the beginning, I didn't have all my notes in order. But just on the resilience and autonomy, some points here: the main idea is that having lower energy prices will give better predictability and stability for economic actors, especially for the price of energy, particularly for electricity. And also, there was this figure of 300,000,000,000, but in 2022, it was 650,000,000,000 because of the crisis that we know very well. And also, the last point is about fossil fuel imports. It's a situation that is specific to the EU because we are importing 58, sorry.
58% of our primary energy supply comes from imported fossil fuels. And this figure is only 24% for China, and for the US, they are net exporters. So I think it's really important to tackle this issue of energy and decarbonization within the European Competitiveness Fund. Thank you.
Thank you, Mr. Jean-Marie.
Speaker 10
Thank you very much for all the interesting questions. I will do my best to answer at least a couple of them. On the issue of how to define competitiveness, I am aware that you can have different opinions. I think that productivity should come first and be the main aim, as I mentioned, and autonomy may be rather formulated in terms of exceptional interventions. And I make that argument not necessarily in relation to what is needed.
I do see, of course, the need for greater autonomy in a lot of sectors: in the energy sector, in the digital services sector, for instance, when it comes to raw materials. But one question is if you can solve it in other ways than through investments; for instance, if you can solve it through trade diversification, which is cheaper and easier to agree on. And the second question, which is a critical question for me when I adopt a governance perspective, is: what is possible to agree on and implement in a strategic manner in the European Union? And I think here, there's a quite clear pattern. As soon as an issue moves towards national security, member states seek control.
As soon as we move towards more interventionist, market-interventionist measures, there will be disagreement among member states. And I think, when you look at productivity and growth, those issues are usually quite far from national security, and they aren't necessarily very interventionist. So, they are relatively easy to agree on. And that is a huge benefit in a union of 27 member states, and something that you really need to take into account. I think, for instance, on Invest EU, where you derisk investment through budget guarantees and where you delegate decision-making to bankers, really.
I mean, you move it very far from politics, and the member states agree on that. And that's seen as relatively efficient, to my understanding. Now, if you look at autonomy and independence, these are typically issues that are closer to security, obviously national security. Member states will want to control it. It is more interventionist, usually when you look at what is needed.
I mean, you need to restrict international cooperation, which by default will always generate dependencies in relation to the US and China, the main highways of the global economy. And, therefore, it will be very conflict-ridden and very difficult to agree on among member states, and very difficult to implement in an efficient manner among all 27 states. So I think this in itself speaks for having productivity as the main aim because it's easier to do in the union, whereas you should keep autonomy as targeted interventions where you can agree. And to echo Mr. Aguilent's comments on the coalitions of the willing, I think, yeah, maybe you can pursue some autonomy objectives through coalitions of the willing. And I think there is an instrument for it already, namely important projects of common European interests, which is really a kind of coalition of the willing because it depends completely on funding from member states and the industrial partners that are in it.
And the commission's role is really mainly to make exceptions to the state aid ban. So, when it comes to governance, the second big question that was discussed here was the stakeholder board. And yes, I do see that you need to be very careful when it comes to the composition of the stakeholder board and make sure that it is not dominated by incumbents. I think that's critical. It's phrased as a stakeholder board, I mean, people with stakes, but you could also see it more as an expert board, of course.
So you can also staff it in that way, or at least move in that direction. On the link with Horizon Europe, I think originally, when the Commission was planning the ECF, it wanted to integrate Horizon Europe completely into this new fund. Now, that didn't happen. There are two different funds. But I think there's still a lingering idea that the ECF should direct and orient Horizon Europe.
And I think that's perhaps a little misconceived. I think it would be better to clarify the complementary roles of these two different funds: Horizon Europe has a specific role to generate new knowledge and disruptive innovation, while the ECF should be focused on deploying knowledge and innovation. And once you do this conceptually, it becomes easier, I think, to specify the decision-making processes and clarify how they should interact. And I think it could make sense to have different work programs within the same policy windows, for instance. One is focused on deployment with money from ECF, and the other is focused on R&I with funding from Horizon Europe.
Speaker 8
So I'll just say a few words about three or four points here. So, the first one is about competitiveness. Competitiveness is actually an outcome. You know, it actually depends on a lot of things in the economy. So, I think this is quite important.
Europe had an experience before with the Lisbon agenda, if you remember, of course, and it wasn't so successful. That's partly because of the reason that I actually tried to define competitiveness and to close the gap by just looking at, or by just, let's say, that there was a bit of a disconnection between the objectives and the reality on the ground. Right? So, nowadays, we have more or less the same problem. I mean, also, competitiveness is contextual.
This is quite important. It changes over time. Sometimes, over periods of time, you might have countries which are very competitive, but then afterwards, they lose it because of some factors. And what are these important factors that enable competitiveness? I think Europe should not forget the rule of law.
I think this is quite important. Investment comes when there is a rule of law. And maybe what's happening now in the US, and what's been happening in China for years, will help Europe in this respect. This creates a competitive advantage for Europe. Then, the right institutions.
Again, this is quite important to have the right institutions in place to enable competitiveness. Then, market depth. I think, actually, this is a point where Europe can cut a lot of red tape and really increase competitiveness just by diminishing the number of bureaucratic interventions. This is a huge potential for improvement. And then, of course, to have within the EU the same level playing field.
Yes. There are differences among countries, but somebody mentioned here in one question that we can actually leverage this by having networks of partnerships across various countries in different regions of Europe. And this should actually strengthen Europe. Then, about funding. I mean, clearly, the number here, you cannot fully expect that this ECF would actually sort out all the Europeans' problems on competitiveness.
