EU leaders want to increase the competitiveness of their countries, but do not know how

 

European Union leaders are considering a new "European Competitiveness Deal" on Thursday to help the 27-nation bloc close the gap with rivals China and the United States, amid fears that the old continent's industries will otherwise be left behind.

 

 

 

In a volatile geopolitical environment, redefined by events in Ukraine and rising tensions in the Middle East, which pose new economic challenges, EU leaders see the need for urgent action.

 

 

 

China, the United States and the European Union are the world's three largest economies, but the EU's share has declined over the past 30 years. 

 

 

Europe is now under pressure from efforts by the US and China to support investment in domestic manufacturing, particularly in renewable energy and green technology, with subsidies and tax breaks.

 

 

 

Ahead of the summit in Brussels, former European Central Bank President Mario Draghi said the EU was not paying enough attention to "external competitiveness as a serious policy issue" and argued that Europe's biggest economic rivals were no longer playing by the rules.

 

 

 

"In light of the new geopolitical reality and increasingly complex challenges, the European Union is determined to strengthen its strategic sovereignty and take decisive action to ensure its long-term competitiveness, prosperity and leadership on the world stage," is the message of the leaders at the meeting in Brussels, according to the draft conclusions, which were presented by the news agency AP.

 

"No time to waste"

 

 

 

The leaders will hear a proposal on the EU's efforts to subsidize industrial companies in response to US President Joe Biden's administration's support for investment in environmentally friendly technologies under the so-called Inflation Reduction Act and to China's subsidies for electric cars and solar panels.

 

 

 

The proposals, made in a statement by former Italian Prime Minister Enrico Letta, respond to widespread concern that US subsidies to boost domestic production in the United States are attracting investment from Europe and threatening the loss of industrial jobs on the old continent.

 

 

 

"Competitiveness is the well-being of our citizens," said E. Letta. - "We are in danger of losing touch. Don't waste time. The gap between the European Union and the United States in terms of economic indicators is widening."

 

 

 

According to his report, between 1993 and 2022, gross domestic product (GDP) per capita increased by nearly 60% in the US, compared to less than 30% in Europe.

 

 

 

According to M. Draghi, the EU does not have a clear strategy to respond to the challenges posed by Chinese and US competitors in key industries.

 

 

 

"Today we invest less in digital and advanced technologies than the US and China, and there are only four European companies among the 50 largest players in the world's technology market," he said. "We lack a strategy to protect our traditional industries from the uneven global playing field caused by regulatory, subsidy and trade policy asymmetries."

 

 

 

EU rules limit the amount of aid that member state governments can give to companies to avoid distorting business competition in the EU's 27-member free trade area. One of the solutions proposed by E. Letta is to require countries to use part of such aid not only for national, but also for EU-wide projects.

 

 

 

The report also calls for better integration of the EU's financial markets so that companies can raise funds for new renewable energy projects from equity, bond and venture capital investors, rather than relying mainly on bank loans. It's an old idea that's slow to materialize.

 

 

 

E. Letta's ideas could be implemented only after this year's European Parliament elections and the appointment of a new European Commission.

 

 

 

"More investment is needed," said European Council President Charles Michel, who chairs EU summits.

 

 

 

"Today there is a paradox," he said, adding that a large part of the funds "leave the European Union and are not mobilized to support the economic base, innovation, technological base."

 

The main paradox: we, the Western Europeans, are discovering, how stupid we are. Amazing.