EU Barroso Pres

Background on sources of growth
Information prepared for the European Council, 23 October 2011
Contents
1
1. 2. 3. 4. 5.
Where does Europe stand? Europes track-record Europes growth potential Key internal levers External challenges and opportunities
Background information for the European Council, 23 October 2011
Where does Europe stand?
We have lost a lot

3
Actual growth compared to crisis-free growth

(EU GDP level, billion)
actual if growth had been sustained
We have lost about 2 000 billion between 2007-2010 due to the crisis, compared to a scenario where we would have kept our average growth rate over 1995-2007. This corresponds to the GDP of France or to 11% of Europes cumulative debt.
Source: European Commission
Our recovery is ailing

4
EU GDP level in recent years

(first quarter 2005 = 100)
Forecast
112 110 108 106 104 102 100
202 000 5 20 5Q 05 1Q1 202 Q 2 0050 5 20 Q 05 3Q3 202 Q 4 00 6 20 60Q 06 1Q1 202 Q 2 000 6 20 6Q 06 3Q3 202 Q 4 0070 7 20 Q 07 1Q1 2020 Q 2 0 07 20 7Q Q 07 3 3 Q 2020 4 0 08 20 8Q Q 08 1 1 202 Q 2 000 8 20 8Q 08 3Q3 2020 Q 4 0 09 20 9Q Q 09 1 1 2020 Q 2 0 09 20 9Q Q 09 3 3 202 Q 4 1001 0 20 Q 10 1Q1 2020 Q 2 1 10 20 0Q 10 3Q3 2020 Q 4 1111 20 Q Q 11 1 1 202 Q 2 101 1 20 1Q 11 3Q3 Q4
EU GDP grew strongly early in 2011, but has slowed substantially since then. Growth in the second half of 2011 is expected to be slow, stalling by the end of the year.
The situation is very uneven across the EU

5
Real GDP growth rate in second quarter of 2011

(percentage change on second quarter 2010)
EU 27 = 1.7 Euro area (17 countries) = 1.6 > 3.0 1.7 3.0 0 1.7 <= 0
Unemployment is reaching high levels

6
Unemployment rates in the EU, Euro Area, US and Japan

% 10
8 6 4 2 0
05 2 Q 0 2 0 1 05 05 Q 20 3 06 2 Q 0 2 0 1 06 06 Q 20 3 07 2 Q 0 2 0 1 07 07 Q 20 3 08 2 Q 0 2 0 1 08 08 Q 20 3 09 2 Q 2 0 1 009 09 Q 20 3 10 Q2 2 0 1 010 10 Q 20 3 11 Q2 1 01
EU Euro area US
1
20
Japan
23 million people are now unemployed in the EU (10% of the working age population) and 16 million in the euro area (9.5%). The slight improvement since 2010 has come to an halt.
Young people are particularly hit

7
Youth unemployment rates in the EU, Euro Area and US

(under 25 year-olds)
% 24 22 20 18 16 14 12 10
Unemployment is twice as high for young people. It has increased sharply due to the crisis and is now over 20%.
05 Q 2 01 20 05 05 Q 3 20 06 Q 2 01 20 06 06 Q 3 20 07 Q 2 01 20 07 07 Q 3 20 08 2 Q 01 20 08 08 Q 3 20 09 2 Q 01 20 09 09 Q 3 20 10 2 Q 01 0 20 10 Q 3 20 11 Q 2 01 11
EU Euro area US
20
Confidence has been shaken

8
EU business investment ratios and households savings

Business investment rate (% of gross added value)
24 23 22 21 20 19 18 17 16 15
Q1
Q1
Q1
Q1
Q1
Q1
05
06
07
08
09
05
06
07
08
09
10
10 20
20
20
20
20
20
20
20
20
20
20
20
15 14 13 12 11 10
Q1 Q3 Q1
Households' saving rate (% of disposable income)
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3 10 20
06
06
07
08
08
07
05
05
09
20
09
10
Investors are still holding back, and household savings rates reflect caution, limiting overall economic demand.
20
20
20
20
20
20
20
20
20
20
20
11
Q1
20
11
Q1
Q3
Q3
Q3
Q3
Q3
Q3
and remains fragile

9
Business and consumer confidence indexes

120 110 100 90 80 70 60
20 2008 0M 20 8 S09 2008 ep 0M 20 8 N11 0 9 ov 20 0M 20 9 J01 2009 an 0 M0 20 9 M 3 2009 a 0M r 20 9 M05 a 20 09M y 20 09 07 2009 Jul 0M 20 9 S09 0 20 9 ep 0M 20 9 N11 1 0 ov 20 1M 20 0 J01 2010 an 1M 03 20 0 M 2010 ar 1M 20 0 M05 a 21 M y 00 1 20 0 07 2010 Jul 1M 20 0 S09 2010 ep 1M 20 0 N11 11 o 20 M v 20 11 J01 11 an 20 1 M0 20 1 M 3 1 20 1 ar M 1 20 1 M05 11 a 2 M y 20 011 07 2011 Ju 11M0 l Se9 p
4 ESI average long-term average Index long-term 2 0
-2 -4 -6
EU GDP year-on-year growth rate (right-hand axis) EU Industry Confidence Indicator (left-hand axis) EU Consumer Confidence Indicator (left-hand axis)
Our financial sector is still adjusting