So clearly, some sort of leverage would need to exist. I mean, this leverage, you need to have a big leverage factor. I mean, you put 100,000,000,000 over seven years, you need to get out maybe 15, 10, 20 times more of that in time. So, how do you do that? Well, it's about looking at, like, enabling all that I've said before.
I think the capital will just come. In the current state of the world, capital will come to the EU. It's just contextual. Right? So then, the level about this, not to forget, actually, that all what we are talking about today reflects the current level of technology.
And I think even the Draghi report mentions this. I'll just give an example: these fusion investments, which should be a... I should take quite an important role. Why? Because they can be a game changer. So, one of the important roles of this CCF, the way I see it, is to enable the potential emergence of breakthrough technology that would actually push Europe again in front.
So, to create seeds for big winners. And if you think about it in this way, then, of course, the problem with subsidies is actually: how do you know you are picking the right winners? With a subsidy, you have a tendency of going wrong sometimes. But creating the framework for ECF to enable the emergence of big winners in the future, I think this should be the primary role. Thank you.
Speaker 2
Thank you very much, Mr. Chairman. And also, thank you to all the good comments, observations, and questions that have been raised by committee members just now. I am going to try to respond to some of them, at least sharing my thoughts on these issues. And I'm not sure there are going to be responses to all of them, but here you go. So, starting with governance and coming back to my initial points, which are the role of accountability, the role of transparency, and the role of having a very simple job description for those who are going to make the decisions about the allocation of money.
I think the proposal we have right now is setting us up for failure because there are just too many objectives. There are too many policy objectives. There are too many outcome objectives. There are too many sectoral subsectors and technologies that are being identified. And there is this old expression, which is that a camel is a horse designed by a committee.
And this is where I feel we are going, which is that we're going to get a lot of camels when we're trying to make horses. Second point: what should we try to aim for? I feel that the discussion, as well as the proposal, is too much occupied with technology. I mean, I think we all understand that we live in a new type of technological modernity. But technology in itself is basically doing zero for economic growth and productivity.
Technology only works when you package it in an organization and when you use technology to change existing organizations and exchange the existing product offerings that firms have. And that means when we allocate funds through industrial policy, we can't really pick the technologies. Technologies are not going to do anything for us. We're going to pick companies, and we're going to choose different companies that are going to be awarded funds to compete. And then it's very important that we are good at selecting companies.
And this is where I would start my own analysis as well. And I don't like picking winning strategies. I think it's much more important, as I said initially, to pick competition and competitors and try to get as much neck-to-neck competition as is practically possible. But we can't get away from the fact that, at the end of the day, the choice being made is about which company or companies are going to get the funds. And then we need to have the talents available to understand which firms and which individuals that lead firms are capable of generating outcomes that we would like.
And this is not something at which politicians are good. This is not something that civil servants are good at. It's not something that investment managers are good at, either. I mean, if you look at, for instance, a typical seed fund, they're going to fail 90 to 95% of the time, which is totally fine if you hit the jackpot on 5 or 10% of them. But they're going to fail a lot because it is very difficult to make the right investment decisions in firms.
This is also why I'm a little allergic to terms like the value of death, etc., which is good that companies get into the value of death. So they die early, then continue to linger for a long time and require a lot of resources. It's bad, of course, if we have really good companies that can't get the funds or access to what they need in order to grow. But trying to maintain or keep alive companies that are not going to be able to survive on their own is not going to be helpful. So it's better to try to pick the type of companies with proof of concept already, that they can compete, they can innovate, and they can generate more competition, and try to see what needs they have.
Finally, Mr. Chairman, you asked about the European preference. So just one comment on that, which is, first of all, we don't know yet what the European preference is going to be. I think what I would avoid with it is that we're going to have a robbing Peter to pay Paul type of process, which is that we're going to make life easier for some companies in the value chain while making life harder for other companies in the value chain. Because if we do that, then we need to be very sure that we're going to reallocate money in the value chains from the low-productivity and low-profitable companies to the higher-productivity and highly profitable companies. And when I look at the sectors that have been identified as targets that are going to be embraced by a European preference policy, I think we are flipping that around.
It seems we are going to try to make life harder for downstream users of raw materials and different types of important inputs, which is going to raise the cost for them if there is a European preference, while making life easier for those that are upstream in generating things. And if that is the outcome, then I don't think it's going to achieve anything at all. Thank you.
Yvan Verougstraete
Thank you. Thank you very much. We'll now pass to the question of the other members, starting with Walter Beek, and then we'll come back to you the other way around. So, we will start again with you, Mr. Ericsson, not to surprise you as I did before. So sorry for that.
So, Mister Wotterberg, the floor is yours.
Wouter Beke
Well, first of all, I thank all the speakers for their valuable contributions. Very inspiring. And I think that we all agree that the European Competitiveness Fund can be a real momentum for the European Union to strengthen our competitiveness, but only on certain conditions. And I want to focus on these conditions. I think that, for me, 3 elements are quite crucial.
The first element is excellence. Excellence must remain the core principle. Funding should be allocated through open competitive calls, based on excellence and impact. Second element, you mentioned the value of that. I think that the ECF must help to bridge the value of that.
It should focus on scale-up and deployment support, industrial ecosystems and infrastructure, allow strong industrial clusters with strong participation of SMEs, and dual-use technologies. And the third element is techno neutrality. Technology neutrality is, I think, quite essential. Calls should focus on sufficiently broad objectives, not on prescribing every specific technology used. My question to the speakers is very concrete.
If we agree that competitiveness is the objective, do you also agree with me that excellence, and not geographical distribution, should remain the guiding principle of the ECF? And how can we ensure this? Thank you.
Thank you, Mr. Fiegelsenk.
