The competitiveness of the EU, in a highly uncertain geopolitical context and thriving rivalry between the main world powers, is the backbone of this week’s community talks. It started with the Eurogroup declaration, which this Monday, called for a mobilization of private capital to boost the bloc’s competitiveness, use public funds as investment catalysts in certain sectors and to coordination of industrial policies to avoid further fragmentation of the single market.
“Effective ways to catalyze and mobilize private capital must be explored at national and European level, including through the participation of the European Investment Bank,” the Twenty point out in their joint statement this Monday. Although private investment is vital, public financing also plays an important role. “Public funds are scarce and will be better used as catalysts to mobilize private capital in areas with positive benefits.
The euro’s Economy and Finance Ministers have urged the mobilization of private capital to boost the bloc’s competitiveness, although all this, considering that, at this time, governments are called to fiscal consolidation. In this sense, the declaration considers “essential” and “urgent” to advance the capital market union for private financing to be mobilized in the EU and, therefore, urges the European Commission to present a proposal that allows progress.
However, the Eurogroup calls for avoid “generalized” industrial policies at the national level to avoid its repercussions on further fragmentation of the single market. Instead, he advocates coordination at the community level and points out that, in specific cases, “industrial policy can serve to address market failures and improve our resilience and open strategic autonomy. However, it must be carefully designed , combined with appropriate framework conditions for businesses and correctly implemented to avoid risks”, such as trade distortions.
The ministers point out that the National industrial policies “should be limited in scopebe future-oriented, create a favorable business environment to boost investment and focus more on technologies and sectors than on companies.” That is, a series of conditions that advocate for coordination at European level instead of national and which prevent the aid that certain Member States with greater fiscal muscle can provide from contributing to fragmenting the single market.
The Eurogroup statement emphasizes the challenges of the euro countries that still remain to be addressed: “low growth, stagnant productivity, insufficient levels of innovation and the demographic challenge.” For these reasons, it considers it “imperative” and “urgent” to address the lagging performance of the economy by “increasing its productivity” and “boosting competitiveness” through reforms and investments.
In their declaration, the Twenty collect the recommendations of the two former Italian prime ministers, Enrico Letta and Mario Draghi in their respective reports to boost the competitiveness of the EU. The Eurogroup talks, since October a year ago, have revolved around energy prices, commercial fragmentation, the productivity gap, the lack of innovation, the role of industrial policy or the lack of funding in the EU for strategic projects.
The heads of the Euro Economy have considered it “a priority to address Europe’s poor productivity performance by improving the conditions for companies to invest and innovate”. They blame this lack of productivity in the EU on the lack of an innovative ecosystem, which has caused the bloc to fall behind in high-value sectors, such as telecommunications technologies and digital industries.
Furthermore, they consider it necessary to stimulate investment in research and development in such a way as to encourage the participation of the private sector. To this end, they propose improving investment conditions, carry out structural reforms and improve coordination of public financing also at European level.
In this sense, they also propose that risk capital be mobilized to finance startups and scaleups, which requires proper functioning and greater integration of the capital market. All of this would help channel savings and investments both within the EU and from third countries.
In line with some of the recommendations already made by Letta and Draghi, the Eurogroup has considered it essential to promote the training and retraining of professionals in the EU to avoid labor shortages. It would be complemented, in turn, by a more flexible labor market, greater labor mobility in the EU and policies that attract and retain talent. “Attracting foreign talent is also crucial to mitigate the consequences of population aging,” the statement notes.
The effects of high energy prices on the bloc’s competitiveness is another of the points referred to by the Eurogroup. “Good planning for the green transition and security energy are not only complementary imperatives, but can present opportunities for economies to increase their productivity,” they say.
Beyond the implementation of more renewable capacity, it refers to investments to address greater flexibility in demand, storage infrastructure or more interconnections. That is why they advocate having a strategy at the community level, complementary to the national strategy, to promote electrification and interconnections, especially between countries, which would lead to lower prices. “It would lower the fiscal pressure by reducing the need for energy aid and would support economic growth while reducing costs for businesses and households.
“The productivity gap has widened between the EU and its trading partners, such as the United States, while emerging economies, such as China, continue to drive competitive pressure,” argue the euro economy ministers.
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