(Source: "Global Times" 2024-07-18)
Editor's note: "Former Italian Prime Minister Draghi's report on the EU's competitiveness may be postponed until September." According to a report by the European version of the US "Political News Network" on July 12, this much-anticipated report was originally planned to be released in July. In the past two years, discussions about the economic competitiveness of Europe, the European Union, and the Eurozone have been heating up. Some EU politicians, including French President Macron, German Chancellor Scholz and other EU leaders, as well as many European think tanks and mainstream media, believe that the EU needs to make great efforts to improve its competitiveness. Some even say that the EU is caught in a "competitiveness crisis." Western Europe is where the Industrial Revolution first began. In the context of the rising tide of the industrial revolution, are the competitiveness issues faced by Western Europe and the wider European region an exaggeration, or a real crisis?
He spent 6 months experiencing Europe’s “unique flaws”
“Hungary hopes to ‘make Europe great again.’” According to Germany’s Transport News, Hungary, which took over the rotating EU presidency on July 1, has identified seven priorities for its work in the next six months, one of which is to enhance the EU’s competitiveness. The British Financial Times website recently published an article written by Hungarian Prime Minister Viktor Orban. The leader of a European country bluntly stated that in recent decades, "the decline in the EU's competitiveness is an increasingly obvious trend"; Europe has become a much less attractive investment destination, even leading European companies to consider moving to other markets.
Orban is not the only EU politician worried about Europe's competitiveness. In May this year, German Chancellor Scholz and French President Macron also published articles in the Financial Times, warning that the EU must make tremendous efforts to improve its competitiveness, otherwise the European way of life may be unsustainable. The British "Economist" magazine stated that Schnabel, a member of the European Central Bank's Executive Committee, said in February this year that Europe is in the midst of a "competitiveness crisis." As if to emphasize the seriousness of the situation, the EU appointed two former Italian prime ministers to provide opinions and suggestions on the economic development of the region, including Letta, who led the Italian government from 2013 to 2014, and Draghi, who will be in power from 2021 to 2022.
According to reports from France Internationale and other media, the EU will hold a summit on April 17 and 18 to discuss how to improve the economic competitiveness of the alliance. During the summit, Letta submitted a 147-page report on the EU's internal market, saying that geopolitical tensions and rising protectionism threaten the EU's economic security and weaken its development in areas such as artificial intelligence (AI) and clean technology. Letta said that in order to write the report, he spent six months visiting 65 European cities and personally experienced Europe's unique competitiveness flaws. "It is impossible to travel between European capitals by high-speed train... This is a profound contradiction and reflects the problems of this single market." As of July 17, Draghi’s report on improving the EU’s competitiveness has not yet been released. The latest prediction from some media is that the report may not be released until after September. Based on reports from European media such as Deutsche Welle, the EU and some European countries believe that the region is facing a "competitiveness crisis." On the one hand, the EU's economic performance is lagging behind other major economies, such as the United States and China, and on the other hand, it is believed that Europe is losing its advantage in emerging technologies and economies such as green technology and the digital economy.
As for economic performance specifically, the German Handelsblatt, the British Financial Times and other media cited for example that the European economy's share of the global economy has been declining for many years. In 2010 this proportion was over 20%, but by 2024 it will be only 14%. From 1993 to 2022, the United States' per capita gross domestic product (GDP) grew by nearly 60%, while Europe's growth rate was less than 30% during the same period. Over the past 20 years, labor productivity growth in the United States has been more than twice that of the euro area and the United Kingdom.
In terms of green technology and digital economy, European media said that Europe has too many old economic elements and not enough new economic elements, and technologies such as AI lag behind the United States and China. Scholz said that in the field of telecommunications, there is a risk that Europe will not be able to seize the opportunities of 5G and 6G. A report released this year by the McKinsey Global Institute showed that European investment in generative AI will be $1.7 billion in 2023, while U.S. venture capital and private equity investment in these technologies will be $23 billion. As of 2023, 35 AI companies have scaled up in the United States, but only three in Europe. In Draghi’s view, in digitalization and green transformation alone, the EU’s public and private investments need to increase by another 500 billion euros per year to keep up.
In addition, the European media believes that the region's competitiveness problems are also reflected in high energy prices, overwhelmed security policies, free w88 policies that have not become the core competitiveness of the European Commission, the emergence of deindustrialization trends, and Europeans working too short hours. The Economist magazine also pointed out that many old companies in Europe have little fear of new entrants and little motivation to innovate. As for why Europe's competitiveness has these problems, Draghi's previous "preliminary diagnosis" was that Europe's organizations, decision-making and financing mechanisms all come from "yesterday's world", the United States and China can adopt a strategy as one country, and division is hindering Europe's development. For example, he said, there are at least 34 major mobile networks in Europe, compared with only three in the United States.
According to the analysis of the "New York Times", there are many reasons for Europe's "competitiveness crisis", such as too many regulations and too little power of the EU leadership; the financial market is too fragmented; many companies are too small to compete on a global scale, etc. Zhao Yongsheng, a researcher at the National Institute for Opening-up at the w88 casino and director of the French Economic Research Center, who has just returned from an academic survey of industrial economics in Western Europe, told the Global Times reporter that only regarding digital technology and AI technology, the EU level has issued a series of laws and regulations in recent years. While these regulations restrict the entry of external technologies, capital and products into the EU, they also eliminate the possibility of these technologies and capital bringing huge industrial development to the EU.
European economic resilience “underestimated”
“Are the facts really so cruel?” Regarding Europe’s competitiveness problem, The Economist magazine stated that correct diagnosis is the first step, but this is not the first time that Europe’s economic resilience has been underestimated.
