The European Union finds itself confronted with a significant challenge in the current global transition to new technologies. Both experts and leaders within the EU have voiced apprehensions regarding the EU’s inability to keep pace with the economic competitiveness and innovation demonstrated by the United States and China. The imminent deliberations are anticipated to revolve around the imperative need for a “New European Competitiveness Deal” aimed at addressing these pressing concerns.
An influential factor contributing to this predicament is the swift disruption brought about by new technologies, such as artificial intelligence and zero-carbon manufacturing. Additionally, China’s surge within the global market and heightened protectionism have further compounded the EU’s economic woes. The substantial impact of the loss of cheap Russian gas, previously heavily relied upon by EU industries, should not go unnoticed.
Moreover, the EU has faced censure for its lack of dynamism and innovation, impeding its capacity to acclimatize to the evolving economic terrain. A report by McKinsey has underscored that while Europe excels in areas such as combatting climate change, it significantly lags in terms of economic growth and frontier technologies.
The topic of subsidies has also come under scrutiny, with the United States offering generous green tax breaks as part of its Inflation Reduction Act (IRA). In contrast, the EU’s reaction has been comparatively restrained due to resistance from certain member states. Concerns have been raised regarding the potential for a damaging subsidy race among EU members, despite warnings from the International Monetary Fund that subsidies alone cannot rectify the EU’s growth predicaments.
Another area of concern is the efficacy of the EU’s single market, which has been a linchpin of the bloc’s prosperity but is in need of enhancement, particularly with regards to services and intangibles. Proposals have been made to deepen the single market and establish capital and energy unions to tackle these challenges.
Although previous EU growth strategies have fallen short in their implementation, there is an increasingly pressing impetus for taking action and effecting necessary changes. EU leaders are being encouraged to place special emphasis on fostering knowledge exchanges and creating a more conducive environment for small businesses. It is evident that the EU must undertake measures to ensure its competitiveness and avoid falling behind other global players.