Niels Fuglsang
Thank you, Chair, and thank you to the speakers. I would like to continue on the notion of "don't pick the winners." And I'm not sure if we disagree, but I would like you to elaborate a little bit on that idea. To me, it sometimes seems as if that's a slogan from some kind of fairy tale that we should not pick the winners because isn't that what we do to some extent? When I'm in the competitiveness fund, we want renewable energy to win over fossil energy.
And when we go in a certain direction, for example, if we want to electrify, we have to set up a whole infrastructure. So we don't want to have a lot of different infrastructures competing with each other. We want to pick one set of infrastructure because otherwise, it would be really expensive and probably not very efficient. And when we look at a country like China, which has electrified much more than we have, have they not had a strategy of picking the winners when they, for example, outcompeted our solar industry? Didn't they say, you know, we want to win in this area?
We want to pick this winner. And did they not succeed? So I want to ask you if you can elaborate on the idea of picking or not picking the winners and how we should go about that on the competitiveness front. Because I think, to some degree, we are picking the winners, and we should be.
Aura Salla
Thank you. I think that we still need to make a careful assessment of whether it makes sense to integrate research into this competitiveness fund. Horizon needs to clearly remain a standalone research program, which should not be mixed with supporting any industry production. The second thing is that I want to highlight that this should not be mixed with cohesion in any way. Excellence needs to be the guiding principle here.
Now, the proposal refers to excellence-oriented criteria. But it does not clearly require funding to go to these highest-ranked projects, and this worries me a lot. We could end up supporting weaker ones and attracting less private investment. Invest EU is a standalone program that has shown us that this can work via the European Investment Bank and the European Investment Fund. And it's a loan facility.
And we could also open the door to political preferences and geographic balancing, which we do not want to see. So, my question is: how do we guarantee that funding consistently goes to the best and most productive projects as well, without any geographical prioritization? Thanks.
Christophe Grudler
You, chair. And I'd like to thank you all for the excellent presentation and your insights. The new Competitiveness Fund is an important milestone when it comes to structuring our industrial and innovation policy in the context of the new MFF. And it shows that there is a clear desire to simplify instruments and provide our strategic sectors of industry with better support. And this is obviously in line with the Draghi Report.
My question is twofold. Do you believe that this fund is fit to face these challenges given what's going on in the U.S.? S. And China, for example, where there is huge funding, a strong strategic orientation, and very often a tendency for national preference? And then, where do you believe funding is most efficient to meet our industrial objectives?
Direct payments upfront, or would this maybe reduce incentives? Or should it be more structural objectives, such as capital participation or loans, to support businesses long term? Thank you.
Mr. Eck.
Matthias Ecke
Thank you, Chair. Thank you also to all the experts. I think this is still an extremely interesting debate that we have here because everyone is clear about what the objectives of the ECF are. But given the limited resources we still have, even if it's a new policy instrument, we have limited resources at the Central EU level, so how can we best achieve it? I was wondering what your position is on a more sectoral basis.
And we've discussed the pros and cons of clearer budget lines and clearer working programs. On the other hand, we also need to bear in mind the administrative context. So every one of these working programs will, to some degree, be related to a unit within the European administration that handles them and that needs to have some expertise in the subject area, in the sector. So, what do you think about a more detailed sectoral approach, with working programs that combine Horizon and the ECF at the level of, let's say, a specific technology sector?
Niels Flemming Hansen
Thank you very much, and thank you to the distinguished and broad panel for being here today. I was a rapporteur for the ITRE opinion on the InvestEU Omnibus, where we secured vital support and simplification for our SMEs. I would like to ask your opinion on how to improve the commission's proposal. We ensured secured reporting requirements for smaller amounts of support. And how would you recommend we integrate something like this into the proposal?
Article 27 establishes the EU business network. Would you have any recommendations on how to strengthen the provision, such as focusing more explicitly on local retail banks to be included in the implementation? And in Article 33, energy renovations are mentioned. Should we expand the fund's focus to explicitly reach the household level? And to what extent would a dedicated loan facility for energy renovation strengthen the fund's overall goals for creating lead markets for clean technology, while ensuring the transition remains accessible and affordable at the household and SME levels?
Thank you.
Thank you. Mrs. Lekos?
Eszter Lakos
Okay. Thank you very much, and thank you also for the inspiring speeches and the introduction to our work. I would have several questions. The first one may be to Professor Ericsson. And you mentioned that the clear intervention logic is missing from the ECF, and we should have a better understanding of what the needs of the different countries and regions are and what support they actually need.
So, this is missing as well. I would like to ask you how you would address this gap. Myself and other MEPs are concerned with the incumbents. You have touched upon this. And, of course, I am also concerned that the winner-takes-all ECF could be created.
So, like this, we would further increase the innovation gap. Also, Mr. Lungu mentioned that the productivity gap would probably be at the core of how we define competitiveness. So, this would not help at all to compete on a global stage and would go against convergence in innovation. So I would ask you, what measures would you recommend to ensure that the ECF delivers support to innovative firms across the European Union and fosters innovation convergence while, of course, supporting competitiveness? The other question I would like to ask, and I will speed up, is to Mr. Janenbring on the ECF governance.
You mentioned that the commission enjoys a great deal of flexibility. We see it in deciding priorities and work programs. And what do you think about the expert-driven priority setting and VP work program setting? And also, where do you think that member states should be in this process? Because, you know, they know best their economies and their needs.
So, where would you insert them? And the last one, again, going back to Professor Ericsson, you mentioned how to select the beneficiaries. And you mentioned that good companies have the talent, and this is something that I actually heard from researchers who won ERC and EIC grants as well in Horizon Europe, so go for the best group of researchers. You said to go for the best companies. So, what do you think would be the conditions for the best company?
