1. Europe –Economy, society, business, currency, governance
Henry McLeish
Jeremy Harrison

2. Two big current issues Britain and the Euro
Europe, enlargement and the Convention

3. The importance of the Euro issue
It will determine what kind of economy Europe becomes
It will help condition Europe’s relations with the US and the rest of the world

4. The background 90 % of EU trade is internal
The Euro has strengthened against the £ and $ by more than 10% in the last year
It is beginning to rival the $ as a world currency

5. The UK and the Euro – the five tests
Conditions for investment in the UK
Financial services
Compatible business cycles
Flexibility to deal with emerging problems
Growth, stability and jobs

6. The UK and the Euro – the real issues
The business cycle
The cost of joining
The housing market
Sovereignty
Winning a referendum
Winning an election

7. Enlarging and governing Europe
The current means won’t work with 25 nations and 480 million people
The issue of sovereignty
Regionalism is part of the answer

8. Europe: business, jobs, enterprise
Jeremy Harrison May 2003

9. The European Union The Euro is becoming a world currency
15 Member States, 11 official languages
The biggest developed labour market in the world
GDP lower than the US
More regulated than the US, but with some of the world’s top business environments
The Euro is becoming a world currency
EU has 20% of world purchasing power and 39% of world trade
90% of its trade is internal
Its governance is a concern

10. The people of Europe Europe’s population is already 374.2 million
The US population is million
After enlargement Europe could have as many as million citizens and 18 official languages
It will still have at least three distinct cultures of business

11. Where do they live? Most of Europe remains sparsely populated
Mobility has always been relatively low – despite efforts from the European Union
This and the slides that follow help confirm Europe as an economy of regions within a political structure of nation states
Some 80% of Europe is still sparsely populated and largely agricultural

15. What kind of economy? 80% of the land mass is still rural
The old industries have been going for decades
Protected agriculture – but so has the US
Steel industry very exposed – unlike US protection
Knowledge economy less dynamic than US - labour more expensive than India and Far East
High skills – tech in Scandinavia

17. Where is the real wealth?
Europe’s economy is growing, but the real money is where it always has been
From London in the north, via the Low Countries, Northern France,Germany and ending up in Milan – this is also how it was in the 15th Century, plus Scandinavia
But look at Ireland – ten years ago it was still alongside Spain and Southern Italy

19. There are still huge disparities of wealth
If the candidate countries joined today they would add less than 5% to the EU’s GDP
Current US GDP is still 9% above the combined total of EU and candidate countries

20. GDP in the enlarged EU
Figures on map are % EU GDP
US GDP is 9% larger than enlarged EU GDP

21. Building a European economy
IT skill shortages
Difficulty in predicting skills
Difficulty in delivering skills

22. The US and the EU in the big growth period – ’85-’97
In US male and female employment rates rose
In EU only female employment rates rose, and only 50% as much as in the US

23. Employment has been the big worry
Unemployment traditionally 2x the US
Long term-unemployment in urban/industrial regions
Poverty in rural regions
Employment rate 62% (US 70%)
Women’s employment rate 51%

24. The next big problem – labour supply
Existing skill shortages in high tech
Aging population – fewer young people longer in education
Low retirement ages
Low mobility within the EU
Potential high mobility from East and Central Europe
By % of unused capacity will be in 3 countries – France, Spain, Italy (south)

25. The working age population is declining throughout Europe
Of the larger countries, the decline is least steep in the UK
Italy is already experiencing the sharpest decline, and it gets worse

28. Where will the young workers of the future be found?
Shows the sharp decline of the future labour force in the south
Shows Scandinavia and the Netherlands recovering significantly after 2005

30. Mature men in Europe are better educated than they have ever been
The depth of the Portuguese and Spanish difficulties are clear
Germany has been caught up – statistically at least

32. The improvements are even more dramatic amongst mature women
This shows Germany’s relative weakness in female employment
Spain’s and Portugal’s women are becoming better educated at a faster rate than their men
The Scandinavians and the UK show the best progress

34. Women are already training more than men
The Anglo-Saxon business cultures are training at work more, and training more women than men
The Latin business cultures are training at a far lower level, but more women than men are training
The German business cultures are training at a surprisingly low level, and more men than women

36. Who is bothering to train older workers?
Only the Scandinavians and the UK
Very little is happening in the Latin cultures
More, but not a great deal in the German cultures

39. All Europe’s net job growth has been part-time
Even in the downturn part-time work increased

41. Trade Union membership is higher than in the US, but falling
Surprisingly low in Germany, France, Italy and the Netherlands

43. But collective bargaining coverage shows a completely different picture
In France coverage is more than 90%, whilst membership is less than 10%
In Germany less than 30% membership provides more than 90% coverage

45. How do European countries deal with change
How do European countries deal with change? Some regulate to protect jobs
Regulation is most strict in the South
It is least strict in the UK and Ireland

46. Strictness of employment regulations (OECD index)

47. Others make it easier to shed jobs, but provide better benefit coverage
The south provides the worst benefit coverage
The UK, Ireland and Continental Europe the best

48. Unemployment benefit coverage rate (%)

49. Europe has five of the top ten world business environments
Netherlands UK
USA
Canada
Singapore
Hong Kong
Ireland
Switzerland
Denmark
Germany

50. What makes the Netherlands so attractive?
No major bureaucracy
Corporation tax 12%-30% negotiated in advance
Tax deals for expatriates
Hi-tech clusters
Ace telecommunications
Multilingual workforce
No 4 in world competitiveness
Cost of living below NY, LA, London, Paris, Frankfurt
World airport/ rail to rest of Europe

51. Ireland? Corporation tax 12.5%
Fastest growing in economy in Europe for a decade
Educated, skilled workforce
High property prices
Transport and infrastructure problems
In the Euro

52. UK? Good company taxes Open market Open labour market
High-tech clusters
High cost of living
Public services in difficulty
Unevenly educated and trained workers
Not in the Euro