The American press has been questioning whether Europe can maintain economic parity with the US and China as its share of the global economy shrinks.
One story this week in the New York Times, for example, said fears were deepening that Europe could no longer compete with the two superpowers it finds itself sandwiched between. Reasons suggested for this included a surfeit of regulations imposed by the European Union, weak leadership in the bloc, fragmented financial markets, a lack of public and private investment, and companies that remain too small to compete on a global scale. The paper also highlighted a lack of energy security, cheap exports from China and a reliance on American military protection.
Patricia Cohen, reporting for the New York Times, noted: “At the same time, Beijing and Washington are funnelling hundreds of billions of dollars into expanding their own semiconductor, alternative energy and electric car industries, and upending the world’s free trade regime.”
The story made extensive reference to an April report from Enrico Letta, about how to empower the single market to fund prosperity and a sustainable future. Letta, who wrote the More Than a Market report, is a member of the chamber of deputies of Italy. He also served as PM of the country for two years.
Letta wrote in April that there was a need for a new single market, explaining: “The single market has always been intrinsically linked to the EU’s strategic objectives. Often perceived as a project of a technical nature, on the contrary it is inherently political. Its future is tied to the EU’s strategic objectives and thus to the context in which the EU acts.”
‘Ongoing project’
He added: “Therefore, it should never be considered a completed endeavour, but rather an ongoing project. Still, an immediate boost is needed to bring the single market at a par with the current context and to prepare it for continuous evolution in line with the dynamics of our time.”
Letta also acknowledged that the EU’s share of the global economy had diminished and was “sharply decreasing” in favour of rising Asian economies. It is, he wrote, a trend driven by a shrinking and ageing population after an “alarming” decline in the birth rate.
Back in 2021, however, EY had already warned “swift action” was needed to secure Europe’s long-term attractiveness for investors after a 13% decline in foreign direct investment during Covid. The firm noted at the time that, while foreign investment fell during the pandemic and its subsequent lockdowns, it was still expected to rebound swiftly. But EY added that some areas such as investment in the life sciences sector had seen increases – in this case, 62% – while the number of logistics projects rose by 11%.
The firm went on to warn the continent could not be “complacent”, adding “Covid-19 has elevated the importance of a number of factors that influence location decisions. Take skills, for example. Businesses have always located their operations in areas where there is an abundance of talented workers.
“But the Covid-19 crisis has accelerated businesses’ digital strategies and, as a consequence, their need for digital competencies. In addition, the 2021 Europe Attractiveness survey’s data reveals that nine in 10 businesses consider environmental sustainability to be an important factor that determines their investment strategy.”