10
Total realised write-downs and capital injections in the banking sector, from January 2007 to August 2011
(in billion, by region)
1 ,400 1 ,200 1 ,000 800 600 400 200 0 Write-do wns Capital injectio n Write-downs Capital injection
Worldwide Wo rldwide
A US merica
Europe Euro pe
Asia A sia
EU banks have raised as much additional capital as they have written down (lost in asset values) since the crisis started. There is still a significant adjustment to come (deleveraging). Public aid and guarantees to the financial sector amounted to 4.6 trillion over the period, i.e. 37% of EU GDP, or 6% of the total assets of the sector.
Source: Bloomberg
-50 50 0
-100 100 150 200
Loan flows to non-financial corporations ( billion, last three months)
The crisis has resulted in a shortage of credit for non-financial firms and households, hindering recovery.
20 03 20 Fe 0 b 20 3M 2003 ay 20 03 Fe 03 Au b 20 g 20 03M 03 Na oy 20 v 20 04Au 2003 Feg b 0 N 20 4M o 2 04 a v 20004 Fey A 0 2 4 ub 20004Mag 2 04 Noy 20005Au v 2004 Feg 05 Nob 20 M v 2 05 a 2000 Fey 5 0 A b 2 5 u 2000 Mag 055N y 0 Aov 22 0006 ug Fe 20 5 N 20 06 ob 06 M v Fay 22 00 6A eb 00 6 Mug 22 00 a 00 66No y 2 2000 Au v 0 7F g 20 6 N e 2 00 07 ob 7M v a F 22 ey 00 00 77A b M u 2 200 ag 00 77N y Au 22 ov 00 00 78F g 2 N e 2 00 08 ob 8M v 22 Fe ay 00 00 88A b M 22 u ag 00 00 88N y Au 22 ov 00 00 89 g Fe 2 20 N o v 09 b M 22 Fe 00 ay 00 b 99 M Aa 22 uy 00 00 99 g A 22 Nu 00 ov 01 90 g N 2 F ov 20 e 01 10 b Fe 20 0M 20 a b 10 y 1 20 0M Aa 20 10 u y g 20 10A Ng 20 ov 10 u 20 11N ov 201 Fe 1 b Fe 20 11M 11 ab My
Access to credit is more difficult
Balance of opinion on lending conditions (over the past 3 months)
ay
-70 -60 -50
10
20
30
Loan flows to non-financial firms and bank lending conditions
-40
-30
-20
-10
11
Source: European Central Bank
Debt holds back firms

12
Stock of loans of non-financial corporations (total outstanding loans each year, in % of gross value added)
120% 100%
80%
60%
40%
20%
0%
19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10
Non-financial corporations have accumulated debts over time and started to reduce them as of 2009. The overall level remains high and is likely to hold back future investment and growth.
and households are also constrained

13
Household debt-to-income ratio in 2009

(calculated in % as: loans and liabilities / gross disposable income)
300% 250% 200% 150% 100% 50% 0% BE DE DK EE FR HU LU CZ AT LV SK NL LT PL PT UK ES SE IE SI IT FI
Household debt increased pre-crisis (relative credit boom). On average, every European was liable for 16 800 of debt in 2009. This represents a very variable share of the disposable income depending on the country.
Source: European Commission Note: no data for BG, EL, CY, MT, RO
Fiscal imbalances mean an extra cost for all

14
Gross public debt in the EU (% of GDP)

(past trends and medium-term projections)
100 95 90 85 80 75 70 65 60 55 50
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
% of of GDP) GDP (%
+7
+ 20
Baseline
Baseline + additional 1p.p.increase in the interest rate/decline in growth rate differential from 2015
Baseline
Baseline + additional 1 percentage point increase in the interest rate or decline in growth rate by 1 percentage point
The level of GDP debt has increased from 60% to 80% as a result of the crisis. A further rise in borrowing costs or a decline in growth by 1 percentage point would substantially increase the burden, by another 7% of GDP by 2020.
The financial markets remain volatile

15
Sovereign bond spread over German bund, ten-year maturity

(basis points over time)
bas is points
EL
2000
1600
1200
PT
800
IE
400
IT ES BE
M ay 11 Jun 11 Jul 11 A ug 11 S ep 11 O c t 11
0
A pr 11
Uncertainties over the sustainability of debts in a number of countries have led their borrowing costs to rise.
Labour mismatches may hinder recovery

16
Evolution of labour shortages and unemployment over time

(labour shortage = % of manufacturing firms indicating labour as a factor limiting the production)
12,0
10,0 2008q1 2008q3 6,0

2011q2
Labour shortage indicator (%)
8,0
4,0
2010q3
2,0
2009q1
2010q1
0,0 6,5 7,0 7,5 8,0 8,5 9,0
2009q3 9,5
10,0
unemployment rate (%)
Unfilled vacancies started to increase as of mid-2009, while unemployment is also reaching very high levels. This points to labour market mismatches, such as inadequate skills or limited mobility, in certain sectors and regions.
Europes track-record
1. Overall performance
EU GDP has grown over the last 15 years

19
EU GDP 1995-2010
(in billion, 2005 prices)
12000
10000
8000
6000
4000
2000
wn has gro P D G hat nding t a t s r e d + un 1995! / t n a w We
0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
EU GDP grew by nearly 35% over 1995-2008 and reduced by approximately 2.5% over 2008-2010. Over the last 15 years, this represents an average annual growth of 1.8% (US = 2.5%).
Europe created 23 million jobs

20
Numbers employed in the EU from 1995 to 2010

(million persons in total and in the main sectors of the economy)
250 million persons 200 150 100 50 0
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
Services
Industry
Agriculture
23 million extra jobs created since 1995. 33 million in services, but industry and agriculture each lost about 5 million (the total number of jobs of the Czech Republic or Portugal). In agriculture, job loss was continuous. In industry, 4.6 million jobs were lost over 2008-2010.
The picture of the EU economy is changing

21
Share of sectors in total economy 1995

3% 3 22 %
22 24 24 %
2010
22 %
Agriculture, hunting and fishing Industry Construction Trade, transport and communication services
6% 6
19 % 19 24 %
6 6%
Business activities and financial services Public administration, education, health, community and personal services
24 24 % 21% 21
29 29 %
21 % 21
In 1995, services accounted for about 2/3 of the total economy (cf. trade, transport, communication, business activities, financial services, public administration, education and welfare). In 2010, they represented about 3/4 of the economy.
What this means for each sector

22
Growth in gross added value by sector

Situation in 2010 compared to 1995 (1995 = 100)
Agriculture, hunting and fishing Industry branches Construction Business activities and financial services Trade, transport and communication services Public administration, education, health, community and personal services Total economy
0 100 20 120 40 140 60 160
While the overall economy has grown by one third over 15 years, business activities - such as accounting, legal and consulting services - , financial services, trade, transport and communication services have grown much more.
What this means for job creation

23
Job creation by branches from 1995 to 2010

Agriculture, hunting and fishing Industry branches b ra n c h e s Construction Business activities and financial services Trade, transport and communication services Public administration, education, health, community and personal services Total economy
- -10 10
--5 5
0 0
5 5
10 10
15 15
20 20
25 25
Million persons employed million persons employed
Job creation was driven by the services sector. The primary and secondary sectors have lost about 10 million jobs since the mid-1990s.
The types of jobs created

