More industry in Europe's future?

The tensions between growth and austerity were in evidence today as industry commissioner Antonio Tajani unveiled the Commission's plan to boost European industry.

The Commission wants to bring industrial activity in Europe up to 20% of EU GDP by 2020, back to the level it was at before the economic crisis. Today industrial activity is just 16% of EU GDP.

Of course industrial activity in Europe has been in decline since long before the current economic crisis began, as this video produced by the Commission explains. Manufacturing has moved to the developing world where parts and labour are cheaper. Tajani acknowledged “We've made mistakes in the past, we've let industry and SMEs fend for themselves for too long.”

But the communication from the Commission suggests there is possibility to reverse this trend. Pointing to the fact that wages in China have been growing at 20% per year in industrialised regions, the Commission concludes, “it becomes more interesting in investing in Europe again as the advantages of cheap labour are gradually diminishing.”

Whether this is actually true would probably be a matter for serious debate. After all, even if wages are on the rise in China, what's to stop companies moving their manufacturing bases even further afield, ever-chasing the most advantageous labour markets?

But it was the seeming conflict between this jolt to the European economy and the current austerity strategy imposed by Europe's centre-right governments that had the journalists in the room most interested. How would the kind of growth envisioned here be possible in the current age of austerity? And given that manufacturing is viewed by many to be an element of Europe's past, is it really realistic to think that we can emerge from the crisis with an equal or stronger manufacturing sector?

This question was given an uncomfortable answer by the fact that four of the six EU member states listed by Tajani as having a greater than 20% share of GDP for their industrial sectors could also be found on an accompanying list of the least competitive industrial sectors in Europe.

The accompanying ‘industrial competitiveness report' divides member states into high performers such as Germany, France, the Netherlands and the UK; uneven performers such as Greece, Italy and Spain; and poor performers such as Bulgaria, Poland and Hungary.

Tajani's list of countries with higher than 20% shares – Germany, Hungary, Slovakia , Lithuania, Slovenia and the Czech Republic begs the question – in this day and age, is it necessarily a good thing to have industrial activity as a large portion of GDP? Aside from Germany and Slovakia, the rest of these countries are all in the ‘least competitive' category as determined by the Commission.

This would seem to suggest that a high share of industrial activity is a relic of the past in Europe rather than the economy of the future, with the notable exception of Germany.