If I want to put it another way, how would you define excellence within the ECF? Because we have this.
In Horizon.
Have to.
Eszter Lakos
We have this in Horizon, not in the ECF yet. So, I would be extremely happy if you could shed some light on that.
Yvan Verougstraete
Thank you. Thank you. This will finish the second round of questions. There will be a third round with the opinion-giving committees right after. I propose the experts give an answer for 4 minutes each, if possible, starting with Mr.
Ericsson. Thank you.
Speaker 2
Thank you very much, sir. Chairman. And also, you again thank the members for excellent comments and questions. There are a lot of things to pick up on here regarding what has been said. May I start just with a comment on what we mean when we say "don't pick the winners," which I think is a good question to ask.
It is, of course, a metaphor which comes from the study of industrial policy, and it reflects an old form of industrial policy practiced, for instance, in East Asian countries in the late 1960s and the 1970s, where you wanted to concentrate resources to build national champions. So you have the Samsungs, the Hyundais, the Mitsubishis, etc. And they largely colonized the rest of the market in order. And in order to become big and try to get the scale advantages of being big, it came at the expense of having a market with more competition and more dynamism. That, of course, is not in opposition to what you just mentioned, which is that there are a lot of things: infrastructure, roads, telecom, and railroads.
We can't have many of them competing with each other because then it would be just too expensive. So it's more of a model of thinking of industrial policy than that, sort of picking winners. And my point here is to avoid that, both in terms of picking one winner, one technology, or one region; trying to pick firms that are going to compete with each other and that are also going to stimulate more investment and the type of innovation race that we want to have between European firms as well. Secondly, on the intervention logic and how we can establish an ECF which has a better chance of success, also in terms of driving excellence. So I don't think we can avoid the questions of governance, and I think it is going to come down to governance.
Obviously, having, in the first place, a European competitiveness fund, which is more focused on selective targets, is useful. And I think here that also speaks to the reference and the comments that several have made around the fact that Mario Draghi, in his report, identifies a gap of around €800 billion per year. It's not a total; it's per year. And here, we're talking about a very limited fund stretched over several years. So we shouldn't live in the fantasy that the European Competitiveness Fund is going to do anything to address that particular macro problem.
I want an intervention logic that is much more micro-oriented. It's not about trying to plug an investment gap or doing any things like that. It's trying to drive as much innovation, change, and disruption as possible. And if the overarching target for that is going to be productivity or European growth, I don't know. I mean, I don't think it matters so much either if you have the right intervention logic, which is we want to achieve something here that has more lasting consequences than just leading to a little bit more money spent and a little bit more money being taken up in order to invest a little bit more in some firms.
So, the extent to which we can also follow what Professor Aguilan said in his introduction, with the reference to the ARPA systems in America, especially DARPA, which is a famous one, is that they try to be as heterodox as possible. Try to award ideas, companies, managers, and business models that have a proof of concept but err on the side of craziness rather than on the side of normalcy. Thank you.
Speaker 8
Yes. So I'll follow along the same lines because I think they are quite relevant. I mean, the amount of investment needed, definitely, the Draghi reports say 800,000,000,000. In practice, it's likely this is going to be double that. So, probably, this is per year.
So, obviously, the question emerges: what is the role of the ECF, really? And I would see it more as an incubator for ideas, for promoting ideas, for putting ideas into practice, for generating new technologies, thinking very medium and long term, and as an enabler to the whole economy. So you have the horizon, which is actually going to be coupled with this, well, along the supply chain in the end. So you are going to have ideas coming from various fields. I mean, it's not like when I was mentioning picking up winners.
The idea was not to fall into some stylized framework of thinking, but to just define a project and not make it too restrictive. So the option should be available. If someone has a great idea and wants to invest in it, let them do it. So I would see the fund as being an enabler and actually promoting risk-taking, really. To promote risk-taking because if out of 20 ideas, one comes out that could change the future of Europe, then let it be.
And it's true that we do not need to build the infrastructure ourselves. I mean, essentially, these ideas are going to generate everything around them. I mean, think of the oil. The oil, you found the oil, you put it into practice, you make it worth it economically, and then everything was built around it. I mean, it's not like you don't need to think beforehand about what's going to be.
So I would say that the role of ECS of ECF would be to encourage risk-taking and to think out of the box, really, because in terms of money, clearly, it is not going to be enough. And then, around this issue regarding fostering innovation convergence across the EU. Yes. Here, I think some degree of competitiveness is going to come in very handy. Like, you have countries which might lack the technical expertise now, but they could come in with something else.
They could come in with maybe some labor cost advantage. Yes. We come in with some fiscal regimes as well, some local regulations, and these are competitive tools. And, overall, for the EU, it's much better to have it spread around, not concentrated in two, three, or four countries within the EU. Obviously, this is probably not optimal in the medium and long term.
Yes. I think I'll stop here. Thank you.
Speaker 10
Thank you very much, Mister Chairman, and thank you again for all the questions. I think I will pick up the one on intervention logics and award criteria first. And I think that it would make sense, and my recommendation would be to have a strong excellence criteria, for sure, and a strong impact criteria to orient investments to the best projects clearly. I would also recommend having experts, if possible, to apply these criteria. But I am also aware that different sectors might have different needs.
It's not necessarily the case if you look at more specific criteria that the health sector and the space sector have the same needs. I don't think so. So it will be more complicated than just stipulating an excellence criterion across the board. I think European added value is another good criterion to have in mind. I would not recommend having a geographical key.
