Market Analysis

EU leaders will hear about the need for a shake-up to compete globally

Amos Simanungkalit · 18 Apr 2024207 Views

European Union leaders are gearing up to address the bloc's lag behind competitors like the United States and China in green and digital technologies.

Enrico Letta, the former Italian Prime Minister leading the assessment of the EU single market's shortcomings, emphasized the urgency of action, stressing that ignoring his comprehensive 147-page report would be a missed opportunity. The report underscores how geopolitical tensions and protectionism pose threats to EU economic security, particularly in key sectors like artificial intelligence and clean technology.

Concerns are raised over the impact of substantial U.S. subsidies and China's dominance in tech supply chains, which the EU heavily relies on.

Draft conclusions propose a nine-point plan to bolster the EU's position, emphasizing the need to deepen the single market and establish capital and energy unions. However, the effectiveness of these plans remains uncertain, with longstanding obstacles such as resistance from member states to relinquish control over national financial regulations hindering progress, as seen in the stalled capital markets union initiative.

Belgian Prime Minister Alexander De Croo, currently holding the EU presidency, acknowledges the report's relevance but stresses the importance of translating its recommendations into tangible actions. Letta highlights the potential of redirecting private savings towards the real economy, suggesting this could have a significant impact. The European Commission estimates that an additional investment of €620 billion annually is necessary for the green and digital transitions.

BusinessEurope, a lobby group, echoes the report's call for revitalizing the single market and simplifying EU regulations. Mario Draghi, former head of the European Central Bank, emphasizes the need for consolidation and collaboration within the EU to achieve competitiveness.

He advocates for investment in common goods like energy networks and a comprehensive strategy for securing essential resources. Eurometaux, a non-ferrous metals association, underscores the challenge by stating that the EU must open numerous new mines and processing/recycling plants by 2030 to meet critical mineral goals.