Calls for enhanced EU competitiveness have intensified following Donald Trump’s presidential victory, with concerns about the EU’s ability to compete against the U.S. and China. Mario Draghi emphasized the need for a unified industrial policy, faster decision-making, and significant investments. The Budapest statement outlines tasks to strengthen the single market and investment. EU leaders are urged to address fragmentation in the market and capitalize on private savings for innovation to avoid potential trade conflicts and ensure economic stability.
Urgent Measures Needed for EU Competitiveness
By Philip Blenkinsop and Anita Komuves
The call for enhanced competitiveness within the European Union has become more pressing in light of Donald Trump’s recent presidential victory in the United States. Mario Draghi highlighted the urgency on Friday, expressing concerns about the EU’s capability to face the escalating challenges posed by the U.S. and China.
Trump’s reelection announcement included a stark warning: the EU could face significant repercussions if it does not increase its purchases of American goods. He suggested the potential for imposing tariffs ranging from 10% to 20% on a wide array of imports into the U.S.
During an informal gathering of EU leaders in Budapest, former ECB President Mario Draghi noted that the urgency for action has amplified since the election results. “Indeed, the sense of urgency is stronger today than it was a week ago,” he remarked to reporters before sharing his competitiveness report with the leaders of the Twenty-Seven.
The report, commissioned by the European Commission and unveiled in September, emphasizes the necessity for the EU to adopt a more unified industrial policy, accelerate decision-making processes, and make substantial investments to remain economically competitive with the U.S. and China.
Draghi’s comments come in the wake of the collapse of Germany’s governing coalition and as French President Emmanuel Macron grapples with domestic political challenges, raising questions about the stability of the Franco-German alliance.
Luxembourg Prime Minister Luc Frieden pointed out that none of the neighboring countries—Belgium, France, or Germany—currently has a parliamentary majority, underscoring the need for strength rather than instability within the EU to address significant challenges.
Budapest Statement: A Roadmap for Strengthening the EU
Many observers believe the EU is trailing its competitors in critical areas such as energy and digital transition, hindered by limited innovation, bureaucratic hurdles, high energy costs, and reliance on China for essential raw materials.
On Friday, European leaders endorsed the Budapest statement, which outlines a comprehensive list of tasks with specific deadlines aimed at reinforcing the single market, boosting investment capital, and unifying the energy market.
Ursula von der Leyen, President of the European Commission, announced that the new European executive would unveil plans within its first 100 days to assist the industry in achieving carbon neutrality by 2050, along with proposals by June to expand the single market.
Draghi assessed the additional investments needed by the EU at approximately 750 to 800 billion euros annually. However, some of the more fiscally conservative nations within the bloc have already raised objections to the idea of utilizing common borrowing for part of this funding.
He emphasized that the most pressing issue is not joint financing, but rather addressing the fragmentation of both the single market and capital markets.
Efforts to establish a Capital Markets Union (CMU) have been ongoing for a decade, yet progress has been slow due to varying national interests, economic cultures, and regulatory frameworks among member states.
Christine Lagarde, President of the ECB, stressed the urgent need for the EU to develop a unified system for directing private savings toward innovative enterprises and to explore “new methodologies” to achieve this goal, according to officials familiar with the discussions.
Belgian Prime Minister Alexander De Croo warned that the EU must act decisively before Trump potentially returns to the White House, addressing the implications of a possible trade war between the partners and clearly articulating the need to discuss their shared competitor, China.