VZCZCXRO5262
RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHVI #1199/01 1161325
ZNR UUUUU ZZH
R 261325Z APR 06
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 3221
INFO RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 VIENNA 001199 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA, EUR/ERA, AND EUR/AGS 
 
E.O. 12958: N/A 
TAGS: EUN PREL ECIN EFIN ETRD AU
SUBJECT: APRIL 21-22 INFORMAL COMPETITIVENESS COUNCIL 
FOCUSES ON SERVICES DIRECTIVE, INNOVATION, AND R&D 
 
 
Summary 
------- 
 
¶1.  Under the overarching theme of "Investing in 
Excellence and Innovation," the EU's informal 
Competitiveness Council met in Graz April 21-22 to 
discuss how the EU could best meet the challenges of an 
increasingly competitive global marketplace.  Ministers 
focused on the completion of the internal market for 
services to boost European growth and to facilitate job 
creation.  However, the Council failed to approve the 
draft Services Directive, citing the need to fine-tune 
the draft, with the aim of approving it at the May 29 
Competitiveness Council.  Ministers also preliminarily 
agreed on funding allocation for the 7th Research 
Framework Program (RFP7), establishing a new European 
Institute of Technology and a Global Monitoring for the 
Environment and Security (GMES) initiative.  End Summary. 
 
 
Services Directive -- Not Yet 
----------------------------- 
 
¶2.  The April 21-22 informal Competitiveness Council 
found broad support for the Services Directive draft, but 
failed to reach formal agreement.  The Chairman of the EU 
Competition Council, Austrian Minister of Economics and 
Labor Martin Bartenstein, reported that the informal 
Council, as well as European Parliament (EP) members in 
attendance, supported the Commission's draft.  The 
informal Council tasked Coreper with finalizing the 
details and formulations as soon as possible, with the 
aim of reaching final approval at the May 29 
Competitiveness Council. 
 
¶3.  Bartenstein and the EU Commissioner for the Internal 
Market and Services, Charlie McCreevy, underscored that 
the current draft is non-negotiable.  McCreevey added 
that the Council would either approve this Directive or 
no Directive at all.  EU Commission Vice-President and 
Commissioner for Enterprise and Industry Guenter 
Verheugen stressed that the draft creates a single 
services market, while maintaining the EU's social, 
security, and quality standards.  Verheugen said that the 
Commission is not prepared to discuss the issue again, as 
the political price to achieve a compromise was already 
high. 
 
 
Innovation -- Key for Growth and Employment 
------------------------------------------- 
 
¶4.  Innovation, as one of the core goals of the Lisbon 
Strategy, was the centerpiece of the ministerial 
discussions.  Verheugen emphasized that innovation is key 
for the EU to reach its growth and employment goals.  The 
Commission proposed innovation as the central theme for 
the Finnish Presidency in the second half of 2006. 
Before the end of the year, the Commission plans to 
present new initiatives in the following areas: 
improving the subsidy system for innovative enterprises 
and venture capital financing; forming innovation 
clusters on national and regional levels; facilitating 
knowledge transfers, especially between universities and 
business; introducing tax incentives for R&D; and 
utilizing public procurement to stimulate innovation. 
 
¶5.  Bartenstein pointed to innovation clusters, public 
sector support for innovation, and technology transfer as 
central elements to meet the challenges of globalization. 
EU Commissioner for Competition Neelie Kroes said there 
was a consensus that the EU has to do more to promote 
innovation and R&D, particularly for small- and medium- 
sized enterprises.  She warned member states against 
protectionism, which hampers growth, employment and 
competitiveness. 
 
 
Research & Development -- More Funding 
-------------------------------------- 
 
¶6.  The Council informally agreed on the 7th Research 
Framework Program (RFP7), which is 60% higher than the 
RFP6 and will provide Euro 54.2 billion for R&D during 
2007-2013.  Verheugen affirmed that R&D policy is at the 
core of the EU's growth and employment initiative.  He 
said that progress in the informal Council contributed 
politically to further consensus building within the EU. 
Despite increased funding for RFP7, Verheugen and EU 
 
VIENNA 00001199  002 OF 002 
 
 
Commissioner for Science and Research Janez Potocnik 
noted that the EU R&D budget was too low in comparison to 
that of the U.S.  According to Verheugen, Europe has to 
close this gap, if it wants to compete globally. 
Ministers also reiterated support for the establishment 
of a European Institute of Technology. 
 
 
Security research 
----------------- 
 
¶7.  Referring to the results of the February 20-21 
European Conference on Security Research, the Austrian 
Vice-Chancellor and Minister of Transport, Innovation and 
Technology, Hubert Gorbach, stressed the importance of 
the EU developing lead-markets in security research and 
other R&D areas.  The ministers defined security research 
as homeland security, illegal immigration, crisis 
management, and terrorism, but excluded external 
security.  Verheugen noted that finding the right balance 
providing security and respecting personal rights and 
freedoms was a highly political issue that the EU was 
dealing with. 
 
 
Global Monitoring for Environment and Security (GMES) 
--------------------------------------------- -------- 
 
¶8.  Gorbach highlighted the Global Monitoring for 
Environment and Security (GMES) initiative, as Europe's 
second flagship project in space technology after 
Galileo.  The Commission will provide Euro 1 billion for 
the phase-in to keep the project on track.  GMES has 
applications for urban and transportation planning, 
disaster protection, and in other areas.  Gorbach noted 
that, in the short- to medium-term, the public sector 
will have to develop the end-user markets. 
 
MCCAW