APRIL 21-22 INFORMAL COMPETITIVENESS COUNCIL

UNCLAS SECTION 01 OF 02 VIENNA 001199 SIPDIS SIPDIS STATE FOR EB/IFD/OIA, EUR/ERA, AND EUR/AGS E.O. 12958: N/A TAGS: EUN PREL ECIN EFIN ETRD AU SUBJECT: APRIL 21-22 INFORMAL COMPETITIVENESS COUNCIL FOCUSES ON SERVICES DIRECTIVE, INNOVATION, AND R&D Summary -------------- ¶1. Under the overarching theme of "Investing in Excellence and Innovation," the EU's informal Competitiveness Council met in Graz April 21-22 to discuss how the EU could best meet the challenges of an increasingly competitive global marketplace. Ministers focused on the completion of the internal market for services to boost European growth and to facilitate job creation. However, the Council failed to approve the draft Services Directive, citing the need to fine-tune the draft, with the aim of approving it at the May 29 Competitiveness Council. Ministers also preliminarily agreed on funding allocation for the 7th Research Framework Program (RFP7),establishing a new European Institute of Technology and a Global Monitoring for the Environment and Security (GMES) initiative. End Summary. Services Directive -- Not Yet -------------- ¶2. The April 21-22 informal Competitiveness Council found broad support for the Services Directive draft, but failed to reach formal agreement. The Chairman of the EU Competition Council, Austrian Minister of Economics and Labor Martin Bartenstein, reported that the informal Council, as well as European Parliament (EP) members in attendance, supported the Commission's draft. The informal Council tasked Coreper with finalizing the details and formulations as soon as possible, with the aim of reaching final approval at the May 29 Competitiveness Council. ¶3. Bartenstein and the EU Commissioner for the Internal Market and Services, Charlie McCreevy, underscored that the current draft is non-negotiable. McCreevey added that the Council would either approve this Directive or no Directive at all. EU Commission Vice-President and Commissioner for Enterprise and Industry Guenter Verheugen stressed that the draft creates a single services market, while maintaining the EU's social, security, and quality standards. Verheugen said that the Commission is not prepared to discuss the issue again, as the political price to achieve a compromise was already high. Innovation -- Key for Growth and Employment -------------- ¶4. Innovation, as one of the core goals of the Lisbon Strategy, was the centerpiece of the ministerial discussions. Verheugen emphasized that innovation is key for the EU to reach its growth and employment goals. The Commission proposed innovation as the central theme for the Finnish Presidency in the second half of 2006. Before the end of the year, the Commission plans to present new initiatives in the following areas: improving the subsidy system for innovative enterprises and venture capital financing; forming innovation clusters on national and regional levels; facilitating knowledge transfers, especially between universities and business; introducing tax incentives for R&D; and utilizing public procurement to stimulate innovation. ¶5. Bartenstein pointed to innovation clusters, public sector support for innovation, and technology transfer as central elements to meet the challenges of globalization. EU Commissioner for Competition Neelie Kroes said there was a consensus that the EU has to do more to promote innovation and R&D, particularly for small- and medium- sized enterprises. She warned member states against protectionism, which hampers growth, employment and competitiveness. Research & Development -- More Funding -------------- ¶6. The Council informally agreed on the 7th Research Framework Program (RFP7),which is 60% higher than the RFP6 and will provide Euro 54.2 billion for R&D during 2007-2013. Verheugen affirmed that R&D policy is at the core of the EU's growth and employment initiative. He said that progress in the informal Council contributed politically to further consensus building within the EU. Despite increased funding for RFP7, Verheugen and EU VIENNA 00001199 002 OF 002 Commissioner for Science and Research Janez Potocnik noted that the EU R&D budget was too low in comparison to that of the U.S. According to Verheugen, Europe has to close this gap, if it wants to compete globally. Ministers also reiterated support for the establishment of a European Institute of Technology. Security research -------------- ¶7. Referring to the results of the February 20-21 European Conference on Security Research, the Austrian Vice-Chancellor and Minister of Transport, Innovation and Technology, Hubert Gorbach, stressed the importance of the EU developing lead-markets in security research and other R&D areas. The ministers defined security research as homeland security, illegal immigration, crisis management, and terrorism, but excluded external security. Verheugen noted that finding the right balance providing security and respecting personal rights and freedoms was a highly political issue that the EU was dealing with. Global Monitoring for Environment and Security (GMES) -------------- -------------- ¶8. Gorbach highlighted the Global Monitoring for Environment and Security (GMES) initiative, as Europe's second flagship project in space technology after Galileo. The Commission will provide Euro 1 billion for the phase-in to keep the project on track. GMES has applications for urban and transportation planning, disaster protection, and in other areas. Gorbach noted that, in the short- to medium-term, the public sector will have to develop the end-user markets. MCCAW