00:00The World Economic Forum has published a new study circling out high energy costs as the
00:05biggest drag on European competitiveness with electricity prices two or three times more than
00:09competing economies. For more we can go to Switzerland now and bring in Andrew Caruana
00:13Galicia from the World Economic Forum. Good morning and thank you so much for joining us.
00:18Just tell us how can this be addressed? Good morning Maeve and thanks for having me.
00:23So maybe just very quickly on the problem itself. Europe is still an industrialized economy and
00:33therefore energy is a major input and Europe is dependent to a huge extent on imported energy
00:40and so as long as that remains the case we'll have no control over its prices and that means the
00:46solutions focus on domestic homegrown sources of energy. Without that Europe will remain
00:55vulnerable to geopolitical volatility and we've seen this year only in spring oil and gas prices
01:01rose by almost 50 percent. The real miracle is that European industry for so many years has been able
01:09to compete even with these high energy prices. So Europe's auto industry for example is just as
01:14competitive as the American auto industry but there are new players now China for example so it's just
01:23not possible for Europe to continue to compete with the energy prices that it has. We don't need to bring
01:29down the prices to US or Chinese levels but we do need to narrow the gap and domestic homegrown
01:35sources of energy are the only real way to do that for Europe. It's a miracle you say that they
01:40can
01:40indeed survive and your research under also says that Europe needs new alliances to reduce dependencies
01:45and secure supply chains. I'm sure you've been following the big debate about Canada this week.
01:50Was the EU right to offer Canada this special status? To be clear the best thing that Europe can
01:56do is focus on its own internal market but there are certain areas where Europe will never be able to
02:02be self-sufficient like critical raw materials for example and so that means if we look at the global
02:09picture where are there significant dangerous dependencies and again this doesn't mean Europe
02:16needs to take the binary approach of self-sufficiency versus dependency it needs to look at diversification
02:24that's the best hedge against these dependencies and Canada is an obvious partner there are there's
02:32cultural affinity we heard Prime Minister Carney speaking French yesterday but there are also
02:39differences between Europe and Canada that make the relationship complementary Canada's rich in natural
02:45resources has a strong technological base a strong defense industry so that that's actually a perfect
02:52example of what Europe needs to do over the coming years. And one of the big messages in your
02:57research is as well that Europe already knows what needs to be done the problem is delivering and
03:02we're now two years on since the Draghi report but only 15 percent of the ideas are implemented why?
03:08That's exactly it so we've moved from a problem of diagnosis whereas Europeans we couldn't agree on
03:14what needs to be done to a problem of delivery this is good news because agreeing you know coming together
03:20around the set of objectives is an enormous challenge in any country let alone a block made up of 27
03:27different
03:27member states. Now if we look at where progress has been made on the Draghi recommendations
03:33it's very clear that the majority of implemented recommendations are in areas where the EU institutions can
03:42act largely alone when it comes to deep surgery of Europe's market like its energy market its capital markets
03:50then we run into the usual problems of of member states consensus the European Parliament in some cases
03:59so now what we really need is just not to lose momentum to treat this as a campaign ensure that
04:06even
04:06while Europe puts out fires on its borders or within its borders its its direction of travel remains
04:14constant. And just picking up on that point we know Europe has huge savings great companies but European
04:19businesses still only raise around half as much capital compared to the US why is that so why is Europe
04:25so
04:25bad at turning savings into investment in European companies what exactly needs to change do you think?
04:30So to start with the good news I mean Europe has the best savers in the world so it has
04:36a pool of 37
04:37trillion euros in savings. Europeans save twice as much as Americans. The real tragedy is that even though
04:45they do that they are poorer than Americans so Europeans are unable to build up wealth at the same rate
04:52as
04:52Americans even though they are actually squirreling away savings at a much faster rate. So we we don't have
05:00savings problem we have an investment problem how do we bridge this gap our research points to several
05:06solutions if we look at certain European countries like Sweden the Netherlands Denmark even the UK where
05:14they've moved to capitalized pension systems this means adding to pay as you go pension systems adding a layer
05:22of capitalized pensions on top of capitalized pensions on top of that means that we we suddenly see
05:28a massive growth in in the rate of individual investment versus savings pension systems are generally
05:39the best first step for Europeans for anyone really to become an investor and so
05:46the UK 14 years ago moved to a system of auto enrollment into capitalized pension systems
05:53more than 90 percent of people remained enrolled and within those 14 years the UK now has a pot of
06:00over
06:00100 billion pounds which is then plowed back into the real economy and so that's the real difference
06:07between countries like Sweden Denmark the Netherlands versus the larger European economies which use pay as you go
06:13systems they don't have those patient pools of capital that go on to invest in the real economy
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