Energy Costs Risk Europe’s Competitiveness, Johansson Says

Energy costs are probably the biggest challenge facing European policy makers as they attempt to make the region more competitive, said Leif Johansson, the chairman of Ericsson AB who heads a Europe-wide industrial body.

European Union member states need to coordinate and integrate their energy policies to prevent costs from rising as they fall in competing regions such as the U.S., Johansson said in a phone interview before talks in Berlin today with German Chancellor Angela Merkel and French President Francois Hollande.

“We are beginning to see a very wide gap coming up with the U.S. for energy-intense industries,” said Johansson, who heads a group of about 50 chief executive officers and chairmen from Vodafone Group Plc to Siemens AG. “Energy perhaps is the common denominator where all European countries need to think how we can make that a more efficient and better market.”

Johansson is advising the French and German leaders plus European Commission President Jose Manuel Barroso as they bid to shift the EU’s focus from crisis fighting to tackling longer-term challenges such as record youth employment in Spain and Greece. Merkel and Hollande have said they will present a joint “competitiveness pact” to put to fellow leaders at an EU summit in June.

“We have done a lot to ensure the stability of the euro zone, you might even say most of what is needed,” Hollande told reporters in Berlin. “That was the precondition. Our priority is to reach the highest level of growth. To achieve this we have to do whatever is needed to get Europe’s competitiveness as high as possible.”

Growth, Finances

Merkel, who hosted today’s talks, said the goal is “a Europe with more growth, a Europe with solid finances” and jobs, and a competitive Europe, “because we won’t achieve this any other way.” Energy policy, research and information technology will feature in this evening’s discussion, she said.

Germany, Europe’s biggest economy, has seen energy costs rise as the country shuts nuclear reactors and expands more expensive renewable-energy generators such as wind turbines and solar panels. Gas prices in Germany are now four times those of the U.S. because of the latter’s support for shale gas, Ulrich Grillo, president of Germany’s BDI industry association, was cited as telling the Frankfurter Allgemeine Zeitung on Jan. 28.

Skills Shortage

Europe also needs “flexible and responsible” education systems to provide companies with people skilled in math and sciences to help plug a gap of “possibly 500,000 engineers, math, science and technology” workers by 2025, said Johansson.

He is meeting Merkel and Hollande in his capacity as head of the European Roundtable of Industrialists, whose corporate members include Total SA, Nestle SA and Bayerische Motoren Werke AG and have combined sales of more than 1.3 trillion euros ($1.7 trillion), according to the group’s website.

Political will to find ways to make Europe more competitive has increased in the past year or two, Johansson said. “It used to be an economic insight that large corporations, small and medium-sized corporations, and academia lived in symbiosis with each other to create strong clusters,” he said. “That has now spread to become a political insight.”

While short-term crises such as the current one in Cyprus need to be handled “in the best way,” a coordinated plan to make Europe more competitive “is the only thing that over time will create more jobs and restore back growth,” Johansson said.

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