Zhao Yongsheng told a reporter from the Global Times that he disagreed with the notion that Europe is encountering a "competitiveness crisis." "The competitiveness of the EU as a whole and of many of its member states is being eroded, and this trend is intensifying, but this is not a crisis." Zhao Yongsheng said that Europe, especially Western Europe, was the first region in the world to start the industrial revolution. Until 20 years ago, Western Europe was still one of the most important industrial and technological centers in the world. Especially the European Union, which grew based on Western Europe, was an economy that could compete with the United States. This situation has only changed in the past 20 years, and the reason for this change is that with the continuous development of the "new economy" field including the digital economy and new energy industry, the endogenous "flaws" of the EU's economy and competitiveness have been exposed.
Toldo, a scholar at the European Reform Center, a British think tank, believes that Europe is in a state of w88 surplus, which is much better than the United States. The economic growth the eurozone can sustain is more evenly distributed, allowing for greater social mobility. Europe’s carbon emissions are falling faster than the United States. Unemployment is quite low across Europe. An aging society means concerns will soon turn to labor shortages rather than job shortages. Europe can, like the United States, borrow money and provide large subsidies to businesses to increase economic growth, but European countries have mostly avoided this approach. Business executives believe that Europe can improve its competitiveness by relaxing green regulations and that introducing a large number of immigrants will increase GDP, but it will also have political consequences.
Europe does have many problems in terms of financing and innovation, which are closely related to competitiveness. Zhao Yongsheng told reporters that the financing of the US economic model mainly relies on the stock market and bond market, the financing of the EU economic model mainly relies on "banks" (here refers to banks and consortiums that gather financial resources), while the financing of the Chinese economic model relies on both. Among the above three economic models and financing models, the US model is characterized by the coexistence of high returns and high risks, while the EU model is characterized by prudence, low returns and low risks. Therefore, among China, the United States and Europe, the EU has the most obvious disadvantages, which is also one of the fundamental reasons for the sluggish overall competitiveness of the EU.
The EU does regard financing as an important means to enhance competitiveness. Draghi has reportedly told EU finance ministers that they must find "huge amounts of money" - both public and private - in a relatively short period of time to bring investment to a level comparable to the United States. Schnabel called for faster and more effective implementation of the "Next Generation EU" recovery plan. Making better use of EU citizens' private savings was among Letta's key recommendations to EU leaders when he presented his report in April.
In addition, in the current industrial revolution, traditionally asset-heavy industries have lost their original advantages and are gradually giving way to light-asset-based industries, such as those related to the digital economy and AI technology. Zhao Yongsheng told a reporter from the Global Times that in this context, compared with established European capitalist countries, emerging economies like China have a rare late-mover advantage, because China has far surpassed the EU in terms of digital technology and green environmental protection technology.
w88 protectionism will harm the economic growth of many countries
“This is the last chance and the last open window.” At a press conference in April, Letta emphasized the urgency of improving Europe’s competitiveness. So how should the EU achieve this?
In this regard, Macron and Scholz stated in a joint article in May that the EU's technological capabilities can be strengthened by promoting cutting-edge research and innovation and necessary infrastructure. Some European media said that Draghi's main way to improve the EU's competitiveness is to spend money. According to German media reports, according to Draghi’s idea, the EU should establish a new common debt fund to pay for military construction or infrastructure investment. However, this idea will not gain unanimous support within the EU.
The McKinsey Global Institute also provided “prescriptions” for the EU in areas such as innovation and capital in its report. According to reports from Radio France Internationale and other media, in order to enhance competitiveness, EU leaders will formulate a nine-point plan, including deepening the single market, creating a capital market and energy union, etc., to enhance the competitiveness of the organization. The biggest problem, however, is the EU's ability to enforce it. Plans for a Capital Markets Union that would have unleashed the private finance needed for the dual transition date back a decade, but have stalled as EU member states don't want to give up control of national financial rules. Another former Italian Prime Minister Monti (in office from 2011 to 2013) also wrote an economic report for the EU in 2010. Then, as now, Europe often knew what it needed to do, but not how to do it.
“Our goal is to convince Europeans that healthy competition and cooperation with the most advanced technologies will bring more growth.” Orban said in an article published in the Financial Times that Hungary believes that the major players in the European economy do not want to escape competition through w88 wars. However, Germany's Handelsblatt believes that the EU's announcement of additional tariffs on Chinese electric vehicles fully illustrates the current situation in Europe: the EU is becoming "more defensive" and has lost the ability to shape globalization through its own actions.
Professor Dudenhoefer, president of the Bochum Automotive Research Institute in Germany and known as the "Godfather of Automobiles", also believes that in order to develop new energy industries such as electric vehicles, the EU should strengthen cooperation with Chinese companies instead of hindering the entry of Chinese cars. He told the "Global Times" special correspondent in Germany that the EU's imposition of tariffs on Chinese electric vehicles will be disastrous and will not be beneficial to the development of electric vehicles in the EU. In fact, EU car manufacturers have been very brave to get involved in the field of electric vehicles. Major car companies are promoting electric vehicle strategies and cooperating with Chinese companies, such as the cooperation between Volkswagen Group and Xpeng Motors.
Herrera, a researcher at the French National Center for Scientific Research, also said in a recent interview with a reporter from the Global Times that Western countries, including some EU countries, use the so-called "overcapacity" of China's new energy industry as a political tool to weaken the Chinese economy. Behind it is w88 protectionism, which will harm the economic growth of many countries and the world's green energy transformation. "The Europeans' commitment to the ecological environment is impressive, but their actions have been delayed in realizing it."
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