This must be the year when issues relating to European competitiveness and the business climate genuinely take centre stage in political debate, write Anna Stellinger, Deputy Director General and Head of International and EU affairs at the Confederation of Swedish Enterprise, and Jan-Olof Jacke, its Director General, in an op-ed published in Swedish business daily Dagens Industri.
A new European Parliament and a new EU Commission will be elected in June this year, for terms that run to 2029. Europe’s faltering competitiveness should be the main issue in the election campaigns for MEPs and the new Commission.
Europe is lagging behind other key regions and European business has for a long time stressed the need for a long-term EU competitiveness strategy. We now see support for a concrete reform policy starting to coalesce. At least if the rhetoric is to be believed. Growing numbers of people are talking about how Europe is lagging behind in terms of international competition and the need for reform to improve the European business climate.
The EU’s GDP represents a shrinking proportion of the world economy, the wealth gap with the US has widened, and European companies have lost global market shares. Companies from other parts of the world are dominating in fast-emerging sectors – especially digitalisation and AI. The EU currently invests less in R&D than China and the US.
The regulatory burden on European business has increased at an alarming rate, while the single market is being undermined by an increasingly permissive attitude to subsidies. In recent years, not only has the amount of state aid increased, more than half has been distributed by the German government. If we add France, the EU’s two largest economies account for more than three quarters of all state aid that has been approved. Not only does this undermine competitiveness, but it also erodes the authority of the Commission as guardian of the integrity of the single market. Entrepreneurship and innovation are stifled by regulation, which then needs to be compensated with subsidies. This is clearly unsustainable.
This must therefore be the year when issues relating to European competitiveness and the business climate genuinely take centre stage in the political debate. Furthermore, the EU’s competitiveness is utterly decisive for the EU’s ability to act in other areas. It is the attractiveness of the European market that gives the EU a strong voice globally and makes it an attractive region to trade and co-operate with. Growth and competitiveness are also vital for European countries to sustainably continue to support Ukraine. Businesses are also expected to be the driving force of the climate transition.
During Sweden’s EU presidency, the Commission finally put forward a framework for a competitiveness agenda. This is excellent. But now it needs to be filled with content.
For many years, there was no common agenda for competitiveness around which the Commission and member states could unite. The momentum that existed in the 90s, following the establishment of the single market and the enlargement of the EU, has ebbed. It was therefore important that improved competitiveness was one of four priority areas during the Swedish EU presidency. This underlined the decisive role of business and the importance of competitiveness for the EU’s work in other areas. During the Swedish presidency, the Commission also finally put forward a framework for a competitiveness agenda. This is excellent. But now it needs to be filled with content.
Competitiveness was a key theme of Commission President Ursula von der Leyen’s annual State of the Union speech address to the European Parliament in September last year. Von der Leyen pledged to do what is necessary to defend Europe’s competitive advantage. The Swedish and European business community takes her at her word and now has clear expectations of what must be done.
European companies are struggling to recruit skilled labour, regulation of key sectors is stricter than in our competitor countries, investment in research and development is lower, and physical and digital infrastructure inhibits trade and economic growth. These challenges are well known and have been documented in multiple studies.
Von der Leyen has also tasked Mario Draghi, former head of the European Central Bank, to make concrete proposals on how EU competitiveness can be improved. This is welcome. However, good suggestions will not be enough, there must also be a will and ability to implement them.
What is needed now is perseverance and concrete policies: