24-05-2025
EU urged not to 'play the Chinese or American game. Play your own game'
The European Union is in the midst of an identity crisis. The landmark Draghi report, published last year by the former European Central Bank president, has sent shockwaves through the union, prompting a complete overhaul of its regulatory, innovation and competitiveness strategies in fear that the bloc will fall irrevocably behind its fellow superpowers.
The eye-opening report, published by Mario Draghi late last year, warned Europe that it was asleep at the wheel, thus missing out on the digital revolution led by the internet and its subsequent productive gains.
The result is a widening productivity gap between Europe and the US, largely explained by the tech sector. Only four of the world's top 50 tech companies are European, and in the past 25 years, real disposable income has grown almost twice as much in the US as in the EU.
Compounding the challenge, Europe is entering an era for the first time in recent history where economic growth can no longer rely on a rising population. To counteract this, Europe needs to increase its investment share by five percentage points of GDP to levels not seen since the 1970s, an ambition characterised in the report as unprecedented but essential. Draghi has called this an existential threat, solvable only by radical change.
The EU must grow and become more productive, the former ECB president Mario Draghi said.
'The only way to meet this challenge is for the EU to grow and become more productive,' the former ECB president wrote.
'If Europe cannot become more productive, we will be forced to choose. We will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility, and an independent player on the world stage.'
Since its release, the watershed analysis has become a cornerstone of the EU's policy agenda, with promises of cutting red tape, endorsing AI, and simplifying laws all part of the bloc's wider strategy to boost competitiveness and close the innovation gap.
It is, therefore, no surprise that the Brussels Economic Forum, the European Commission's flagship annual economic event for more than 25 years, was largely defined by the same report. Held this week and attended by the Irish Examiner, the conference featured politicians, academics, economists, and business leaders, with some heated exchanges between policymakers and analysts revealing a growing disconnect between the EU and its citizens.
French economist and author Timothée Parrique touched on this point during his panel discussion alongside European politicians and industry experts. He argued that Europe is losing sight of what is important, warning that measures like productivity and competitiveness were means and not ends.
'I'm going to say something very stupid, but it is something we tend to forget. The economy is here to satisfy needs and guarantee quality of life,' Mr Parrqiue told the conference, advocating for Europe's need to consider degrowth to mitigate climate challenges.
His remarks were largely dismissed by fellow panellists, with Portuguese MEP Lídia Pereira going as far as to call his ideas 'dangerous'. Addressing the conference, the Social Democrat said that while she appreciated the plurality of views, considerations of degrowth were 'very, very dangerous', and fuelled social movements at odds with moderate politics.
To the audience, Mr Parrique's comments were not considered so controversial.
'If we want to get back within the planetary boundaries across high-income countries, we have to consider down-streaming production and construction,' the French economist noted.
'This is a scientific reality. Economic growth today is not correlated with quality of life, even within the EU.' Taking the example of Portugal, where MEP Pereira is from, Mr Parrique noted that while it is a country with a relatively small GDP, it consistently outperforms other countries within and outside the EU in terms of health and living standards. This was not taken well by the panel.
The EU is increasingly looking to ease green rules on the back of the Draghi report. Its efforts to simplify regulation have been largely criticised by legal scholars, who argue that scaling back the Commission's sustainability and due diligence requirements could allow companies to avoid implementing concrete plans to reduce emissions, undermining the bloc's 2050 net-zero target.
The EU has also dedicated €800bn to bolstering defence spending across the continent amid concerns the bloc is not shouldering enough responsibility for its own security.
These initiatives, both drastic and ambitious, signify a stark shift in the EU's priorities, reflecting a major departure from the bloc's traditional character. In an effort to compete with its fellow superpowers, Europe has pushed to largely become them.
'It is a mistake for Europe to emulate China or the US, and go down the path of European national champions and arms races in industrial policy,' said Adam Posen, president of the Peterson Institute for International Economics, one of the world's most influential economic think tanks.
Delivering the keynote lecture at this year's economic forum, the American economist noted: 'There are two reasons why this is a mistake. The first is simply, Europe will lose.
'Europe does not have the centralisation, resources, or the brutality to compete with the US or China, which have large-scale, subsidised industries.
'The second is, these policies generally tend to fail. We've already seen that to a large degree in China and the US.' According to Mr Posen, the solution is simple and highlights the growing disconnect between academic insight and policymaking.
'Europe cannot lose sight of itself,' the economist warned.
'Europe needs to make the most of the high-income, high standard of law place that is relatively open. It does not need to race down to the lowest common denominator.
'Do not play the Chinese or American game. Play your own game. Europe's best way forward economically and internationally is to be its best self.'
The EU is terrified of falling behind and has looked to fellow superpowers for inspiration, which for them is the path of least resistance.
What is far more challenging, and what it has so far refused to consider, is the need to forge a truly European path forward that is independent of US and Chinese influence and grounded in its own values, with living standards and quality of life at the forefront of its priorities. For that, there is no blueprint.
