"Interaction between national and European research and innovation funding"

Keynote speech by Dr Georg Schütte, State Secretary to the Federal Minister of Education and Research in Oslo, Norway, at the Science Europe's ERA High-Level Workshop 2016.

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Minister Røe Isaksen,

State Secretary Haugstad,

Director-General Hallén,

Ladies and Gentlemen,

The Norwegian polar researcher Fridtjof Nansen is quoted as saying that one should attend to difficult things immediately and to impossible things a little later.

Europe is used to “difficult things”. Many problems appear unsolvable, results unachievable. Let me just mention the refugee crisis, “Brexit”, the Euro crisis as well as the question of how to deal with the great changes accompanying the digitalization of our world.

You might be wondering what all this has to do with the topic of today’s workshop programme – “Interaction between national and European research and innovation funding”. What has all this to do with research, science and innovation? The answer is: a great deal.

These issues represent an explicit appeal to researchers, to scientists and scholars, to innovators in Europe to contribute to solving “difficult things”. It is perhaps sometimes also an appeal to achieve the “impossible”.

In the face of all the crises and challenges that we are currently facing, we must not forget that we in Europe have already mastered very many crises in the past and have achieved many things which were previously considered impossible. We owe a great deal of these achievements to Europe itself, to the European idea, joint initiatives, the striving for commonalities which link us and make us strong.

This realization is true for Europe as a whole but it is also true for our European world of research and innovation, which has changed dramatically over the last thirty years. The EU has assumed an ever stronger role in research and in innovation during this period. And it is therefore only right and wise that we should take the opportunity today to have a closer look at the operating levels of the EU and the Member States.

Let us start with a little thought experiment: Imagine it is the year 2021. We have NOT managed to agree a new EU Research Framework Programme. We are “without” a follow-up programme for Horizon 2020. What would this mean for us in Europe?

We would not have a European Research Council. In other words, we would not be conducting a process to catch up with our American or Asian rivals – and European science would not be attractive by comparison. The current FP7 ex-post evaluation indicates what we would lose:

“The numbers of publications in top-rated scientific journals that acknowledge ERC funding, as well as the number of Nobel Prizes and Fields Medals received by ERC grantees, all demonstrate that ERC grants have quickly become a hallmark of scientific excellence.”

We would not have transnational approaches to solving grand societal challenges.
Scientists and researchers would have limited mobility outside their national borders.
Companies from different Member States would not start joint innovation activities; the result would be a loss of the

“…. positive impact on growth and jobs. FP7 will increase GDP by approximately €20 billion per year over the next 25 years, positive impacts in terms of micro-economic effects with participating enterprises”.

Although, according to the Commission, EU funding only accounts for 7% of R&D expenditure in the European Union, it does, however, have a significant impact. Without the commitment of the EU, Europe’s scientific excellence and the innovative performance of its companies would presumably fall well behind the United States and Asia.

You may be thinking that this scenario is mere political fiction. Very probably. Unrealistic? At the moment, yes. But how about the longer term? The centrifugal forces pulling away at Europe’s political centre have increased and become stronger in recent years. Retreating to national interests limits the scope at European level. The refugee crisis, a possible “Brexit”, the Euro crisis – you name it – all show that it is virtually impossible or very difficult to reach consensus solutions in the Council. There is an increasing necessity to justify European initiatives.

Ladies and Gentlemen,

What does this mean for research policy at European and national level?

I would like to describe four interlinked factors or criteria to outline how we can shape future European R&I policy and the forthcoming framework programme to make them future-proof and more effective and to ensure the success of cooperation between the national and European levels. This can also serve to improve the starting position for our joint research policy in the forthcoming debates on the interim evaluation of Horizon 2020, on the next framework programme with effect from 2021 and for any discussions on an appropriate allocation for research in the EU’s budget:

The first factor is transnationality.

The Treaty of Lisbon provides that the European Union (through the European Commission) and the Member States share responsibility for research and development at European level. The idea of the European Research Area (ERA) was first anchored in primary law in the Treaty of Lisbon. In other words, both sides – the Commission and the Member States undertake to shape the ERA.