24
Skills content of current and future jobs

High qualifications
250 200 150
million jobs
Medium qualifications
Low qualifications
100 50 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Forecast
In 2000, 22% of the jobs required high qualifications while 29% required low qualifications. In 2010, it was the reverse. By 2020, 35% of jobs will require high qualifications and 12 million jobs less will require low qualifications.
2. The service sector
Job creation in services across Europe

26
Job trends in the service sector from 1995 to 2010

(average annual growth rate in %)
EU 27 = 1.6 Euro area (17 countries) = 1.7 > 3.0 1.6 3.0 1.6
Key service sectors that support growth

27
Value added growth of the top 10 growing services

Hotels and restaurants Computer and related activities Post and telecommunications Public administration
services
Other community, social and personal services Retail trade Financial intermediation Education Wholesale trade Other business activities
100
105
110
115
120
These sectors contributed most to growth in services over the last 15 years. Except for business activities, these sectors are not necessarily the ones creating most jobs (see next slide).
Job creation in the service sector

28
Top 10 job-creating service sectors

between 1995 and 2009
Supporting and auxiliary transport activities Computer and related activities Wholesale trade Education Retail trade Other community, social and personal services Hotels and restaurants Health and social work Trade and repair of motor vehicles Other business activities
0 0 2 2 4 4 6 6 8 8 10 10
services
million persons employed
These sectors created most jobs over the last 15 years. Except for business activities, these sectors are not necessarily the ones driving growth most (see previous slide).
3. The industrial sector
Job trends in industry across Europe

30
Job trends in the industrial sector since 1995

EU 27 = - 0.9 Euro area (17 countries) = -1.1 >0 -1.1 0 -1.1
Key manufacturing sectors supporting growth

31
Value added growth of the top 10 growing industries

Publishing, printing and reproduction of recorded media Rubber and plastic products Radio, television and communication equipment Electrical machinery and apparatus Motor vehicles, trailers and semi-trailers Food products and beverages Electricity, gas, steam and hot water supply Fabricated metal products Chemicals, chemical products and man-made fibres Machinery and equipment
industries
100 102 104 106 108 110 112 0 2 4 6 8 10 12
114 14
Out of 30 sub-sectors classified as industry, the above ten are the ones which contributed most to growth in the industrial sector.
Job trends in industry

32
Job creation / loss in top 10 industries

between 1995 and 2009
Motor vehicles, trailers and semi-trailers Wood and wood products Mining and quarrying of energy producing materials Leather and leather products
industries
Other non-metallic mineral products Mining of coal and lignite; extraction of peat Basic metals Publishing, printing and reproduction of recorded media Wearing apparel; dressing; dyeing of fur Textiles
-1000 -1000
-800 -800
-600 -600
-400 -400
-200 -200
0 0
200 200
thousand persons employed
Apart from the car sector, a wide range of industries has lost jobs. This reflects technological progress and greater productivity, outsourcing or relocation strategies in a number of industries, as well as changing consumer demand.
Manufacturing also drives service sector jobs

33
Manufacturing and related business services (number of jobs in 2009)

Manufacturing alone = 37 million jobs Manufacturing and related services = 74 million jobs
R&D 1% Renting and leasing 1% Media and communications 7% 12% Manufacturing 49% Other business services 30% Transport and storage
For every job in manufacturing it is estimated that a further complementary job is needed in a related business service, such as logistics, marketing or legal advice. In total, some 74 million jobs therefore depend on manufacturing.
4. Selected examples
Health and social sector

35
Employment in health and social sector 1995-2009

(average annual growth for each period, in %)
2,0 1,8 1,6 1,4 p 1,2 1,0 0,8 0,6 0,4 0,2 0,0 1995-2000 2000-2005 2005-2009
Total economy
Health and social work
4.2 million jobs created over 2000-2009 More than a quarter of total job creation over the same period 10% of all jobs in countries like DK, FI, NL and SE Around 5% of the total economic output Ageing will reinforce this trend
Car industry
36
Suppliers of a Fiat Bravo: an overview
Currently 3.5 million jobs or 12.6 million when indirect jobs are counted About 1.5% of EUs total GDP and 22% of the worlds car production Number of jobs increased by about a quarter since 1995 250 production lines split between 16 Member States All Member States involved in the supply chain and sales Typically around 50 component suppliers per car, spread all over Europe Around 75% of the value-added of a new car is generated by these suppliers
Automotive News
Green sectors
37
Jobs in eco-industry
(sectors developing sustainable production technologies and services)
4 3.5 3
million jobs
2.5 2 1.5 1 0.5 0 2000 2002 2004 2006 2008 2010
Over three million people currently work in the development of technologies and services to limit the environmental impact of production and consumption patterns. The sector continues to grow.
Source: Ecorys, European Commission
High-tech sector
38
Trends in high-tech sector 1995-2009
1995-2009 Economic growth in high-tech sector Jobs created in high-tech 4.1% 1.4 million
The high-tech sector, i.e. sectors with a large proportion of high-skilled jobs, represented 5.5% of total employment and about 8% of EUs GDP in 2009. The sector has grown much more rapidly than the rest of economy (4.1% versus 1.8%) and it has created 1.4 million extra jobs between 1995 and 2009. This is particularly the case for high-tech services such as telecommunications, computer services and research & development.
Trends in agriculture across Europe

39
Job trends in the agricultural sector from 1995 to 2010

EU 27 = - 2.3 Euro area (17 countries) = -1.9 >0 -1.9 0 -3.0 -1.9 - 3.0
Europes growth potential
Restoring our GDP growth potential

41
(productivity, investment and labour components, in %)

2.50 2.00 1.50 1.00 0.50 0.00 2001-2007 -0.50 2008-2010 2011-2015
Average annual potential growth in the EU
Total factor productivity
Investment
Labour input (employment + hours)
The crisis cut our growth potential by one quarter, mainly as a result of job losses and limited working hours. Beyond the crisis, ageing will reduce our workforce and this will further reduce our capacity to grow.
Acting on our growth levers

