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Great expectations - Post-Summit Analysis

24 October 2006


Maybe expectations ahead of the EU summit in Lahti were just a bit too high, but after heralding innovation as the subject of the get-together, the outcome was pretty weak, even for an “informal” meeting of heads of state and government.

After all, the meeting took place under the Finnish Presidency and in Finland - a country whose recent economic success has been built on innovation and which has shown the rest of the EU just how it can be done. The summit was also preceded by a great deal of preparatory work in various fora, including the report presented by former Finnish Prime Minister Esko Aho at the beginning of this year.

Many organisations have stressed the importance of innovation as a crucial element of the toolbox needed to equip Europe for global competition, including the EPC, which set out prescriptions for shaping an innovation policy capable of delivering results in a recent paper.

Innovation is about the capacity to create new products and services; it is about improving processes to enhance efficiency; and it is about finding efficient ways of bringing new ideas to the market - all of which are crucial to enable Europe to respond to the challenges it faces in today’s globalised world.

Was it therefore too much to hope that EU leaders would discuss these issues seriously, and come up with some agreed guidelines and an action plan that could convince everyone that Europe is on the right track?

Stating the obvious

Sadly, this is not what happened. Yes, the summit concludes that Europe needs a comprehensive strategy for intellectual property rights in the EU. Of course, we do. However, that is nothing new. The key question is how is it going to be done? Declaring that promoting quality must be at the heart of the strategy is little more than a statement of the obvious.

The fact that EU leaders agreed on the need to make the European patent system more cost-effective and predictable was of no great comfort either. The European patent regime has been discussed at summit after summit: it is still utterly inadequate and it could become a serious barrier to the development of knowledge-based competitiveness. So why is it that we still do not have a workable patent regime? For the simple reason that Member States cannot agree on the number of languages to be used - an issue that has to be decided by unanimity.

“It is true that for a while now, we have tried to get a European patent and we haven’t managed. If we haven’t managed, it’s not because the Community institutions haven’t done enough, but simply because people haven’t agreed, not least on the language arrangements. Some Member States have clear language objections,” said European Commission President José Manuel Barroso at the final press conference. And he is right.

On the issue of funding for bringing new ideas to the market, the summit underlined the need for more “seed” capital to develop new projects or ideas. The approach is right, but no specific indications were given as to how and when this could be done. The same goes for standardisation as an additional tool to spur innovation: according to the Finnish Presidency, the summit “touched” on the subject, but that of itself does not mean much.

Cold comfort

Perhaps we can take some comfort from the words of Finnish Prime Minister Matti Vanhanen, who said after the meeting: “Our work on innovation policy will not stop here. I will keep this high on the agenda during the rest of our Presidency too.”

However, the problem is not a lack of will from the Finnish Presidency or the European Commission. Nor is it a lack of the elements for a coherent policy. Rather, it is the lack of shared understanding of the urgency of the issue among EU Member States, not to mention the lack of political will to move beyond peer pressure and the so-called “open method of coordination” to pool resources and develop a common European framework to address the problem.

In this context, the creation of a European Institute of Technology - as advocated by President Barroso - has the right symbolic value. Yet it is seen - not just by the ‘meaner’ Member States but also by many members of the scientific community - as a potential waste of resources that could be better employed by concentrating on existing strengths and centres of excellence across the EU.

Lahti was, of course, an informal summit and it was not supposed to come up with concrete decisions. Still, a more hands-on approach and a tentative roadmap for agreeing on at least some common guidelines would have been welcome. Most of these issues will now be pushed to the 2007 Spring European Council, with the prospect of six more wasted months between now and then.

Energy exchange

The second ‘big’ subject on the Lahti agenda was energy. This attracted more attention, both inside and outside the meeting room, but discussions on the new Commission plan for increasing energy efficiency (through savings on the use of domestic appliances) were at least partly overshadowed by the desire to get assurances on oil and gas supplies from Russia on the eve of a potentially cold winter.