Details of how to implement this shared responsibility are naturally very vague. What is needed is a specific European research policy which complements national research policies but does not compensate for their deficits. On the other hand, this European policy must be coherent in order to achieve a transnational critical research and innovation mass. This is only possible by means of constructive cooperation between the Commission and the Members States, with a clear division of responsibilities. Otherwise, we risk a loss of efficiency and a drain on our resources as a result of duplicate efforts and diffuse responsibilities.

We are seeing an increasing tendency on the part of the Commission to initiate individual approaches to funding without a transnational approach – such as the SME instrument, for example – instead of large-scale research activities. At the same time, the Commission is acting increasingly autonomously. It is setting agendas and directly approaching players in science and innovation – such as research institutions, associations, etcetera – with a view to shaping policies. And it is often doing this without involving the Member States. We have to ask ourselves: What is our role as Member States? And what view does the Commission take of Member States as equal partners in shaping R&I policy? Are we being marginalized as mere “investors in R&I”?

The Commission should play the role of “neutral broker” for Europe as a whole. It should not represent any individual interests and must first and foremost maintain an open, transparent and constant exchange with the Member States.

Ladies and Gentlemen,

The Member States, for their part, often lack sufficient national commitment, especially when it comes to transnational activities to tackle global challenges. This is where the limits of nationally funded transnational research and innovation activities become visible. Take for example Joint Programming or the “Lead Agency” process between the German Research Association (DFG), the Austrian Science Fund (FWF) and the Swiss National Science Foundation (SNF). There is often a lack of critical mass with regard to the volume of funding and the number of participating scientists in the respective community. These limitations can only be overcome with funding from the Commission via the Research Framework Programme.

As far as we are concerned, European collaborative research is and remains a key element of the European Research Framework Programmes. Cooperation in collaborative projects and the resulting exchange or shared use of knowledge, methods, infrastructures and data provide critical mass across national borders. This is precisely the sense and purpose of EU research funding. This form of funding must therefore become the identifying characteristic and the core of the European Research Framework Programmes. Collaborative projects should also continue to include at least three partners from three different Member States or associated countries. To put it more simply: No country on its own can solve the major European or global challenges we are facing: an ageing society, neurodegenerative diseases (Alzheimer’s, for example), climate change or questions of healthy nutrition, to name just a few.

We must be aware of the real limitations of transnational research and innovation activities supported through national funds and determine our political course of action on this basis:

Transnational research and innovation activities produce immense added value for Europe – as described in the FP7 examples I have already mentioned.
The transnational nature of R&I activities is a determining structural element for the successful implementation of the ERA and for deeper European integration.
At the same time, experience in recent years has shown that Member States’ cross-border R&I activities are subject to political and legal limitations.
We therefore need continued Commission funding for the major part of transnational activities through the Research Framework Programme (trusted instruments include collaborative projects, ERA-NETS or measures under Article 185).

Ladies and Gentlemen,

A second factor is European Added Value (EAV).

As I have already mentioned, the Treaty of Lisbon established a division of competences in research policy between the Union and the Member States. At the same time, Article 179 Para 1 of the Treaty on the Functioning of the European Union (TFEU) set the goal of establishing a European Research Area. European added value is a criterion for determining who should do what and at what level.

This criterion has not been conclusively defined but has been steadily developed by the European Commission. Some of you will perhaps remember the so-called “Riesenhuber criteria” which the former German Research Minister drafted in the 1980s.

[Hinweis: The concept was initially based on what was called the ‘Riesenhuber criteria’ in order to justify Community support for R&D. These criteria stated that funding research by the European Community is legitimate in the following cases:

Research conducted on such a vast a scale that single Member States could not provide sufficient financial means and personnel;
Research which would obviously benefit financially from being carried out jointly, after taking account of the additional costs of international collaboration;
Research which would achieve significant results in the whole of the Community for problems on the international scale, owing to the complementary nature of national efforts;
Research which contributes to the cohesion of the common market and which promotes the unification of European science and technology, as well as research which leads where necessary to the establishment of uniform laws and standards.]