42
Sources of per capita real income differences compared to the US

(GDP per head, broken down by employment and productivity)
0% -5% -10% -15% -20% -25% -30% -35% -40%
US
EU2010 in 2010 EU in 2000 2000 Employment and hours worked Productivity (measured per hour worked)
Despite a small catching up in employment and hours worked, the EU income gap with the US has not narrowed significantly. Over three quarters of the gap is currently explained by lagging productivity.
Explaining the employment gap

43
Employment rate
78 76 74
1800
Average annual hours worked per person employed

1900 hours p. p. 1850
( = employed / working-age population)
72 70 68 66
1650 1750
1700
64 62 60 2000 2010
1600
1550 2000 2009
80 70 60 50
Female employment rate
70 60 50 40
Employment rate of people aged 55-64
EU US
40
30
30 20 10 0 2000 2010
20 10 0 2000 2010
The employment gap with the US is explained by lower employment rates for both genders and at all age groups, as well as fewer hours worked. Europes performance has improved relatively over time. The impact of the crisis is significant, notably in the US.
The prospect of a reduced workforce

44
Contribution of employment and productivity to growth

Implicit productivity growth required to maintain 2% GDP growth - assuming that a 75% employment rate is achieved by 2020 for people aged 20-64
employment
2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5%
0.9% 1.0% 2.0%
productivity
GDP
2.3% 2.0%
-0.3%
2010-2020
2020-2030
Even if the EU reaches its target of a 75% employment rate (compared to 68.6% now), the number of people employed will diminish due to ageing. To counter the negative impact and maintain our growth level, productivity will need to increase very significantly.
The prospect of an ageing workforce

45
Working age population by age groups, projected up to 2030

12
10
0 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
2010
2020
2030
The share of workers over 50 will increase rapidly in the coming years. The average age at work will be over 40 for the first time ever, rising from the current 39.6 to 40.8 by 2030.
Explaining the productivity gap

46
Sector contribution to hourly labour productivity growth in EU25 and US (1995-2007)

2.5 %
2.0
Non-commercial services
1.5
Commercial services Construction
1.0
Industry Primary
0.5
0.0
EU
-0.5
US
From 1995 to 2007, labour productivity grew much more slowly in the EU than in the US. The gap is particularly striking for commercial services, but industry was also lagging behind significantly.
Europes firms are small

47
Share of employees in firms according to their size in 2008

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Firms with 0-9 employees Firms with 10-19 employees Firms with more than 20 employees
EU
US
EU firms are smaller than in the US, with 90% of the workforce employed in firms of less than 10 employees. Three reasons are often quoted: i) historical specialisation ( path dependency ); ii) a more fragmented internal market; iii) barriers such as low access to finance. These affect EUs overall job and growth performance.
and specialised in more traditional sectors

48
Numbers employed and wealth created per sector

35 250 000
Value added per person employed
Number of persons employed, in million, in 2008

30
Valued added per person employed in the sector in
200 000
million employed
25 150 000
15
100 000
50 000 5 0
ra de s Ma nu fac tur ing Co ns tru Pr cti o & fes on tec so n hn a ica l, s l a c ie c n Ac tiviti tific c & o m es foo m d s od er ati & A vice on su d s pp mi or nis t s tr er ati v v Tr ices e an s & port sto ati ra on & co In ge mm fo un rma ica tio tio n Re n a a c l es t W tiv at wa ate ities e Re ste r,s pa & ew ir: co recy erag & mp ho ut cling e, us er eh , p old ers Ne tw go ona or od l ke s ne rg ys Mi up nin ply g& qu ar ryi ng et
In 2008, 80 million persons were employed in the traditional sectors of distributive trades, manufacturing and construction. Professional, information and communication service sectors employ only 16 million persons.
Di str ibu tiv
This is also the case for SMEs

49
Numbers employed in SMEs and wealth created per sector

Value added per person employed
25
Number of persons employed in SMEs, in million in 2008 Value added per person employed in the sector in
250 000
20
200 000
million employed
15
150 000
10
100 000
50 000 0
ra de s Ma nu fac tur ing Co ns tru Pr ofe cti & ss on tec i o hn na ica l, s l a cie c n Ac tiviti tific & c o m es foo m d s od er ati & A vice on su d s pp mi n or i s t s tr er ati v Tr ice ve s an sp o & rt sto ati ra on ge & c o In mm fo un rma ica tio tio n Re n a a c l es t t W iv at wa ate ities e Re ste r,s pa & ew ir: co recy erag & mp ho ut cling e, us er eh , p old ers Ne tw go ona or od l ke s ne rg ys Mi up nin ply g& qu ar ryi ng et
0
Di str ibu tiv
90 million people work in SMEs (< 250 employees), of which 56 million work in three sectors: distributive trades, manufacturing and construction. The added value created in these sectors is lower than the average for SMEs employees.
The EU is lagging behind on ICT take-up

50
Business investment in ICT (as % of total investment by firms in 2009)

%
35 30 25 20 15 10 5 0
US US
EU EU
The EU is lagging behind the US regarding investment in hardware, software and communications equipment. If the EU matched US levels, this would add about 5% to the GDP level in 2020.
Source: OECD, Oxford economics
Our business structure drives our R&D (1)

51
Expenditure on R&D as a % of GDP

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
2000 2000
2008 2008
2000 2000
2008 2008
2000 2000
2008 2008
EU-27 EU
Japan Japan
United USStates
Private sector
Higher education sector sector
Government sector
In spite of our 3% target, there has been little progress on R&D spending since 2000. The EU is particularly lagging in terms of private R&D spending.
Our business structure drives our R&D (2)

52
Sectoral R&D investments across the world (in billion )

40
R&D investment 2010 ( bn)
35 30 25 20 15 10 5 0
Automobiles Pharmaceuticals Technology & parts & biotechnology hardware & equipment
Aerospace & defence
Chemicals
Electronic & electrical equipment
Industrial engineering
Software & computer services
EU
US
Japan
Other countries
The EUs research efforts are lagging behind in fast-growing technology-driven sectors such as software, hardware and electronic equipment. Only in the traditional automobile sector the EU is the undisputed R&D leader.
Our young firms invest less in R&D

53
R&D intensity by age for EU and US companies

Old firms (created before 1975) Young firms (created after 1975)
14
R&D intensity (R&D/net sales) %
12 10 8 6 4 2 0
EU
US
Young EU companies created after 1975 invest much less in R&D than their counterparts in the US. This reflects a specialisation in more traditional sectors, but also a difficulty to grow across borders and to access finance.
Where are our YOLLIES?