This was a pity. The Commission proposals, if properly implemented, could have a significant impact: they would be good for individual citizens, who could save money; good for the environment (another neglected item on the summit menu), which would benefit from lower emissions; good for enhancing security of energy supply; and good for spurring innovation and entrepreneurship.

“In order to implement a coherent energy policy and respond to energy crises, we agreed to improve the way we share and process energy information among the Member States,” said Mr Vanhanen, promising to “move ahead” with this before the end of the year.

The real test of success in this area will therefore, once again, be the willingness of Member States - individually and collectively - to make the necessary choices and take right decisions, and to do so in a more coordinated way.

EU-Russia relations

Russian President Vladimir Putin’s presence at the summit dinner not only diverted attention away from the discussions on energy efficiency and innovation, but was also an uncomfortable experience for many EU leaders.

The timing of the President’s visit could probably not have been worse, and left EU leaders scrambling to agree on a common approach towards their discussions with Mr Putin just hours before he arrived in Lahti.

As the Russia-Ukraine crisis at the start of this year demonstrated in dramatic fashion, the enlarged EU increasingly relies on Moscow for supplies of oil and natural gas, with Russian imports now accounting for up to 25% of total consumption.

At the same time, there are growing concerns in Europe about the way in which Russia’s policies are evolving, both domestically and internationally: the measures taken by the government against independent media and, more recently, non-governmental organisations; the murders of the Deputy Director of the Russian Central Bank and investigative journalist Anna Politkovskaya; and Moscow’s growing assertiveness on issues such as bilateral relations with Georgia, the final status of Kosovo and Iran’s nuclear programme; to give just a few examples.

A couple of days before the Lahti meeting, EU foreign ministers had agreed, with some difficulty, on a common declaration on Georgia which, while urging both sides to “tone down public rhetoric”, expressed “grave concern at the measures adopted by the Russian Federation against Georgia”.

Even though this wording was a compromise between quite different approaches inside the Union, it was nonetheless significant, as it was the first time the EU had criticised Russia so openly. In this context, European Parliament President Josep Borrell’s warning at Lahti that “the EU cannot trade human rights for energy” sounded a little wide of the mark politically.

Yet it is undeniable that Russia now feels in a position of relative strength vis-à-vis an energy-hungry EU. Even the traditional European line - that Russia is as dependent on Europe as Europe is on Russia because Moscow needs international investors to improve its energy infrastructure and cash flow, because, in Mr Borrell’s words, “you can’t eat gas” - appears to be challenged by the recent decisions regarding the Shtokman gas field and oil extraction on Sakhalin.

In other words, the much-stated principles of “reciprocity, transparency and openness” (in terms of market access as well) are being undermined, as demonstrated by Gazprom’s recent aggressiveness on European markets. This also explains why Moscow keeps delaying the ratification of the Energy Charter signed with the Union a decade ago, while striking separate deals on pipeline routes with individual EU Member States - most notably Germany and Greece.

President Putin had reassuring words for the EU in Lahti on security of energy supply over the coming months, saying that he wanted cooperation “to be not only mutually beneficial” but also “founded in common principles”. But once again he resisted pressure to ratify the Energy Charter, insisting that “certain provisions” needed to be defined better. Nor was there any sign of a weakening of Moscow’s assertiveness over Georgia, with Mr Putin maintaining that “the initiative to worsen relations” did not originate from Russia.

There were, however, apparently no really awkward moments over dinner and EU Member States managed to avoid the much-feared overt display of disunity. So while there were no real signs of progress on any of the really difficult issues, this is hopefully a good omen for a future full of difficult challenges and dilemmas.

Conclusion

Before the summit, Prime Minister Vanhanen wrote to fellow EU leaders vowing to drive the agenda forward on innovation and energy, describing them as “two of the key challenges facing Europe” which are “central to our competitiveness and prosperity”.

So how did he fare? The summit was indeed a success if measured simply by what could have gone wrong and did not. But it was a disappointment when judged on the basis of the progress which could - and should - have been made.