Remarks by Angel Gurría
5 October 2018 - Štrbské Pleso, Slovak Republic
(As prepared for delivery)
Minister Kazimir, Ladies and Gentlemen,
I would like to thank GLOBSEC, the Ministry of Foreign and European Affairs and the Ministry of Finance of the Slovak Republic for the invitation.
I am honoured to receive this GLOBSEC European Award. The Organisation I lead, the OECD, is part of Europe’s story, part of Europe’s history. Originally founded in 1947 as the secretariat of the Marshall Plan, the OECD has been there from the outset of post-war European reconstruction. And the OECD will continue to play its part in Europe’s future by drawing on what we do best: advancing better policies for better lives.
Of course, the European Union is always a work in progress. As I often say: it’s about the scaffolding. You save for years to come visit Europe with your family, and you arrive to Notre Dame, Il Duomo, the Cathedral in Cologne and you notice with disappointment that the monument is covered because they are repairing it or cleaning it. But you come back in two years and then the scaffolding is gone and you stand in awe before an amazing creation. That is what the European integration process is about, constant repair, constant reform, constant improvement, constant reinvention, constant strengthening, and a lot of scaffolding.
But these are difficult times for this process, for international co-operation and policymaking. Just as we need it most, the space for multilateral work has tightened and we are witnessing a dangerous retreat from economic openness and a rising tide of Eurosceptic voices in many areas of the Union. This Summit is an opportunity to address these challenges and discuss our shared vision for Europe’s future.
The good news is that after years of crisis, the European economy expanded in 2017. GDP growth across Europe is projected to remain solid at 2.3% in 2018 and 2.1% in 2019. Nevertheless, for the Euro area in particular, some clouds are gathering on the horizon. The OECD actually revised downwards its Euro area growth projections for 2018 and 2019 to 2% and 1.9% respectively.
Sustained improvements in living standards are still held back by weak productivity and investment in many countries. The single market remains fragmented, with barriers in key areas, including services, transport, finance, energy and digital markets.
This crisis has also left a legacy of social problems. Real wages fell sharply in some countries hard hit by the crisis and stagnated or barely grew in others. Unemployment in many countries is still above pre-crisis levels. In particular, youth are being left behind – over 30% of youth are jobless in Spain and Italy and over 40% in Greece. In this context migration has become an even more divisive issue, despite the clear case for the economic benefits of migrant integration.
The advance of digital technologies is bringing opportunities for job creation but also new anxieties and implications for inclusiveness. The low-skilled are the most exposed to the risk of automation. Regional inequalities could also be deepened. The OECD has found that within European countries, the share of jobs at high risk of automation varies the most in Spain, with 12 percentage points of difference between the highest and lowest risk regions. It is also high in the Czech Republic, France and here in the Slovak Republic. In Western Slovakia, nearly 40% of jobs are at high risk.
This is highly concerning, because we cannot continue to leave so many people behind. Decisive reforms and deep co-operation are necessary.
The OECD is working hard to support structural reform agendas in many European countries. For example, the OECD-Greece Joint Steering Committee is leading work on competition, anti-corruption and education. The OECD has also been supporting Italy in delivering on its skills agenda, working with France on labour market reforms and with Slovenia on areas including productivity, clean energy and its National Development Strategy, to give just a few examples.
However, to move forward together, ambitious, comprehensive and coordinated reforms are necessary in several key areas.
First, reforms to the architecture of the European monetary union remain essential to enhance its resilience and ensure long-term sustainability. In particular we need to improve risk-sharing and fill in the missing pieces of the banking union. This means, for example, a fiscal backstop to the Single Resolution Fund, which could take the form of a European Monetary Fund. The 2018 OECD Economic Surveys of the European Union and Euro Area can provide useful guidance and recommendations in these areas.
Second, the European Union should deepen its Single Market by boosting competition and innovation and addressing regulatory barriers and infrastructure deficiencies. Look for example at the single market in services. Cross-border provision of services among EU countries makes up only 5% of EU GDP, despite accounting on average for 70% of GDP in individual European countries. Europe’s effective trade integration not only within its own borders but also into global value chains (GVCs) will depend on addressing these barriers.
Third, European countries must make decisive steps to boost inclusive growth. The recent OECD Framework for Policy Action on Inclusive Growth provides 24 indicators to empower the people and places that have been left behind. This should include policies to support citizens to thrive in the digital age. Over 40% of European adults lack digital skills. Many countries are also lagging behind in digital infrastructure, with only a quarter of EU firms using cloud computing, for example. The OECD stands ready to share the insights of our Going Digital horizontal project, which provides a comprehensive package of coordinated policies to make digitalisation a driver inclusive growth by facilitating worker redeployment, investing in skills, adapting social protection, future-proofing labour market regulation and fostering social dialogue. The OECD’s skills assessment and monitoring tools, PISA for students, and PIAAC for adults, are also showing countries where they stand on skills and where they need to get to.
Last, but not least, over 90% of Europeans see climate change as a serious problem. Under the Paris agreement, the EU and its Member States committed to reducing greenhouse-gas (GHG) emissions by at least 40% by 2030 from 1990 levels. Radical policy action is needed. The OECD’s Investing in Climate, Investing in Growth report, commissioned by the German G20 Presidency, has shown that progress need not come at the cost of growth. In fact, a climate-compatible policy package to get to below 2ºC could actually increase long-run output by up to 2.8% on average across the G20 by 2050. However, this will rely on more effective international co-operation.
Just as individual European states gain strength from a united Europe, Europe itself is stronger with a healthy and vibrant global governance and a level international playing field. We count on Europe to help us strengthen multilateralism which is the only way forward in an interconnected global economy.
Take one of the hottest topics regarding trade relations: market-distorting practices, subsidies and overcapacity. This is an area where multilateral co-operation is necessary if we want to advance, as demonstrated by the OECD Global Forum on Steel Excess Capacity, which held a successful Ministerial at the OECD only a few weeks ago.
European countries also need to ensure the implementation of integrity tools like the OECD Anti-Bribery Convention and the OECD Due Diligence Guidance for Responsible Business Conduct. And critically, we need to continue working together at the global level on tax co-operation. The OECD Base Erosion and Profit Shifting (BEPS) Project and Common Reporting Standard for the automatic exchange of tax information (AEOI) have already begun building an international tax architecture fit for the global age and delivered billions into public coffers.
But we need to keep abreast of emerging challenges. Last year newspapers reported that a major US online retailer had paid just €16.5m in tax on European revenues of €21.6bn. This is a serious issue. The OECD/G20 BEPS Project just delivered its interim report Tax Challenges Arising from Digitalisation and an update on this work will be provided in 2019. Together, we need to ensure that loopholes are closed and companies pay their fair share of taxes.
In all of these areas Europe’s support is a fundamental pillar for strong global institutions. Effective, responsive and transparent multilateralism strengthens Europe as it strengthens every individual nation that co-operates internationally.
Ladies and Gentlemen,
I am told that there is a Slovak proverb: “Consider each day as your best day“. These may be difficult days for Europe, but today still feels to me like a great day. Not only am I hopeful that the friendship and determination of all those gathered here can help deliver a better future for Europe, but I am also honoured by the award you have bestowed on me. From my heart, thank you.