I think someone mentioned our national endowments. If we are to try to close the innovation gap within Europe, I think trying to invest in capacity building is probably better. And I think there are a few such instruments in the ECF, such as the EU for business network, for instance. On the question of where to insert member states in the ECF, well, yeah, they are experts on their own systems, and I think they need to be involved. And I think they will be involved.
The European Commission proposed to cut down on comitology, quite radically. But now the council, as one might have predicted, is reinserting a relatively strong comitology, and also a horizontal committee that will kind of look across the ECF. So I think member states' experts will absolutely be involved at the implementation level when it comes to developing work programs. And then, as I mentioned in my intervention, it might be good also to have an impulse from the legislature into the planning process, from a political perspective. I mentioned the Horizon Europe strategic planning process, which is currently in force, where both the Council, the member states, and the European Parliament are involved.
And that, I think, has the advantage of being a fairly light process. It's not very directive. It's really mainly about generating transparency. And there are many other ideas around. For instance, the European semester and the idea of adding more coordination within the European semester and the European competitiveness tool as well, where member states would also be important, of course.
And I think here, my main feedback would be to not try to overdo it. It is extremely difficult to coordinate these same things from a political level. And I think, having light procedures and trying to focus here on the issue of finding the right processes to select projects, I think it is, for me, the way forward. Thank you.
Thank you. Mrs. Levy?
Speaker 14
Yeah. So first of all, on the governance, I agree that it's going to imply mobilizing a lot of resources within the commission for designing work programs. Definitely, this is also why I was talking about the observatory on emerging technologies that is mentioned in the ECF proposal. What I didn't have time to say was that it could also be placed within the Joint Research Center because they are already working on critical technologies and energy technology. So it could make sense to also look at how this work connects with this, and this could be the basis for discussion on how you prioritize different sectors.
But, of course, you also need a political decision at some point here. And when I was talking about the importance of having independent experts here, it is also important to have civil society, unions, and industry leaders in the room so that it's as concerted as possible. And about the concern that the strategic stakeholder board could just be a very obscure instance. This is, of course, a concern, which is why I was stressing the need to make it as transparent as possible. I also want to mention the work of the Institute for Climate Economics, which has done some work on the competitiveness coordination tool and the process around the European Competitiveness Fund in terms of the regular process behind decision-making on an annual and regular basis, which could also be articulated with the European semester in some way.
On the issue of flexibility that we mentioned, when I was talking about it, I was also thinking of this idea of having a mechanism to integrate lessons learned with keeping the objectives clear, but also making sure that you have room for feedback about what works and what doesn't work, and finding a way to strike the right balance between having this flexibility on the one hand, and having the stability and predictability on the other hand, especially for investors, because, as you know, right now, there's a lag in terms of investments also due to the current economic context. So that was about the governance aspect and the instrument aspects. I just wanted to mention what was said about the United States and China and how they use subsidies as opposed to Europe. Also, to say that Europe favors grants, it historically has more instruments using grants than other tools. But I just wanted to mention a study that Idris published last year on new industrial policies, where we have a comparative approach to the US, China, Europe, and other Asian countries.
And what's interesting here is that China has a very different approach with, of course, those five-year plans, which also then include sectoral plans and provincial plans. And there's no room for flexibility in China, but, of course, it's a very different system. And here, I can also refer you to the work of Alice Eckerman, who is a specialist on Chinese policy as well. And she also highlights that China is doing things differently because they don't have the same approach to a lot of things, including ethics, and the rule of law was also mentioned earlier. And here, the approach is very different.
And specifically, for the right instruments for cleantech, about what we should favor more, innovation or existing technologies, just to say that a lot of the technologies that we need to comply with the climate objectives already exist. So here, it would make a lot of sense to use the tools that we have at our disposal around guarantees to ensure the bankability of those projects. And also referring to the idea of extending Invest EU to households. Here again, I can refer you to the work done by Climate Strategy and Partners, who have this very proposition of making sure that you use Invest EU in a way that you open it also to regions, for instance, and also then making sure that, for example, at the household level, grants go towards those actors that do not have access to other resources. One final word on infrastructure, as we mentioned, and I wanted to take this point to illustrate how important it is to connect the European Competitiveness Fund with the other tools that we have.
So, we also have the Connecting Europe Facility, where there is a lot of discussion around infrastructure. This also has to be discussed within the GRIDS package. So, again, the importance of having a tool that connects everything together and makes sure that we have something coordinated.
Thank you.
Yvan Verougstraete
Thank you. Thank you. The last front with the representative of the opinion-giving committees, starting with Mister, and then we will have one minute each, followed by a three-minute answer from the experts. Mister Knutec?
Ondřej Knotek
Thank you very much, Mister Chairman, distinguished colleagues, and, of course, thank you very much to our experts for your presentations. I would like to know your opinion on the priorities of the budgetary control committee, which may not be so sexy, but trust me, it is also very important. I will skip the general words about strengthening transparency and accountability because, in one minute, you cannot say a lot. But I would like to know your opinion on the full application of Olaf, Court of Auditors, and public prosecutor competent competencies across all implementation models of the ECF. Also, very important, we see the need to ensure adequate geographical balance and to direct the technical assistance to less experienced entities.
It is extremely important to reinforce the safeguards against double funding and enhance the traceability of Union funds. And last, with regard to the financing not linked to the costs, it is important to ensure robust justification and clear methodologies for setting and verifying milestones and targets. Basically, the equation is that we need to design the ECF to ensure measurable added value at the EU level, avoid double funding, and, of course, have clear performance indicators.
Danuše Nerudová
Thank you, Chair. Thank you for the presentation. As mentioned by Mr. Aguion, we need to complete the single market and remove all the existing obstacles. I think this would be a far more powerful push for competitiveness than any amount of money alone.