54
More than half of the US leading innovators are young (i.e. born after 1975). US young leading innovative companies (YOLLIES) account for 35% of total R&D for leading innovators and include firms like Microsoft, Cisco, Amgen, Oracle, Google, Sun, Qualcomm, Apple, Genzyme and Ebay. By contrast, in Europe, only one in five leading innovators is young, with a share of 7% of total R&D among leading innovators.
Source: European Commission, quoted by the World Bank
What if we meet our Europe 2020 targets?

55
Average annual GDP growth: scenarios for 2010-2020

2.5% 2.2% 2.0% 1.6% 1.5%
1.0%
0.5%
0.0%
Baseline
Advanced structural reforms
Reaching the Europe 2020 targets will raise growth significantly. This requires structural reforms together with fiscal consolidation efforts so as to increase growth by half a percentage point every year.
Key internal levers
Key internal levers

1. Entrepreneurship, business environment, innovation and access to finance
Barriers to entrepreneurship
58
OECD index of barriers to entrepreneurship (2008)

2.50
2.00
1.50
Japan US
1.00
0.50
0.00
UK NL SE IT SI DK IE PT AT ES FR DE EU FI EE BE SK CZ LU HU EL PL
Entrepreneurs in many Member States still face important barriers, such as regulatory and administrative opacity, administrative burden for start-ups and barriers to competition, that slow economic growth.
Note: No data for BG, CY, LT, LV, MT, RO Source: OECD
Helping our entrepreneurs

59
Time to start a business (calendar days)

50
40
30 The Small Business Act for Europe has set the target of 3 days to start a business by 2012
20
10
0 BE HU DK IT US PT SI EE FR CY NL RO IE UK FI EU DE SE LV SK BU EL LU CZ LT AT PL ES
It currently takes 15 days to start a business in Europe, and only 6 in the US. The agreed EU target is 3 days by 2012, for less than 100.
Start-ups face many challenges

60
Perceived barriers to business start-up (firm survey results from December 2009)
EU
90 80 70 60 50 40 30 20 10 0
US
Japan
Lack of available financial Complex administrative support procedures
Insufficient information on how to start a business
Fear of risk
Post-crisis, EU start-ups see limited access to capital as a major hindrance, but other structural barriers also have an impact.
Source: European Commission, Eurobarometer n283, December 2009.
Venture capital is in short supply in Europe

61
Venture capital investments by investment stage (% GDP)

Early stage investments
0.4 0.35 0.3
% of GDP
Expansion and replacement investments

Expansion and replacement investments
Early stage investments
0.25 0.2 0.15 0.1 0.05 0
EU15 2001
US
EU15 2009
US
EU firms have traditionally much less access to venture capital than their US counterparts. The crisis has further limited access.
Source: European Private Equity and Venture Capital Association (EVCA), European Commission
Labour costs must be watched closely

62
Labour cost index - total labour costs

(year-on-year % change)
EU Euro area
5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2005 2006 2007 2008 2009 2010 2011
Labour costs are growing again. They need to stay in line with productivity to help absorb unemployment and prevent loss of competitiveness.
EU patenting costs could drop drastically

63
Cost of patenting in Europe compared to elsewhere in the world (in )

40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 000
4 045
Validation costs
Procedural fees
32 112
600
4 045
0
1 550
0
1 850
EU
Commission proposal
Japan
US
Today, average EU costs of patenting is close to 35 000. Such costs could be reduced by 80% if the proposed unitary patent system is adopted.
Late payments: an obstacle for many SMEs

64
Average payment duration of bills in number of days in 2010

Business to business B2B Public authority to business (and vice versa)
200 160 120 80 40 0

EL LT C Z H U N L PL PT D E SK ES IE IT C Y D K U K AT BE EE LV SE FI FR
Late payments are a major obstacle for firms to manage cash flows. Delays exceed 4 months in some countries, with bills usually paid faster in the north. The late payments Directive to be transposed by March 2013 will tackle this problem.
Source: European Payment Index 2011
Key internal levers

2. Skills and human capital
Broadening access to tertiary education

66
Share of population aged 25-34 with tertiary education in 2009

60 50 40 Highest EU score
30 20 10 0
Lowest EU score
EU
US
Japan
Today in the EU, only about one person in three aged 25-34 has completed a university degree, compared to well above 50% in Japan and more than 40% in the US. Canada, Australia and South Korea all do better than the EU.
Source: OECD
The case of bottlenecks in IT

67
Percentage of EU population with IT skills in 2010

(various levels of qualifications)
35% 30% 25% 20% 15% 10% 5% 0%
None Low Medium High
60% of Europeans have low or no IT skills. The situation is also worrying for IT professionals. The number of IT graduates has not increased since 2008. If this persists, the EU may lack 700 000 IT professionals by 2015.
Boosting our skills and human capital

68
(% of the 18-24 population with at best lower secondary education)

20 18 16 14 12 10 8 6 4 2 0
Share of early school leavers
EU
Europe 2020 target
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Every year, 6 million of young Europeans drop out of school with at best a lower secondary education. This currently represents 14% of 18-24 year olds.
Promoting active ageing

69
Share of adult population (25-64) participating in lifelong learning

(i.e. receiving education or training during the last 4 weeks)
2005
35% 30% 25% 20% 15% 10% 5% 0%
Best performing Member State EU Worst performing Member State
2010
About 80 million people in the EU have only low or basic skills. More access to training could help reduce this, but actual participation is stagnating. Participation is highest for the youngest, the most educated and the employed, and is thus lowest amongst groups needing training the most.
Improving access to the labour market

