Philippe de Buck of BusinessEurope says now is the time for Ireland to invest in its competitiveness, writes Caroline Madden.

Ireland's economic success serves as a shining example to other European countries, but we are not immune from the major business challenges facing the European Union, according to Philippe de Buck, secretary general of BusinessEurope, the Brussels-based lobby group that represents European business federations such as Ibec.

The achievements of Ireland are tremendous, according to de Buck, who was attending an Ibec conference in Dublin last week. What is interesting, he continues, is that when Ireland joined the EU, it took some time to benefit from it.

"And then some very bright politicians - I think your Taoiseach is one of them - changed the approach and invested in the future.

"Of course you still have to improve. You still have to invest in your competitiveness, you still have to invest in research and development, because you are not alone in the world.

"You may be an island, but you are linked to the rest of the world, and the rest of the world moves fast."

De Buck pinpoints education as a key area where many European countries, not least Ireland, need to up their game. "I think we all share the same problem," he says.

"We need more skilled people. Education can play a key role in filling this skills gap, and so lifelong learning must be encouraged, and the education system at second and third level needs to be reoriented."

Although de Buck feels the standard of European universities is fairly good on average, the link between universities and companies is far too weak.

"Look at what happens in the top universities of the United States, be it Harvard or Stanford or MIT. They work a lot with companies, they are financed by companies, professors there are working for companies as consultants."

This type of liaison is extremely fruitful, creating a lot of spin-offs and pushing companies to evolve, he says, adding that European universities need to liaise with companies and research institutions from all over the world.

"The trend must be to give the universities more freedom, and to give them incentives to work with companies.

"The EU also lags far behind the US when it comes to fostering the growth of small and medium sized entities (SMEs). The number of start-ups in Europe is similar to the US, proving that a culture of entrepreneurship does exist here.

"However, when European and US start-ups are compared three years down the line, a huge disparity becomes apparent. You see that the US companies are much stronger, much larger, [have generated] more employment, more turnover and so on. They have grown much faster, he says. ?

"And that is our problem in Europe - the SME growth. We have enough SMEs but they have to grow and develop themselves."

According to de Buck, one of the key causes of this dichotomy is that markets in Europe are still fragmented. There is a rule in economics that the size of a company, on average, is in proportion to the size of its domestic market. So the larger the market, the better for the growth of the company.

The onerous burdens that companies have to deal with such as regulation and taxation also stunt the growth of small companies. De Buck compares the fate of European SMEs to that of Gulliver who was besieged by tiny Lilliputians and tied down with thousands of ropes.

"We have to free Gulliver here in the European economy and release the potential that we have, and there is a lot to do there."

Although Ireland put the issue of better regulation firmly on the agenda while it held the European presidency in 2004, this effort has not yet produced concrete results, de Buck says.

However, the European Commission now carries out an impact assessment of each new regulation, which represents a welcome change in mentality.

De Buck views the recent agreement of the new EU constitutional treaty as a positive step, not least because he was satisfied with the content of the treaty. With the constitutional debate out of the way, he says the real issues - such as European competitiveness, the single market and economic governance - can now be given attention.