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
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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
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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
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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

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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