70
Female employment and coverage of childcare services in 2009

Female employment rates Employment rates in full-time equivalent Coverage of childcare services
75 70
Female employment rate %
80 70 60 50 40 30 20 10 0 EU PL SK CZ RO HU MT BG AT LT GR LV DE IE CY IT EE FI SI BE LU UK ES PT FR NL SE DK
Coverage of childcare services (% of children aged 0-3)
65 60 55 50 45 40 35 30
Female employment rates vary a lot in the EU. If the share of part-time is factored in to estimate a full-time equivalent employment rate, less than half of the female workforce is employed in several countries. The availability of childcare seems to play an important role.
Key internal levers

3. Single market and digital agenda
The internal market has helped us grow

72
The positive impact of the single market in terms of economic integration
Trade Intra-EU exports = 67% of total exports Intra-EU FDI = 62% of total FDI FDI Growth and jobs 2.1% extra GDP over 1992-2006 500 per head 2.75 million jobs
and the Euro generated tangible benefits

73
Effects of the Euro on trade and foreign direct investments in the Euro area: ranges of estimated impacts
40 35 30 25
average Range of estimated impact
Average average estimated estimated impact impact
Range of estimated impact
20 15 10 5 0
average
Average average estimated estimated impact impact
Trade Trade Trade
FDI FDI
FDI
In addition to the benefits brought about by greater price transparency and the elimination of currency exchange costs, the Euro helped boost intra-Euro area trade by 5-15%, and intra-Euro area investment flows by as much as 15-35%.
Trade is a catalyst for growth

74
Intra-EU and extra-EU exports of goods

Intra-EU exports of goods in bn euro Extra-EU exports of goods in bn euro
683
1348
1528 2538
2000
2010
Intra-EU trade has been high and growing over the last decade. For every 1000 of wealth created in a Member State, it is estimated that about 200 end up benefiting other EU Member States through trade.
Still a large potential for the internal market

75
Medium-term impact (2020) on EU GDP of specific EU level reform measures model simulations
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
Services Directive
Integrated market for energy
Financial integration including venture capital
Public procurement modernisation
Completing the single market would significantly boost growth. Implementing the above reforms would add around 3% to the GDP level in 2020.
in particular on services
76
EU exports of services
(% GDP)
%
Effects of the Services Directive

%
50
Intra-EU27 Extra-EU27
EU-27 exports of services (% of GDP)
6 5 4 3 2 1 0 2004 2010
Effects of the Services Directive on trade and FDI
45 40 35 30 25 20 15 10 5 0
Trade Trade
FDI FDI
The EU is a significant market for cross-border trade in services - but the intraEU dimension for services (58% of total) is weaker than for goods (67% of total). The full implementation of the Services Directive could increase trade in commercial services by 45% and Foreign Direct Investment (FDI) by around 20%. It can bring 0.5 to 1.5% increase in GDP.
IT progress opens up new opportunities

77
EU and US trade in services with the rest of the world

(2010, in %)
35 30 25
EU
US
20 15 10 5 0
Transportation Travel Communications Construction services services Insurance services Financial services Computer and information services Royalties and license fees Professional, technical and other business services Personal, cultural and recreational services
Thanks to new technologies, fast-growing services such as communication, insurance, finance and business services can now easily be delivered across borders. More traditional services (e.g. transport, construction or travel) still require face-to-face contact. The EU is strong on many services, but the US is often a leader in fast-growing markets.
Manufacturing will play a strategic role

78
New products / trends Intelligent products that do the job Clean production Key enabling technologies Advanced materials Healthy ageing Global security
Sectors with opportunities Automotive Mechanical/electrical engineering Nano-, biotechnology, photonics, ICT Chemicals, plastics, metals, pulp and paper Pharmaceuticals Space, aerospace
Emerging societal and technological trends will open up further growth potential for several key manufacturing sectors. Already now, the manufacturing sector accounts for 75% of EU exports and 80% of R&D.
Spreading the use of e-commerce

79
Share of consumers using e-commerce in 2010
Online Purchasing
40.4%
Cross-border r Online Purchasing

0%
8.8%
10%
20%
30%
40%
50%
% of all EU Individuals aged 16-74
The total estimated value of online transactions in Europe was around 165 billion in 2010. About 40% of consumers have used internet to purchase goods and services, but only 9% have done so from another Member State. E-commerce stimulates competition in retail markets and creates new business opportunities, in particular for SMEs.
Source: European Commission and Centre for Retail Research
Catching up with high-capacity broadband

80
Fixed broadband subscribers per population (December 2010)

High speed broadband lines ( 30 Mbps)
40 35 30
Basic broadboand lines
25 20 15 10 5 0
EU
Japan
USA
South Korea
More than 50% of broadband lines in Japan and 40% in Korea are fibre, delivering high-capacity connections. Only 1% in Europe. High capacity connections facilitate the spread of internet-based services and e-commerce.
Moving towards a true digital internal market

81
Spending on music: retail versus electronic purchase

(per capita in in 2009)
35 30 25 20 15 10 5 0 USA USA Japan Japan EU EUaverage average France France Germany Germany Italy Italy Spain Spain UK UK 7.90 2.50
Retail spending (shops)
Electronic spending (on-line)
6.90 5.00 1.80
24.00
1.90
10.70
11.80
13.00
17.00
0.60 0.80
20.40
3.60
4.10
In 2009, each of us spent 2 buying music on-line. In the US, it was four times more. Currently, i-tunes is available only in 15 Member States and Spotify only in 7. The difference is even more striking in the e-books market. In the US, e-books are now outselling hard-covers whilst the EU e-book market is anaemic.
Source: International Federation of the Phonographic Industry
Key internal levers

4. Quality of administration and regulation
Quality of public administration

83
Government efficiency indicator of the World Economic Forum (2011-12)

6 5
Level of efficiency
4 3 2 1 0
IE M T BE LT LV PL H U C Z BU PT N L AT D K LU U K D E FR EL FI SE C Y EE ES SI R O SK IT
According to international rankings, government efficiency varies a lot across the EU. Only Finland, Sweden and Denmark rank among the worlds top 10.
Source: World Economic Forum
Quality of regulation
84
Burden of government regulation indicator of the World Economic Forum (2011-12)

Quality of government regulation 5 4 3 2 1 0
IE LV EL H U N L FR C Z PL D K C Y SE LU AT SI R O M T LT U K D E BG BE PT FI EE ES SK IT
On an international scale, regulatory burden is high in the EU, and none of the Member States ranks among the worlds top 10. At EU level, efforts are ongoing to improve the quality of regulation and reduce administrative burden.
Source: World Economic Forum
Growth p.a.
Quality of expenditure: the case of education

