‘Italian Job’ Reviving EU Competitiveness Starts with Winning Over Citizens
Former prime ministers of Italy, Mario Draghi and Enrico Letta, are embarking on separate missions to revive the European Union’s competitiveness. Their primary goal is to persuade European citizens that a revamped bloc can work for their benefit. While Europe is often criticized for its lack of competitive edge, the economic data tells a different story. Although the per-capita GDP in the EU is approximately 30% lower than that of the United States, Europeans work fewer hours, which partly explains the gap. The EU also maintains a consistent trade surplus with the rest of the world.
However, Europe is facing significant challenges from external factors. The changing global landscape, including tensions with China, the COVID-19 pandemic, and repercussions from the war in Ukraine, has prompted a reevaluation of global supply chains. This shift affects the open economy of the EU more than others and highlights vulnerabilities, particularly in the energy sector. Europe’s dependence on imported gas was exposed during Russia’s attack on Ukraine, resulting in a surge in power prices and the relocation of production by industrial groups. While the crisis has spurred investment in renewable energy, the transition will take time.
Moreover, European businesses are concerned about their reliance on overseas technology, especially in the semiconductor industry. Advanced semiconductors primarily come from Asia, notably Taiwan, while American tech giants such as Microsoft, Alphabet, and Amazon dominate the European market. The lack of coordinated fiscal firepower within the EU also hampers its ability to match the industrial policies implemented by the United States. President Joe Biden’s generous subsidies to stimulate American manufacturing and attract green technology have attracted European companies, leading to a decline in capital spending in Europe compared to a significant increase in the United States.
The EU’s single market, aiming to create a level playing field across the continent, faces challenges due to strict regulations and the inability to lower national barriers in banking. The pandemic caused the suspension of EU rules, allowing state support schemes that have since created competition among European governments. Proposals to address these issues fall into two categories: deregulation and centralized decision-making. While business leaders advocate for less red tape, they also seek centralized decision-making in finance to facilitate cross-border competition.
To address these challenges, Draghi and Letta are tasked with resolving the contradictions and finding solutions to entice EU voters. The skepticism towards the EU among citizens has grown, with concerns about immigration, small and medium-sized businesses, and consolidation. However, a revamped EU-wide industrial policy, focusing on job creation and green energy, may sway public opinion. Ultimately, to succeed in boosting competitiveness, the Italian Job must begin with winning over EU citizens.
In conclusion, former Italian prime ministers Mario Draghi and Enrico Letta are working to revive the EU’s competitiveness. They face external challenges and a skeptical European citizenry. However, a revamped industrial policy and a faster transition to green energy could potentially address these issues and ensure greater collective security in an increasingly hostile world. Winning over EU citizens is crucial for the success of these endeavors.