In this sense, I must say, I find it rather striking to hear some members of the far right here criticizing the EU for a lack of competitiveness when they are often the first to defend narrow national privileges and shield fragmented markets. Dear colleagues, you cannot call for competitiveness while simultaneously blocking the very integration that makes it possible. A deep and fully functioning single market is what creates jobs for Europeans, ensures low prices, and strengthens our union. In your opinion, should we therefore consider conditioning EU funds on progress in removing single market obstacles in some form? In other words, applicants from member states that maintain artificial barriers could face greater difficulty in accessing these funds.
And as Ms. Levy rightly referred to, we must also avoid competitiveness gaps. These gaps exist not only across sectors but also across regions. The data is clear. European research and innovation funding continues to concentrate in a small number of countries, particularly in Western Europe.
Spreading excellence must, therefore, be a core priority for experts. What concrete actions can we take to avoid repeating the same mistakes with the ECF and to ensure that excellence is generally spread across all the member states, from Paris to Riga, from Prague to Athens? Thank you.
Thank you, Mr. Kaneff.
Radan Kanev
Thank you, Chair, and thank you very much to the speakers for this really interesting debate. So I have the difficult task of being the rapporteur on the Sand Committee opinion. And I say difficult task because, obviously, the link between competitiveness and health policy is, at best, abstract. And to me, and also to my shadow reporters, it is rather unclear whether, in the health, biotech, and agriculture sectors, we are pursuing health policies or industrial policies. It's a very open question because it could be both.
And, yeah, it's not stated in the text of the commission. It's rather unclear what kind of agricultural policies and activities are included in this window, as it is also not specified. So, I feel a bit stupid, and I'm very happy to have people much smarter than myself in the room. And I'm asking, what is your read? What is your take on this specific window of the Competitiveness Fund?
And you will be really helpful to all of us in the sound negotiating team if you have any answer.
Dan Barna
Thank you. Thank you, Chair, and thank you to the invited experts for their consistent contribution. I'm the rapporteur for the opinion of the Regulatory Committee. So my question is, how can the fund effectively balance the Commission's focus on excellence and drive on competitiveness with the territorial dimension strongly advocated by the Committee on Regional Development? Just before this meeting, I was in that regi committee, and all the groups, which is quite rare in this parliament, supported this regional approach which should exist in the fund.
So, this principle does not harm the cohesion. They also prioritize place-based innovations to avoid overheating existing hubs and include specific financial bonuses for cross-border consortiums in the vulnerable Eastern border regions to prevent widening regional disparities. This is the first one. And secondly, furthermore, considering the European Court of Auditors' critical observations regarding the undefined nature of the EU added value, the potential lack of accountability in the new accelerated award procedures and financing not linked to costs, and the convoluted governance structure comprising multiple new advisory boards, what mechanism do you think should be put in place to ensure that the drive for budget flexibility, which is a good thing, and the rapid deployment do not compromise sound financial management, auditability, and tangible additionality of public spending? So, these were my two questions.
Yvan Verougstraete
Thank you. I propose we also include the three persons who asked for cash GIs in this one; then we don't have to make one more round. Starting with Mr. Tonin. No?
Okay. Then, Mrs. Frais.
Sigrid Friis
Thank you. Thank you for the floor and for this very interesting hearing on an important topic, not just for us in the ITRE committee, but for all of Europe. We know that, in the current context, Europe must invest in innovation, green technologies, and strategic industries to become competitive in a global situation that keeps challenging us. I want to highlight also how the climate-related damage already now is costing us in Europe around 45 billion euros. Let's keep in mind that any investment that makes climate change worse or contributes to higher global temperatures and more extreme weather is not putting any strength towards our competitiveness.
Rather, quite the opposite. It creates economic damage. It weakens our resilience. So, let's be strategic. Let's reduce future risks to truly strengthen our competitiveness.
With that in mind, I want to raise two questions for the panel. The first one being: how do you see the Competitiveness Fund evolving? Should it primarily be a broad, cross-cutting instrument to support overall competitiveness? Or should we see it as a strategic tool to also prioritize investment to reduce long-term economic risk? This could be a risk linked to climate change or environmental pressures.
Secondly, which role do you think the Life program should have in the Competitiveness Fund, given its role in funding climate mitigation and environmental protection projects and reducing long-term economic risks? Should it be included in the fund, or should it be a separate standalone program? Thank you.
Regina Doherty
Sorry. Thank you. I apologize for being late. And I just wanted to say thank you for the insights already shared with us today. I'm the rapporteur of the opinion from the Internal Market and Consumer Protection Committee.
And I really believe that if the European Competitive Fund is going to help make real progress in strengthening Europe's competitiveness, then we want to make sure that we really don't undermine the single market in any way, shape, or form. From an INCO perspective, I think that we should be clear that the fund shouldn't become another complex centralized instrument or a bloated subsidy that only the largest players can navigate. It should be really transparent, simple, and easy to access for all of our SMEs right across the member states, but also be used as an instrument to actually unlock some of the barriers that we have in the single market, look for genuine opportunities to scale up, and also provide legal certainty where we can for some of our businesses that tell us it doesn't exist. So, can I ask you a question? Can you explain, based on how you've seen other funds operate in jurisdictions, how this fund can avoid being counterproductive and actually ensure that innovation-leading SMEs really get their hands on the money and investment that we so desperately need them to get, and not just be some sort of very convoluted, albeit altruistic and ambitious, instrument? I want to make sure that it does exactly what it says on the tin.
So how can we be sure that we've already looked at this to make sure that the end game, which is what we all want—unlocking the single market, realizing the potential of our SMEs, and helping them in a simplified way—is actually what we're going to get at the end game?
