UK's Mandelson says EU must reshape to support innovation

The European Union must re-build its leadership and reshape its core spending and economic policy to strengthen Europe's ability to compete on a global scale, Department for Business Innovation & Skills Secretary Lord Peter Mandelson said today.

Speaking in Brussels, Belgium, at an event hosted by the think-tank Bruegel, he said the EU needed to 'get real' about the need for a strong leadership and radical change in order to keep pace with the G2 - the USA and China '-including greater strategic support for innovative, high-growth sectors and low-carbon job-creation.

Lord Mandelson, himself a former European Commissioner, offered a wide range of suggestions for refocusing EU policy around innovation and investment in growth, including:

' Refocusing the EU's structural and research funds to support innovation;
' Potentially amending EU State Aid rules to boost growth in high-tech industries;
' Driving forward the benefits of a single market, especially by making open trade in services a reality; and
' Rethinking some of the organization of the European Commission to reflect the importance of innovation, the digital economy and climate change.

Lord Mandelson said that it was important that open markets and fair competition was defended during the downturn and this remains the case. He argued that it is right for the temporary State Aid framework to end in 2010, but that new guidelines are needed on risk capital so as to support the growth of high-tech industries.

He said: 'The EU's budget priorities are misaligned, and that needs to change. We need to start seeing that the EU budget of 'just 1%' of EU Gross Domestic Product as a critical 1% of added value for the EU - but that should be better used, notably at the cutting edge of our investment in European innovation, especially in the skills that help people get good jobs and in low carbon job creation. 'EU rules risk suppressing investment in innovation. Change is needed. EU rules need to encourage private capital to invest and innovate, and state aid rules need to provide the right kind of space for governments to encourage and facilitate such investment. That's a departure, but it is necessary."