Is Davos the event to cure Europe’s economic woes?

Transcript

The theme ‘The New Global Context’ couldn’t be more fitting for this year’s annual World Economic Forum. World Finance speaks to Mark Spelman, Managing Director at Accenture Strategy and member of the Global Agenda Council, to discuss if Europe is effectively embracing this ‘new normal’.

World Finance: Now, one of the biggest criticisms of the EU is that it applies policy in sort of a piecemeal fashion. Let’s focus specifically on fiscal consolidatory efforts, related to bringing down a country’s deficit, versus structural reform. We have not seen the application of these ideas happen in an effective manner, so do you think that Davos is really the place to see movement?
Mark Spelman: I think it’s really important to remember that Europe’s not homogenous. So the dynamics of what happens in, for example, southern Europe, is different from what’s happening in northern Europe, which is different from Scandinavia.
So, what you’re trying to do is apply those principles of fiscal stability and structural reform, in different parts of Europe.

World Finance: Davos does one thing really well, and that’s bring everyone to the table, right? So: if we take the top tier countries in the EU, and the ones that are really struggling, the ones that really need the reform and to be bailed out, frankly, in the end: those countries are going to have some of the biggest, most decisive stars at Davos. So who should we be watching for?
Mark Spelman: Well. We know that quite a lot of the European leaders are going to turn up in Davos. We expect to see Angela Merkel making a frontline speech. Francoise Hollande’s going to be there. David Cameron’s going to be there. So I think that you’ll see a lot of the frontline major leaders taking to the stage at Davos, and really talking about what their view is about the outlook going forward.

[T]he digital single market absolutely needs to move forward

And this balancing act between, on the one side, a German-centric view which says ‘You need to have financial stability in order to create the backbone for further reforms,’ and other countries saying, ‘Actually, we need more space and more latitude in order to be able to create the degrees of freedom to drive particular structural reforms.’

That is going to be manifest on the open stage in the public forums. But a lot of the private discussions will be, how is it really going to work in practice?

World Finance: Everything that you’ve mentioned is going to ring true. We’ve heard these conversations take place, well before even Juncker was able to enter into his position. But these are all theoretical conversations, right? So, if there are backroom conversations, they’re going to involve the business elite who can afford, frankly, membership and attendance at these events. But are the right key stakeholders taking part?
Mark Spelman: Well, I think there’ll be a lot of important stakeholders there. And one of the key messages, for example, from the business community, will be something like the digital single market absolutely needs to move forward. Because if you look at the whole digital agenda, for example, it absolutely addresses some of Europe’s critical needs. It addresses the needs of growth, it addresses the needs of creating jobs. It’s around productivity, and it will improve European competitiveness.

So I think there will be areas like the digital single market, which is one of the priorities on the European Commission. And business will be saying ‘This really does need to move forward,’ in a very practical way.

And we’ve already seen that: particularly around the development of online shopping, but increasingly with industrial internet, which is going to be one of the big trends, I think, over the next two years. There’s going to be a lot of discussions about how Europe can really use its scale and its size to be able to, sort of, take advantage of this key trend.

World Finance: Everything that you’ve said is very positive and hopeful on the prospects of advancing these talks. But what if there is an embarrassing consensus around Jean Claude Juncker’s ability to really invoke the change that the economy is demanding? What do you do then?
Mark Spelman: Well, I think one of the things that business and policymakers can do is that Jean Claude Juncker has put together a 10 point programme. And what he’s actually looking for is the degree of business support and empathy with some of those key initiatives.

And so, one of the things that you can actually do in those private, one-on-one discussions, is if you like, reinforce what are some of the priorities, and some of the examples, that the commission needs to hear about, about why things need to happen.

Because what the commission, and what governments are looking for from business, is validation that they’re on the right track. And what they want from business is examples of where things are working; but also where things are not working. So for example, if you look at the digital single market: understanding the difficulty of doing cross-border payments, and how you can improve that. Looking at ways of, for example, addressing issues around consumer protection, or harmonisation of VAT rates across different parts of Europe.

I think 2015 is going to be really critical in terms of getting momentum on the European agenda

These are practical issues which politicians like to hear about in terms of examples, so that when they go back to Brussels, and back to their home countries, they can then look at what can be done to address those key problems.

World Finance: Very hopeful on your side, I think, in terms of what can actually come out of this event. So moving forward, how many months do you think it’ll be before we see something really tangible?
Mark Spelman: I think you have to look at Davos in the context of the annual cycle that goes on around Brussels and international governments. We’ve clearly got an important European Council meeting coming up. In April, the digital single market will be one of the key focal points. Juncker has made a specific point that he wants momentum in the first six months or so of his new commission. So I think 2015 is going to be really critical in terms of getting momentum on the European agenda.

And the key acid test is really, when you come back to growth and jobs.

So: can Europe actually move the growth rates, nudge them forward, and at the same time begin to address some of the underlying issues about a jobless recovery?

Those two me are the two underlying output tests that we’ll be watching for during the course of 2015. Davos gives you a great start to the year, because it brings some key stakeholders together. And hopefully that will create some momentum.

World Finance: Okay, well we’ll all be watching. Thank you so much for joining me today Mark.
Mark Spelman: My pleasure.