Adnkronos Rome, 7 Feb. (Adnkronos) – "The European economy is at a crossroads. The competitiveness compass adopted at the end of January by the European Commission should outline a new strategy for the next five years. Will this ambitious plan be successful?" Paolo Gentiloni writes for Brookings Institutions, a research center where he is a 'distinguished fellow'.
"Donald Trump's victory in the US presidential election was not Europe's preferred outcome. However, the main source of Europe's troubles lies neither in the short-term economic outlook nor in the risk of President Trump launching a trade war. The main problem is the lack of European competitiveness well described by the recent reports of two former Italian prime ministers, Mario Draghi and Enrico Letta. Addressing this problem is exactly what the Commission's competitiveness compass is about. Europe now has a plan. The European Union promises to prioritise innovation and support for businesses 'crushed by high energy prices and a high regulatory burden'."
"The plan addresses four main challenges, largely following Draghi's imperatives," writes the former EU Commissioner: bridging the innovation and technology gap; combining decarbonization and industrial policy; strengthening economic security; reducing the bureaucratic burden. A "good plan" but, he notes, "success is not guaranteed (…) Will the Commission succeed in gaining the support of Europe's major economies?"
For Gentiloni there are "three obstacles". The first is "the resistance to reducing the fragmentation of capital markets". And if, on this point, "unanimity proves out of reach, will the EU be ready to move with 'enhanced cooperation' between 15 or 20 of the 27 member countries as it did when it introduced the euro or abolished restrictions on cross-border travel?", asks the former prime minister.
The second “hurdle” is cutting red tape, which “is easier said than done.” And finally, “money. That’s the obvious and most challenging hurdle. The easy answer is, of course, private investment. And the whole plan is designed to incentivize that. But it also requires huge amounts of public money raised at the European level. The EU as a whole has the lowest level of public debt among its global peers. Although resistance to public spending is shifting slightly in Germany, will that be enough to push all EU members to spend more?”
Gentiloni concludes: "Europe has a good strategy to address its weaknesses. But headwinds and obstacles will not be easy to overcome. The problem with medium-term plans is also the risk of disruptive events: a bad conclusion to the Russian war in Ukraine or a trade conflict with the United States. My view is that a full-scale trade war between the EU and the United States can be avoided. However, pursuing competitiveness priorities in a deteriorating geopolitical and trade environment could become very challenging."