We are emerging from a period where transnational research in smaller and medium-sized projects represented the nucleus of activities and where European added value was most manifest. These times are over. A study by the Institute for European Environmental Policy (IEEP) in 2012 underscores this point:

“There is no commonly shared understanding of EAV as a concept in itself, for both methodological and political reasons. Some relate the EAV concept to legal EU principles such as subsidiarity and proportionality, some refer to an economic efficiency rationale, while others argue that it implies solidarity and the dissemination of best practice across the Union.”

Even the Commission stated in its 2011 “Working paper – The added value of the EU budget” that European added value can assume different forms in the field of research: economic effects, critical mass, overcoming barriers between Member States, dialogue between science and industry, world-wide excellence, efficient research infrastructures and leverage effects.

Today we can say that basically everything goes. The boundaries between the fields of activity of the Union – that is to say the European Commission – and the Member States have never been so blurred. It is not a question of an academic debate on how to define European added value but a matter of the concrete delineation of fields of action which raises key questions of cooperation.

Let me mention one example: Germany spoke out against introducing support for individual SMEs in Horizon 2020. This was not because we are against funding SMEs but because we do not see any European added value. Practically every Member State has funding programmes for SMEs. Do we need a European competition in this area? We very much doubt so. Especially as this scheme has opened up a Pandora’s Box of further ideas and measures along the lines of individual funding. Seeing that these measures are also running at EU level, the Member States will and must consider whether to reduce or terminate their own national funding programmes; after all, there is a funding programme at European level. Article 179 certainly never intended this.

European added value will also play a role in shaping the European Innovation Council (EIC). According to our own analyses, there is no gap in the system of European innovation funding. The European funding system covers the entire spectrum of the Technology Readiness Level with a variety of instruments. To name just a few, these instruments range from basic research projects with the potential for application in Future and Emerging Technologies (FET), to “Innovation Actions” for close-to-market projects, to the “Fast Track to Innovation” instrument. We must therefore debate very precisely what gap the EIC is to fill and what added value this initiative will produce in the end. There are apparently plans for individual SME funding to play a larger role in the EIC. This worries us.

I would also like to refer to a further phenomenon in cooperation between the Union and the Member States. The Commission has introduced a tried and tested evaluation system with international panels of experts who guarantee an independent and fair evaluation. When excellent EU projects cannot be financed due to lack of funds, the Commission assumes that these will be funded under national programmes or under the Structural Funds, which act in a similar way to national funding pots. This means that the European level has a strong prerogative. The Member States would basically only provide the funding. I am being deliberately provocative here to make it clear that the Member States are increasingly having to face the question of what role they want to or are able to play in future.

We are seeing a gradual shift of power to the European level. This is characterized among other things by changes in streams of funding. The first Framework Programme began in the 1980s with under 4 billion euros. Today, we have Horizon 2020 with funds of almost 80 billion euros to distribute. I assume that the next framework programme will not have less but even more funds. At the same time, one can see that several Member States have reduced their national budgets and are encouraging their researchers to participate increasingly in European competitions. We are convinced that European funding cannot replace national efforts. We in Germany are investing so much in research and innovation because our national strength forms the basis for our ability to compete both in Europe and internationally. In other words, Europe is running the risk of developing two types of Member States. On the one hand, Member States which can no longer survive in the field of research by their own efforts and which depend on funding from the European Union. On the other hand, Member States which are expanding their national basis and regard European competitions as an add-on.

I believe that this phenomenon is also part of the explanation for the innovation and competitiveness gap in Europe. We can help with limited European measures, but the main burden and the main responsibility for funding research and science must lie with each individual Member State.

What conclusions are to be drawn from this?

We must define European added value in the research sector more clearly. Currently, the Commission defines EAV in different terms depending on the funding concept and research area. A certain scope for definition is by all means appropriate. However, it should not be as indefinite and random as is currently the case. Otherwise, it will continue to be possible to find a justification for every funding activity or idea in the field of R&I by simply referring to EAV. 

Ladies and Gentlemen,

The third criterion is the number and way of functioning of the funding instruments.

If we take a look at the instruments of Horizon 2020 or the ERA, we see a wide range of different, often disjointed but also overlapping approaches. New ideas and instruments are often added at short intervals. Please do not misunderstand me. New instruments can certainly be useful. But they must be limited in both number and complexity and should involve the simultaneous abolition of previous instruments.