85
PISA reading scores and spending on primary and secondary education as a % of GDP per capita
32 30 28 26 24 22 20 18 16 425 445 465 485 505 525 545 BG LT LU CZ SK DE PT NL FI AT ES IT LV SK
DK UK
EE BE
PL HU FR SE
There is little correlation between spending on primary and secondary education per pupil (as a % of GDP per capita) and PISA results. Finland and the Netherlands are below the EU average on spending per pupil in relative terms (23.6%) while their PISA scores are among the highest. Many of the countries with high relative spending levels only show around average PISA reading scores.
Source: European Commission, OECD
Quality of taxation systems

86
Overall tax-to-GDP ratio in the EU, US and Japan in 2009

(in %, including social security contributions)
60 50
40
30 20
10
0 DK SE BE IT FI AT FR DE HU EU NL SI LU EE CY UK CZ MT PL PT ES EL LT BG SK IE JP RO LV US
Given the high tax burden in the EU, shifting taxes from labour towards less distortive taxes, such as those on environmentally-damaging activities or consumption, could contribute to stimulating jobs and growth.
Source: OECD
Key internal levers

5. Key areas for action at national and EU level
Recommendations for action at national level

88
Public finances
Fiscal consolidation Long-term Sustainability
Labour market
Active Labour Market Policy Labour market participation
Structural policies
Business environment and SMEs R&D and innovation Public services and cohesion policy
Financial stability
Fiscal framework
Taxation
Wage Setting
Education
Network industries
Energy efficiency
Service sector
Banking
Housing market
AT BE BG CY CZ DE DK EE ES FI FR HU IT LT LU MT NL PL SE SI SK UK
Total number
22
16
10
11
17
10
Note: For IE, LV, EL, PT and RO, the only recommendation is to implement existing commitments under EU/IMF financial assistance programmes
Priority areas for action at EU level

89
Strengthened EU economic governance

Macro-economic & fiscal surveillance Regulation of financial services Targets and guidance for structural reforms
Europe 2020 flagships for smart, sustainable and inclusive growth

Digital Agenda Youth on the Move Innovation Union
New Industrial Policy
New Skills and new Jobs
Platform against Poverty
Resource Efficiency
Modernised EU levers for growth and jobs

Single Market Act Trade and external policies Structural Funds
External challenges and opportunities
External challenges
1. Global growth opportunities and trade performances
EU growth depends on global growth (1)

92
Real GDP growth in 2011
Annual percent change

10% or more 6% - 10% 3% - 6% 0% - 3% less than 0% no data
By 2015, 90 % of future economic growth will be generated outside of Europe.

Source: IMF World Economic Outlook (September 2011)
EU growth depends on global growth (2)

93
(%
6 5 4 3 2 1 0 -1 -2 -3 2005 2006
Contributions to global GDP growth, PPP basis based on 2007 PPP weights) based(%, on 2007 purchasing power
Contributions to global GDP growth

standard weights)
Rest of the World China Japan United States European Union
2007
2008
2009
2010
2011
2012
2013
2014
2015
Global growth is expected to be strong again, but may remain below pre-crisis levels for some time. China and emerging countries will contribute significantly.
Source: IMF World Economic Outlook (September 2011)
2016
EU export performance remains strong

94
Export share (goods, % world exports)

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
EU EU27*
US US
Japan Japan
China China
India India
Brazil Brazil
Russia Russia
1995
2010
The EU benefits from being one of the most open economies in the world and its external position remains relatively strong, despite fierce global competition.
Source: WTO, European Commission
EUs trade balance in relation to others

95
Trade balances (billion Euro)

400 200
-200
-400
-600
-800 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
EU
USA
Japan
China
The EU has experienced a small trade deficit over the last decade as a result mainly of its imports of energy and raw materials (see next slide).
The structure of the EUs trade balance

96
EU trade balance in 2005 and 2010 ( billion)

400 300 200 100 0 -100 -200 -300 -400 2005 2010
Agricultural products
Fuels and mining products
Commercial services
Manufacturing
Other goods
When excluding the large deficit on energy and raw materials, the EU trade balance is strong, with a large surplus in manufactured goods and services.
The costs of energy

97
Price index for energy in the EU and US 2001-2010

(2005 prices = 100)
EU energy
140 130 120 110 100 90 80 70 60 50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US energy
As the EU imports more than half of its energy, the global rise in energy prices means that the price paid for energy in the EU is now almost double that of ten years ago. This is a significant extra cost for EU business and households.
External challenges
2. The importance of trade for Europes growth and jobs
The contribution of trade to growth

99
Sources of growth in the EU in 2010

Trade Other growth sources
Extra-EU trade is a cushion when domestic demand is weak: in 2010, roughly 1/4 of EU growth came from international trade.
The role of FDI in steering growth

100
EU inward FDI from the rest of the world: situation at the end of the year as a % of GDP
24,0 22,0 20,0 % of GD P 18,0 16,0 14,0 12,0 10,0 2004 2005 2006 2007 2008 2009
Inward investment is playing an increasingly important role in GDP growth. In the long-term, Europes capacity to attract investment is key to its economic and technological development.
Our futures are interlinked

101
Relation between EU imports and exports of goods

23% 20%
Growth in extra EU exports of capital and consumption goods
7%
8%
Growth in EU imports of intermediate goods from China, excluding fuels
1999-2003
8%
2003-2008
15% Share of China in EU imports of intermediate goods (end of period)
Two thirds of EU imports are key intermediates for production and exports, and they come increasingly from BRIC countries. China doubled its share in EU imports of intermediate goods since 1999. These imports have contributed to the strong growth of EU exports of final goods.
The EU is dependent on raw materials

102
Share of raw materials (RM) in EU imports (%)

45.0% 40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Agricultural RM
Industrial RM
Energy RM
Total RM
The share of imports of raw materials, notably energy, has been continuously rising and now represents more than a third of total EU imports.
Many EU jobs depend on trade outside the EU

103
Export-oriented employment as part of overall employment

(in %, latest available figures)
More than 10% 8% - 10% 6% - 8% 4% - 6% Up to 4%
The example of the EU-South Korea Free Trade Agreement

