Business Summit

A Second Chance for Europe

French President Francois Hollande (L) welcomes German Chancellor Angela Merkel as she arrives to attend a Western Balkans summit at the Elysee palace in Paris, France, July 4, 2016. REUTERS/Regis Duvignau
French President Francois Hollande and German Chancellor Angela Merkel.
  • Why it matters

    Why it matters

    France and Germany account for 36 percent of the European Union’s economic output, making them the two most influential member state.

  • Facts

    Facts

    • About 270,000 people in Germany work for French companies, while 310,000 people in France are employed by German companies.
    • Topics at the business conference in early September include innovation, education, research, cooperation, support for startups and reform of antitrust policies.
    • The context of the meeting includes multiple crises involving Europe, such as decision by Britain to exit the European Union, which has put the Continent’s political unity in question.
  • Audio

    Audio

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Europe is in the midst of a crucial test of strength.

Several crises have developed and intensified within the span of just one year. A massive influx of refugees has arrived in many European Union member states. The British have decided in favor of Brexit. There has been a growing number of terrorist attacks. And populists, who believe they have the answers to all these complex problems, are gaining popularity.

Other crises also continue to smolder. Many citizens have little trust in European institutions. The national debt and competitive ability crisis that led us to the brink of Grexit has not yet been overcome. Relations with Russia are tense, and those with Turkey have worsened. Wars and conflicts rage on just outside the European Union in Syria, Iraq, Ukraine, Libya and beyond.

Is this the end of Europe? This question will be a key topic at a meeting attended by approximately 50 leaders of supervisory and management boards of top German and French companies, who will gather in early September in Evian on Lake Geneva for the 25th annual Franco-German business conference.

The global views of German and French managers have strongly converged in the past two decades.

Since the first meeting, the French and German economies have grown together in an unprecedented manner. Germany is France’s most important trading partner, and France is Germany’s second most important after the United States. Together, our economies account for 36 percent of the economic output of the European Union’s 28 nations. About 270,000 people in Germany work for French companies, and 310,000 people in France are employed by German companies. When one of the two countries gains in economic strength, not least in export strength, the neighbor also profits from it.

The global views of German and French managers have strongly converged in the past two decades. We pursue similar business and social goals, feel the same international competitive pressures and deal with the same paradigm shifts, with digitalization taking the lead. And the question occupying our minds at the moment is: Where does Europe go from here?

The closely-linked economies are among the most important reasons why France and Germany have a key role to play in overcoming the current crisis. Yet the fear of some in Europe that our two countries could dictate to other member states is unfounded. The Franco-German role is not defined by an assumption of hegemony, but rather by the concern that centrifugal forces are increasing and Europe could fail. The goal of our partnership has always been to provide an impetus that benefits the community. This has only become more vital in the wake of the Brexit vote.

In the current situation, the goal should be proceeding step-by-step to secure what has already been achieved – from the single market and Schengen to security cooperation. That also includes strengthening Europe’s economic power above all else. Economic development is the deciding factor in political and social stability, global competitiveness and the question of whether the citizens, and young people in particular, will support the European idea in the future.

As business leaders, we see it as our duty to support politicians in this task. Perhaps we were too passive in recent decades and took Europe for granted. Together with our partners in politics and society, we must work together to renew the Continent economically and ensure that the benefits of a united Europe are directly felt by all its citizens.

The question of which form these French-German economic impulses take will be a key issue at the upcoming Evian conference. Taking center stage will be feasibility. It’s a matter of very concrete “lighthouse projects” that have a signal effect. We want to mention a few approaches that will be discussed in Evian.

First, innovation: Young, innovative companies help our economies profit from disruptive changes, the so-called paradigm shifts. But it remains difficult to start companies in both our countries –  in the World Bank’s Starting a Business ranking, France places 32nd out of 189 countries, and Germany places 107th.

Young entrepreneurs in Europe who are already able to show signs of success often lack sufficient capital. Particularly in the late financing phases, they require significant capital resources to expand their business on a large scale. With that in mind, the question presents itself as to how we can give more of a helping hand to startups. Could Germany and France do more to simplify and harmonize their regulations for starting businesses? And could a Franco-German fund for investments in digital future technologies give the whole venture-capital scene a boost?

Second, education and research: Dynamic, attractive colleges and universities promote the development of strategic branches of industry – that can be seen in the examples of Stanford in California, the Massachusetts Institute of Technology and the leading universities in Beijing and Shanghai. The schools of higher learning in Germany and France work at a top level and have in some cases already established business incubators.

But even our top institutions offer little of substance compared with their American and Asian counterparts. Would it be conceivable that a German and a French university with a strong profile in future-orientated disciplines join forces and lay the foundation for a “European Stanford”?

Third, cooperation and investment in future technologies: Both German and French industries have their strengths in sustainable technologies that can shape our lives in the future. Wouldn’t it make sense to work together to build large-scale infrastructure in both our countries with charging stations and pumps for cars fueled by electricity and hydrogen? Would a partnership in the field of autonomous driving be advantageous?

Could the German and French governments demonstrate how the costs of offshore power generation could be reduced by half within a decade in a pioneer project with leading energy companies? And would developing a joint smart grid pay off in the form of lower energy costs and greater security of supply?

Investments in areas like these could develop a multiplier effect for our national economies – and establish Europe as a model market for the mobility of the future and for renewable energies. That would benefit the European economy as a whole and would also open up opportunities for growth in relation to other economic regions.

Fourth, competition policy: In Asia and other parts of the world, huge corporations are merging to capture global markets. In Europe, on the other hand, the company landscape remains fragmented in many key industries. There is a lack of companies with the critical scale to hold their own against global competition in the long term. Despite this, antitrust law in Europe often views company mergers in terms of national competition structures instead of global power relationships.

We need European players who are able to compete with global competition and keep know-how in Europe, particularly in key sectors. Could Germany and France lead the way in modernizing national and European competition laws and thereby increase the competitiveness of European companies?

Through their example of post-war reconciliation, France and Germany once made possible a unprecedented new beginning in Europe. Together, they have brought the process of uniting Europe forward in the past decades. Once again, our future depends on this partnership.

It’s time to work together again to counteract forces threatening to pull Europe apart, and to give young people, especially, a prospect for a promising future. It’s time to set economic change in motion because only an economically prosperous Europe can be politically strong as well. We should give Europe a second chance – and seize this opportunity as a second chance too.

 

To reach the authors: gastautor@handelsblatt.com

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