European companies are expressing alarm over the record high prices of both the euro and oil. Businesses are asking EU governments to make a stand and get the ECB to cut rates. Ernest-Antoine Seillière, President of BusinessEurope, which groups member states’ industrial federations and represents 20 million European companies, spoke to EuroNews on the global financial crisis, the euro’s export-denting strength, the real risk for the EU’s economy and Europe’s enviable but costly social umbrella.
EuroNews: “The financial crisis risks becoming a global economic crisis, so it seems that ends the debate about inflation, spending power, poverty and business problems; aren’t governments eventually going to have to step into the breach and save the banking and financial sectors?”
Ernest Antoine Seillière: “As you know the situation is very uncertain. It’s that very incertitude that’s causing the problem. The financial sector detests not knowing how big a crisis is, or how long it will last. They’re uncomfortable, and that plays on their behaviour. It’s obvious that governments are becoming more and more concerned, so if the crisis deepens it’s inevitably a government matter and, I should say, one needing international co-operation.”
EN: “Are Europe’s businesses financially healthy?”
EAS: “They are competitive, no-one should doubt that – if they weren’t they’d be bankrupt or taken over, so the European production system is competitive. However, if the banking crisis isn’t ridden out, and the current problems and uncertainties persist, that will inevitably lead to a credit crunch and as we all know, available credit is companies oxygen”.
EN: “Looking at the monetary crisis, the euro’s now close to $1.60, and oil’s been stuck at 100 dollars a barrel a while now. How will this effect European companies?”
EAS: “An uncontrollable rise in the euro is not an advantage for us because exports are hit in sensitive areas like aerospace, industrial goods, or luxuries. But let’s give the whole picture. The rising oil price that fuels inflation and makes the economic climate difficult is in part cushioned by the high euro. We’d pay 40 percent more for our oil if it wasn’t for the healthy euro/dollar differential”.
EN: “Some big European companies have already said they could be relocating because of the high euro. Do you see this as really the only possible answer?”
EAS: “After five years of full-blooded globalisation, with relocation a constant theme, we’ve been able to create nine million jobs in Europe, so we warn against any exaggeration, even if that’s what happens in politics, where opinions are stirred by relocation scares. Some is needed to ensure European competitivity, including some offshore production for cost reasons, but this relocation underpins entire sectors of Europe’s economy, so we should be applauding the power and growth of emerging economies for what they earn for us”.
EN: “European workers are increasingly demanding to have a slice of a companies’ profits, and at the same time employers are complaining about inflexible social security systems. What’s the real contradiction between social and industrial Europe?”
EAS: “We are very proud of Europe’s social model, which can be summed up simply as – in times of growth, some of the profits pay for social security. The Nordic countries showed us the way forward here, and it’s their ‘flexi-security’ that’s our model, not a pretty word I agree, but it works. We don’t protect jobs, we protect the workers so they can find new jobs quickly, and if possible with training, better paid ones”.
EN: “Do you think that for this to happen Europe should abandon budgetary restraint to create jobs and boost growth?”
EAS: “Well, companies themselves on this question are saying loud and clear success won’t come by increasing public debt, that achieves nothing, so companies are united in demanding continued budgetary discipline. We must stop looking for the easy way out instead of facing the fact there’s better things to do”.
EN: “You’ve directed France’s industrial and business confederation that today is in the eye of a moral and politiical storm. Should employers buy off the unions in exchange for peace?”
EAS: “Absolutely not. The revelation that a confederation member was enaged in such archaic practices is to be condemned, and came as a shock, for French bosses and the public. But the reaction from the confederation and other employer’s bodies has been healthy and rapid, and a modern and transparent monitoring sytem’s being set up. So we’ve put that behind us. We’ve taken a number of strong leads to dissolve this, and for me, who was more or less behind the creation of the French Employer’s Confederation, it’s been very satisfying to see how it’s coped, and I’m sure it will emerge stronger from the crisis”.