1.6 billion in customs duties saved per year
104
New trade opportunities once fully implemented: nearly 20 billion of additional EU goods and services exports New access for service suppliers Tackling non-tariff barriers Access to government procurement Protection of intellectual property Strong competition rules Commitment to sustainable development
The example of green sectors

105
Europes share of the world market in green sectors
0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0
Power generation Water Management
Energy efficiency Sustainable mobility
Material Efficiency Waste management
Europe is a world leader in environmental technologies. This global market is forecast to triple by 2030.
Source: Roland Berger, European Commission
External challenges
3. Europes trade strategy and priorities
Trade and investment policy how we engage

107
Multilateral policy (WTO / Doha Development Agenda)
Our trade strategy
Bilateral agreements (mainly Free Trade Agreements) Other instruments (e.g. transatlantic economic dialogue, high-level dialogues)
The EU has the policies to tap into the external growth potential
Trade and investment
108
Resources efficiency
Strength of the Single Market
Innovation and green technologies
Projection of the EUs regulatory model Energy security and climate change
Overview of EU agreements
109
Countries with which the EU has concluded preferential trade agreements Countries with which the EU is currently negotiating preferential trade agreements Countries with which the EU is considering opening preferential negotiations EU and its customs union European Economic Area
Bilateral agreements already in place

110
Agreements in force
Negotiations concluded
EFTA Central America Caribbean ACP Columbia & Peru South Africa Chile Euro-Med Turkey SAA South Korea
Mexico
ACP stands for African, Caribbean and Pacific Group of States EFTA stands for European Free Trade Association SAA stands for Stabilisation and Association Agreements signed with Western Balkan countries
Bilateral agreements under development

111
Negotiations ongoing
Under consideration
Russia Canada Ukraine Eastern Partners Euro-Med Gulf countries Malaysia India Singapore Other ASEAN Japan
Pacific EPAs
Mercosur
African EPAs
EPAs: Economic Partnership Agreements with ACP countries Euromed: Forthcoming negotiations on deep and comprehensive Free Trade Agreements Russia: Commitment to negotiate a Free Trade Agreement already contained in the Partnership and Cooperation Agreement of 1997
Strategic economic partners trade links

112
EU exports and imports in goods and commercial services (2010)

Russia 108.7 billion 172.8 billion
United States 367.2 billion 301.1 billion
Japan 62.1 billion 79.8 billion
China 133.3 billion 299.3 billion
Brazil 41.2 billion 38 billion
India 44.6 billion 41.3 billion
Strategic economic partners investment links

113
EU inward and outward investment stocks (2009)

Russia 88.8 billion 27.5 billion
United States 1134.1 billion 1044.1 billion
Japan 84.0 billion 135,3 billion
China 58.3 billion 5.7 billion
Brazil 132.2 billion 52.3 billion
India 27.2 billion 5.5. billion
Focus on our neighbourhood: Southern Mediterranean / Eastern Partnership

114
Neighbourhood countries matter economically: our 5th most important trading partner Security and solidarity Sharing prosperity / participation in the Single Market Ambitious work plan agreed and perspective of new agreements (Arab Spring)
Focus on Asia
115
Fastest growing economies in the world

GDP growth rates
Developing Asia China India ASEAN-5 Indonesia Thailand Malaysia Philippines Vietnam
2010
9.5 10.3 10.1 6.9 6.1 7.8 7.2 7.6 6.8
2011
8.2 9.5 7.8 5.3 6.4 3.5 5.2 4.7 5.8
2012
8.0 9.0 7.5 5.6 6.3 4.8 5.1 4.9 6.3
Fast regional economic integration

ASEAN integration China - ASEAN agreement ASEAN Japan agreement
Crucial part in Europes supply chain

Source: IMF, World Economic Outlook, September 2011
116
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Background on sources of growth

Information prepared for the European Council, 23 October 2011

Background information for the European Council, 23 October 2011

Where does Europe stand?

We have lost a lot

Actual growth compared to crisis-free growth

Our recovery is ailing

EU GDP level in recent years

The situation is very uneven across the EU

Real GDP growth rate in second quarter of 2011

Background information for the European Council, 23 October 2011

Source: European Commission

Unemployment is reaching high levels

Unemployment rates in the EU, Euro Area, US and Japan

Young people are particularly hit

Youth unemployment rates in the EU, Euro Area and US

Confidence has been shaken

EU business investment ratios and households savings

Households' saving rate (% of disposable income)

and remains fragile

Business and consumer confidence indexes

4 ESI average long-term average Index long-term 2 0

Background information for the European Council, 23 October 2011

Source: European Commission

Our financial sector is still adjusting

-100 100 150 200

Loan flows to non-financial corporations ( billion, last three months)

Access to credit is more difficult

Balance of opinion on lending conditions (over the past 3 months)

Loan flows to non-financial firms and bank lending conditions

Source: European Central Bank

Debt holds back firms

and households are also constrained

Household debt-to-income ratio in 2009

300% 250% 200% 150% 100% 50% 0% BE DE DK EE FR HU LU CZ AT LV SK NL LT PL PT UK ES SE IE SI IT FI

Fiscal imbalances mean an extra cost for all

Gross public debt in the EU (% of GDP)

The financial markets remain volatile

Sovereign bond spread over German bund, ten-year maturity

Labour mismatches may hinder recovery

Evolution of labour shortages and unemployment over time

10,0 2008q1 2008q3 6,0

Labour shortage indicator (%)

0,0 6,5 7,0 7,5 8,0 8,5 9,0

unemployment rate (%)

EU GDP has grown over the last 15 years

wn has gro P D G hat nding t a t s r e d + un 1995! / t n a w We

Europe created 23 million jobs

Numbers employed in the EU from 1995 to 2010

The picture of the EU economy is changing

Share of sectors in total economy 1995

What this means for each sector

Growth in gross added value by sector

What this means for job creation

Job creation by branches from 1995 to 2010

Million persons employed million persons employed

The types of jobs created

Skills content of current and future jobs

Job creation in services across Europe

Job trends in the service sector from 1995 to 2010

Background information for the European Council, 23 October 2011

Source: European Commission

Key service sectors that support growth