EU authorities acknowledge that the European economy lags behind the US and China. It stands from the comprehensive report “The Future of European Competitiveness,” presented last week in Brussels.
Europe’s Competitiveness Challenge
According to Mr Draghi, European industry and economic competitiveness are not going to die soon; however, it is in a slow agony mode as Europeans are becoming poorer, innovation is stagnating, and consequently, competitiveness is declining. The COVID-19 pandemic and the War in Ukraine have revealed the ongoing vulnerabilities of the European economy and security.
The dependency on cheap energy, the lack of basic COVID-related medical supplies, such as masks and vaccines, the emigration of one-third of highly qualified individuals in high-tech areas, the delocalisation of basic industries like steel and chemicals, and the declining levels in international educational rankings have all underscored the necessity for a comprehensive study aimed at propelling the EU forward and making the necessary route corrections.
Key Findings and Recommendations
The report is entitled “The Future of European Competitiveness”, Part I: “A Competitiveness Strategy for Europe”, and Part B: “In-Depth Analysis and Recommendations.” These documents identify the underlying causes of this lack of competitiveness as innovation, security, and resilience. Hence, research and innovation are central to readdressing the situation. The report foresees investments to restore European competitiveness in the range of 800 billion Euros.
However, the question remains: where will the funding for these recommended investments come from? That is the critical question and a probable failing of the report’s good intentions. The EU has a history of presenting grandiose plans, such as the EU Global Gateway, but funding often falls short, leading to little or no tangible outcomes. To compensate for the lack of funds, Cohesion funds, according to Mr Draghi, should be reallocated to focus on digitalization, transportation, education, and connectivity rather than traditional areas.
Labour and Skills Development
Labour and skills development will play a central role in his report, but they are traditionally areas that belong to member states and even subnational levels. Will the EU step in with training programmes? Mr Draghi recommends a great EU push in this area. Labour is set to decline further, with an estimated reduction of 2 million workers disappearing from the labour market by 2040. The solution to this pressing problem lies in improving education and training to enhance workers’ productivity, according to the rapporteur.
Does the EU need another crisis to act? “No, we are still in crisis mode” was Draghi’s answer to the report question. In some sectors, such as solar panels, certain industries have fallen too far behind, prompting suggestions that protective measures through tariffs may be too late. According to Draghi, Europeans are vulnerable to competition from the US and China. The EU sins by inaction or by implementing too many sanctions, which often have a backlash, as seen in the recent case concerning Chinese electric vehicles.
My Takeaways
On the one hand, the report advocates for a multipronged approach to re-energize EU growth and competitiveness, focusing on innovation, decarbonisation, and security. The recommendations highlight the need for a strategic, coordinated response that addresses both domestic and international challenges while prioritising European values and sustainable development.
On the other hand, the document does not provide a comprehensive solution to the challenges facing the EU but acts as a starting point for initiating necessary conversations and enacting strategic changes. It needs to address these gaps to offer a more comprehensive and actionable plan for the EU to become a truly global competitor.
Additionally, the EU, like all large bureaucracies, tends to operate in an incremental or gradualistic manner, which is insufficient given the current competitiveness challenges that require a disruptive approach to catch up and close the gaps. This necessitates visionary leadership to persuade public opinion, bureaucrats, and both political allies and opposition to embrace disruptive changes. To complicate matters, visionary leaders rarely emerge from heavy bureaucratic systems, and from the political sphere, the traditional EU leaders—such as those from Germany and France—are experiencing historically low levels of leadership effectiveness and approval rates.
Finally, the EU’s path towards competitiveness necessitates not only economic strategies but also political strategies and a deeper understanding of its unique strengths. Above all, it requires a more proactive approach to geopolitical dynamics, such as fostering strategic autonomy, as well as a commitment to internal cohesion to prevent further extremism in EU social and political arenas. Additionally, the EU needs a clearer vision of how to leverage its values and assets in a rapidly changing world to escape its ‘slow agony’.
Ricardo Martins ‒PhD in Sociology with specialisation in EU policies and international relations. Guest researcher at Utrecht University, the Netherlands, especially for the online magazine “New Eastern Outlook”