Jan Farský
Hello. Thank you for the possibility to say some words and to ask the question. I very much welcome the creation of a new European competitiveness fund and the concentration of former instruments into one coherent tool to boost your competitiveness. But I have to mention that historically, applicants in some member countries of all regions have been far less successful in applying for funding from programs aimed at supporting research, development, and innovation. In fact, the disparity is so wide that five member states have drawn more union funding for innovation projects than the 15 widening countries combined since 2021.
I am really in favor of excellence and of supporting the best of the best, not only the winners but also the competitors and competitiveness. But I cannot skip these facts. And my question is: how can we improve the current trend that is widening the gap between the successful and less successful countries? Do we have better instruments that at least set some limited conditionality in calls for projects that will intensify participation in consortia by entities with less experience in applying for this kind of EU funding? Do we have better ideas to create the desired spillover effects?
We haven't been successful in bridging this gap yet, and this new MFF is our chance to help improve it. So, please do that. Thanks.
Yvan Verougstraete
Thank you very much. I suppose we go now for the last round of answers from the experts. Missus Levi, could we start with you?
Speaker 14
Yes. Yeah. So I want to first maybe address this question of excellence versus geography. I don't have a definite answer or opinion on this, but maybe one part of the solution could be the concept coined by Climate Strategy and Partners, whose work I am referring to once again: the concept of finance as a service. So there's this issue of making sure that there's capacity building around accessing these EU funds, and maybe this could be one thing to also investigate. On the question of the life program, I think this also goes back to the question of how we define competitiveness.
So, I have no specific opinion on whether it should be included in the fund or whether it should be a standalone program. I do think that there should be a budget reserved for life because there is value in these actions, and I believe that it fits into competitiveness. But if it's in a different program, in a different scope, as long as it's safeguarded, that's the main objective. And I'm just looking to see if there were other points that I want to address.
Yvan Verougstraete
I didn't mention it, but it was supposed to be one minute. So, okay.
Perfect. Sorry. Thank you.
Yvan Verougstraete
But no problem if you have something else you want to add. So, yes, Joven.
Speaker 10
Thank you. Sorry, is this a closing remark, or is it a comment? It's a comment on the questions. Sorry, is this a closing remark, or is it?
Yvan Verougstraete
A question? It's three minutes, sorry. Three minutes. And if you can answer, sorry. So, if you want to jump in again, it was my fault.
So, it's just three minutes. And I propose that you give your last answer and closing remarks at the same time, if possible, because we are a bit late.
Speaker 10
Thank you. I think there were quite a few questions on whether we should focus on certain areas, such as climate change. Someone mentioned energy prices previously. I think it was you, Mr. Chair. And I think that speaks to the question of earmarking a little bit.
And just to give you an idea of how much the ECF changes the current system, I looked at how the current funds that the ECF is integrating earmark funding. And it's not only that there are 12 or 14, depending on how you count, different funds. It's also that each fund earmarks specifically within it. So in total, there are some 40 different pots of money in the current funds, and that has changed then to four policy windows and basically no other earmarking. So it's really a huge shift, especially since the amount of money available is at least doubled compared to the existing funding.
Same.
Speaker 10
Time. So, can you, given that, earmark a little bit without damaging flexibility? Yes. I guess you can. I mean, it's a matter of degree, obviously, and you would need to earmark the right things.
And maybe there isn't agreement on what you should earmark. I think, provided that you can agree on very few priorities, earmarking wouldn't be bad, but I think it would be very bad if you earmark a lot to different purposes. I think you could, for instance, add a quantitative target for how much money should be allocated to SMEs. You have to take one type of earmarking, based on the argument that this is a weak voice in the governance structure. So I think there are ways to earmark cleverly, but one shouldn't overdo it.
And then, if I may comment just a little bit on this issue of comparison between the EU, the US, and China, I think it's really difficult to make a good comparison. I mean, one reason is that these are states with a very broad portfolio of instruments that they can use for their industrial policy. And if you look at what they do, the IRA, for instance, I mean, it's tax subsidies, which you really can't do. In China, I understand that the allocation of free land to firms is an important type of subsidy. The EU can't do that either.
So the EU is much more restrictive in what it can do. Education that Mr. Aguioung mentioned allowed the EU to catch up with the US a couple of decades ago. The EU can't do that either. It's really about member state competencies. So it's very difficult to compare with the US and China, and you can't out-subsidize them.
That's certain, sir. Clear and certain. And the second point in this comparison is that I think both the US and China, one of the keys to their competitiveness is that they have fierce competition in very large internal markets. So, I think this is probably the most important thing for the EU to achieve a better-functioning internal market. Thanks.
Yvan Verougstraete
Thank you very much. Perhaps before going to you, Mister Olengo, I'm giving the floor back to Mrs. Levy. Once again, I apologize for the misunderstanding. I propose that you can make your conclusion too.
Speaker 14
Yes. Thank you so much. Now, just to say that I think the exchange today proves that it's not an easy topic, with no easy solutions. It's quite complex. There's a lot of small things to arbitrate on.
I think, as a final point, I'd just like to say how much I want to stress the importance of prioritization and making sure that you're targeting some sectors. And I also wanted to come back to the point on the ETS that we didn't discuss further, but it also links to this point on the articulation between the different policies. But as much as we discussed Horizon Europe and the ECF as a whole, this also links with the Innovation Fund and the need to make sure that there is as much money as possible for decarbonization projects, which also really depends on two things: how many free allowances you have and the price of carbon. So that was not the final point that I wanted to make. Thank you.
Speaker 8
So I'll just rephrase a little bit the ideas that I said before. Actually, this fund, the way I would see it, because of the amount of money involved, is just like a test bed for ideas that might potentially impact you with future competitiveness in a big way. So this will be like a sort of enabler for the old theory of comparative advantage. I mean, really, what does Europe have, you know, to compete? What resources does it have?