The example of the EIC is currently making this clear. As I have already stated, we see no gap in European innovation funding which this could close. What are lacking, however, are the compatibility and the consistency of the instruments with one another. It should be possible to support a project stage-by-stage from the basic idea right up to market maturity. The overall range of funding is often confusing for people seeking funds.

One positive example here are the Important Projects of Common European Interest (IPCEIs). These are large-scale, Europe-wide industrial policy instruments with a research component. The projects can develop the necessary leverage to strengthen Europe’s industrial base in certain areas and position it at the top worldwide, for example in microelectronics or battery cell production.

It is important to consolidate and adjust the instruments before discussions begin on the 9th Research Framework Programme. I am firmly convinced that we will achieve an added value for Europe with fewer instruments – particularly for our institutions of higher education, research institutions and companies. It is a matter of making the application process and the use of the remaining instruments less complicated and of ensuring a good balance: several small, flexible instruments and fewer stand-alone, larger activities with a structural, systemic effect.

We conclude that 

Generally speaking, the existing instruments must be reviewed on the basis of clear indicators. This will enable evidence-based decisions to determine which of them have proved successful, which should be developed further, and which instruments have not been successful and should therefore be abandoned.
These considerations are extremely relevant, precisely in view of the huge over-subscription of the funding calls under Horizon 2020. We must avoid a situation whereby the best researchers withdraw from European research due to the immense outlay required and the poor chances of success.
In view of these limited financial means, it is all the more important to hold on to the principles of European cooperation in research. We consider it essential to retain the principle of excellence as a major selection criterion.

Ladies and Gentlemen,

The fourth criterion refers to the way in which risks are financed. State R&I funding is based among other things on the “gap” between the benefit of research activities for the national economy on the one hand and for the private sector on the other. Providing state aid to companies reduces the high financial risk of conducting R&I projects. Loan-based funding (under the European Fund for Strategic Investments (EFSI), for example) is available for projects with a lower risk, among other things to limit the failure probability of repayment. Grant funding, on the other hand, supports projects with a tendency to be high-risk and which are not profitable from the company’s point of view in the short or medium term.

There are signs that loan-based funding is receiving growing political support at both national and European level. We consider this development – together with the political trend of encouraging increasing support for innovations at the expense of research funding – to be a great danger for Europe. On the one hand, it means that we are not supporting enough high to medium-risk ideas and projects; this will lead to fewer innovations in the medium to long term. In other words, we are losing our edge on the markets and seeing a drop in our prosperity. On the other hand, public funding is increasingly displacing private innovation funding in close-to-market areas. This is unhealthy from the economic point of view. State decisions at the close-to-market stage instead of entrepreneurial decisions have never been a successful policy for long.

We therefore conclude that 

Grant-based funding for R&I should not be reduced further to the advantage of loan-based funding within the framework of Horizon 2020 and the next Framework Programme.
The use of loan-based funding under Horizon 2020 and the forthcoming Framework Programme should be limited to close-to-market areas such as industrial demonstration and commercialization projects.
Research creates the basis for innovations. The forthcoming Framework Programme must ensure an effective balance in funding all areas of innovation – including strong basic research, application-oriented and industrial research and research on societal challenges.

Ladies and Gentlemen,

Let us finish the thought experiment that we began with. There WILL be a new EU Research Framework Programme. However, as I have just described with my four criteria, it is essential to ensure that our political strategies are able to withstand the forthcoming debates on structure, budget and content.

To sum up: We need more Europe in the sense of more harmonization, coordination, political agreements and work-sharing. In view of the crises and challenges which we are currently facing in Europe, we must constantly affirm this understanding and act accordingly.

I would like to close by returning to Fridtjof Nansen. He was not only a great researcher and scientist but also a Nobel Peace Prize laureate, among other things for his work as the League of Nations’ first High Commissioner for Refugees in the post-war years of 1920 to 1922. This is also a highly topical area today. The second part of the Nansen quotation that I began with stated that one should attend to the impossible a little later. This sums up our situation in Europe today. Our task is to find and apply impossible solutions.

Thank you.