Europe’s industry is being ravaged by exorbitant energy costs and an over-valued euro, blighting efforts to reverse years of global manufacturing decline.
By Ambrose Evans-Pritchard, in Cernobbio, Italy
9:07PM BST 08 Sep 2013
“We face a systemic industrial massacre,” said Antonio Tajani, the European industry commissioner.
Mr Tajani warned that Europe’s quixotic dash for renewables was pushing electricity costs to untenable levels, leaving Europe struggling to compete as America’s shale revolution cuts US natural gas prices by 80pc.
“I am in favour of a green agenda, but we can’t be religious about this. We need a new energy policy. We have to stop pretending, because we can’t sacrifice Europe’s industry for climate goals that are not realistic, and are not being enforced worldwide,” he told The Daily Telegraph during the Ambrosetti forum of global policy-makers at Lake Como.
“The loss of competitiveness is frightening,” said Paulo Savona, head of Italy’s Fondo Interbancario. “When people choose whether to invest in Europe or the US, what they think about most is the cost of energy.”
A report by the American Chemistry Council said shale gas has given the US a “profound and sustained competitive advantage” in chemicals, plastics, and related industries. Consultants IHS also expect US chemical output to double by 2020, while Europe’s output will have fallen by a third. IHS said $250bn (£160bn) in extra US manufacturing will be added by shale in the next six years.
European president Herman Van Rompuy echoed the growing sense of alarm, calling it a top EU priority to slash energy costs. “Compared to US competitors, European industry pays today twice as much for electricity, and four times as much for gas. Our companies don’t get the rewards for being more efficient,” he said.
Europe’s deepening energy crisis has for now replaced debt troubles as the region’s top worry, with major implications for the Commission’s draft paper on shale expected in October. The EU’s industry and environment directorates are pitted against each other. The new legislation could in theory stop Britain, Poland, and others going ahead with fracking.
“Personally, I am in favour of shale gas in Europe because we have to do more for industry,” said Mr Tajani.
Mr Tajani said the crisis is compounded by the tight monetary policy of the European Central Bank, which has failed to alleviate a serious credit crunch for small firms in Italy, Spain, and the eurozone periphery.
“The euro is far too strong and it is making it very hard for our companies to compete with the Chinese. We need a real central bank, like the US Federal Reserve or the Bank of England, willing to promote growth,” he said, in an unusually blunt criticism of a fellow EU institution.
“The ECB should be lending to small firms, just as the Bank of England is doing. It is impossible for us to bring down unemployment or cut our public debt without a strong industrial policy that revives small business,” he said.
Guy Verhofstadt, leader of the European liberals, said it is time to broaden the ECB mandate to include growth, warning that the eurozone is at risk of chronic stagnation and a “Japanese winter” unless the central bank goes beyond short-term measures.
Jean-Claude Trichet, the ECB’s former chairman, said the bank has already done everything it can, insisting that EU governments deliver on pledges for a banking union and economic reforms.
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