Europe Must Get Back to Manufacturing: CEO

Europe made a serious mistake in trying to carve itself out as a services industry region to the detriment of manufacturing, a CEO told CNBC Thursday.

Factory worker
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"We made a serious mistake in Europe when we left out manufacturing. We need to produce stuff, not just services. We need to get some of that back. Look at Germany—it’s very successful because they are manufacturing industry. Never lose sight of manufacturing as a key element of Europe," said Jim Hagemann Snabe, Co-CEO at SAP.

He added that to get growth back into the world's ailing economies, there should be a firm strategy with innovation at the core.

"Yes you need jobs, but it's about young people in jobs and with enough focus on education. That is why India is so successful. They're very focused on education,"
Snabe said.

He said technology did not necessarily lead to fewer jobs because of enhanced efficiency but could lead to greater job creation.

"To create jobs you need to be efficient. While it sounds like technology will cut jobs, I believe that it generates jobs because it allows you to be competitive and innovate and with that comes growth and jobs," Snabe said.

Snabe said that the world has changed from the initial difficulties in the immediate aftermath of the financial crisis three years ago and is now facing new challenges.

"In 2009, it was all about efficiency. Now innovation is on the agenda, helping companies to innovate through technology. We innovate faster than others acquire," Snabe said.

Sales at SAP, the world's largest maker of business software, were up 26 percent in Europe, 35 percent in the U.S. and 42 percent in China, Japan and Asia-Pacific. The company reported an overall 23 percent jump in operating profit for the third quarter last month.

Snabe said the euro zone debt crisis was a short-term problem for Europe. Its bigger, longer term problem, he said, is shifting demographics with an aging population with a fundamental reshuffling of the world order.

"We have a much more fundamental problem,” he said. “The demographic challenge in Europe is significant. We're talking about jobs, but in a couple of years we won't have enough people to fill those jobs. We'll have an aging population expecting to live longer with an inefficient health care system and not enough people to pay for that.”