So at the moment, it can probably use the R and D. I mean, somebody was referring to the solar panels. The research was done in Europe and in the US, of course, but in Europe, a lot of research was done, and then the Chinese took the technology and just scaled it up. So, I think the question should be more about seeing what follows after. What follows after you have some money allocated to the ECF when the products are out?
How to scale it up as well? And a lot of these things actually could happen if some current restrictions, some current barriers are going to be removed within the EU. This fragmentation is really damaging. And referring to the concentration, to the geography aspect. Concentration is really, in theory, something we know is bad.
I mean, we saw it in the COVID. If you have activities which are concentrated in several countries, it makes the whole of Europe vulnerable because it is not so resilient. And each country has something which can be considered as excellence. So I think by joining countries and creating partnerships, this creates a much stronger unity. And, actually, it is going to answer all the other issues such as scaling up and what follows next.
Thank you.
Thank you. Mr. Ericsson?
Speaker 2
Thank you, Mr. Chairman. And, again, thank you also to the members for the good comments and good questions. I'm going to end this very quickly on my part and just say thank you, in the first place, for the time here and for the invitation to come and speak to you today. A couple of points were raised that I'm going to address. Firstly, the single market.
I mean, frankly speaking, if we talk about one industrial policy that will generate a lot of impact, it is not based on tax concessions or on grants. It's based on a general industrial policy. It is the single market. And if we're going to prioritize something, it's the single market. And if we want to prioritize something else after that, it's the single market.
So, we can continue. And perhaps if I was going to do, say, where on the scale is the ECF going to come between one and fifty in terms of importance in generating a different future for Europe in terms of growth, investments, and innovation? Perhaps somewhere around 25th place. There are 24 things above that are more important. The issue of conditionality, or what I was calling reform-based support, came up, and this is something which I believe is important as well.
But I would use that for programs that are a little bit more tied to member states than they are to trying to achieve the best outcome of different types of product-based support that we're going to give. We have a process going on, for instance, now with the savings and investment union, which is increasingly being embedded into other types of processes, plans, and policies in the EU, where we are thinking along the lines of pushing member states to do necessary reforms in order to improve capital markets, as they receive different types of support. And I think that's very important also in this context because the limited resources that we have need to be magnified with a lot of private investments that are going to come, and that won't come from banks or through the bond market. It's going to come through other parts of the capital markets, and we need to achieve that. Finally, I took pity on Mister Kanev, the member from the SANTE committee.
I don't know if he is still here. And his plea for perspectives on the competitiveness fund for him. I think the biotech sector more broadly is, of course, already identified in the ECF, but it's one where there is a general need to improve the framework conditions for Europe to compete. Life sciences, if you excuse my European nationalism, were invented in Europe. Chemistry, organized chemistry, the big life science companies came from here.
But our companies, apart from one—which sadly is not going so well these days, a Danish life science company. So, I'm not going to mention the name. But apart from that one, we haven't really seen a live science executive who has been available, sort of having the ability to innovate and compete in global markets as they used to do in the past. I grew up in a pharmaceutical town. There are hardly any pharmaceutical companies left there anymore.
You know all about Moore's law, how the capacity of chips can double every 18 months. There is an equivalent called Moore's law. Oh, sorry. Eroom's law, which is Moore's law flipped around, states that every fifth year, the cost of developing a new drug doubles. And that has become one of the plights we are facing: high development costs in the life sciences sector, and it's partly because we need more innovation in how we develop things.
We need more research, more companies, and more innovation in how we improve the productivity of the entire R&D sector. And that's one thing I think a rapporteur for Santé can have: an obvious task to point this out as we go forward. Thank you.
Yvan Verougstraete
Thank you very much. You speak about the reporters. I don't know if the reporters want to add a last word.
Christian Ehler
I mean, never in politics is there a last word. I think, because, I mean, we know all this is sometimes a painful exercise also for our experts, that questions are diverse, driven by different interests, like a shotgun going in every direction. I just want to reassure you, first of all, it would be the last encounter. We're coming back to you. Secondly, we found what you had been contributing so far really valuable.
So what I mean is, Mr. Aguilhon being an ERC grantee, one of the biggest ERC grants I've ever given. So, I mean, if you don't listen to people, we are not funding wisely with the ERC. I think that we would be maladvised. I think that this differentiation in the political steering process and the reality between, let's say, what member states are granting to the Union and what is the role of the Commission is well received and understood, but not much reflected actually in the proposal. I think the battle cry for the common market, I mean, we had originally been considering, to be honest, that we would have preferred not to have an ECF.
We would have preferred to have an internal market facility. So, for the deepening of the market. So in a way, this is now, on the one hand, a big ambition. So far, it's a bit of an institutional compromise. But this is really one of the occasions where we should listen in terms of what the parliament is contributing to the experts, because I think I can underline practically everything that has been said.
And to be honest, to some extent, this proposal is unfinished business, and we try our best to keep the parliament together, not to let that become a lobbyist exercise. But on the other hand, I think we really have to write a program, which is not yet on the table. Thank you.
Yvan Verougstraete
Thank you very much. Thank you very much, everybody, and obviously the four of you, and also Mr. Aguilan, thank you for the very insightful comments that you have brought today. It's for sure that we will come back to you with additional questions because the discussion is far from finished. We will have to make a choice, the right choice, the right balance between flexibility and control, between choosing the right companies, sectors, or competitors, and all those things you mentioned today.
So, thank you for that, and let's continue the discussion. Thanks to all for the attention, and have a nice afternoon.
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