Marton Monus / REUTERS
|
Neubauer Artists LLC Getting your Trinity Audio player ready... |
ANALYSIS – Hungarian Prime Minister Viktor Orban, who is hosted the summit of the Twenty-Seven in Budapest, promises to “Make Europe Great Again“, taking inspiration from the slogan of Donald Trump.
Will the election of Donald Trump be the electroshock that Europeans have been waiting for to reverse the decline of their economy in relation to the United States? This is the challenge that the twenty-seven heads of state and government were called upon to respond to, at an informal summit on the competitiveness of the continent, in Budapest, on Friday. In publishing a report of nearly 400 pages on the subject, in September, the former president of the European Central Bank Mario Draghi, nicknamed “the savior of the euro”, promised them a
“slow agony” if they did not act now.
He threatened to respond by taxing imports at a rate of 10% or 20%. However, European industry is already penalized by Washington’s support measures for its companies, on the one hand, and by Beijing’s subsidies for its own, on the other.”For Trump, there is no point in designating an adversary. He is constantly fighting against his European allies whom he sees as enemies.
The factory closures announced in recent days by Michelin in France and Volkswagen in Germany are a glaring illustration of this. Europe is up against the wall to defend its traditional industries, first and foremost the automobile industry, which is facing a tsunami. Equally worrying, the fate of the Swedish battery producer Northvolt, on the verge of bankruptcy due to the absence of a clear industrial policy and a lack of public support, is casting doubt on the Old Continent’s ability to embrace the technological transition. The urgent need is therefore to move from a commonly shared observation of decline to action.
Host of the summit, Hungarian Prime Minister Viktor Orban promises to “Make Europe Great Again “, inspired by the slogan of his “friend” Donald Trump, “Make America Great Again “. For Italian Prime Minister Giorgia Meloni” instead of wondering what Trump will do, Europe must ask itself what it can do for itself”. In a Budapest declaration on a new European competitiveness pact , fiercely negotiated for several weeks, the Twenty-Seven adopted the outline of an action plan. A 12-point roadmap, spread over four pages. It is up to the new Commission chaired by Ursula von der Leyen to implement it. This will be its priority for the next five years. Starting with a strategy expected by June 2025 on the deepening of the single market, with specific objectives. Another major project: completing the Capital Markets Union in 2026, a challenge for a file that has been debated for more than ten years. Other priorities include increasing European defense capabilities, increasing investment in research to 3% of GDP in 2030 (compared to 2.25% currently, and 3.5% across the Atlantic), a regulatory ” simplification revolution” , the pursuit of decarbonization and the digitalization of the economy… ” A start-up that wants to develop in Europe faces a headache of 27 different legal regimes,”recalls Ursula von der Leyen, who mentions the creation of a pan-European “28th regime”.
Lack of ambition
Behind these good intentions, it remains to agree on the crux of the matter: financing. It was necessary to fight hard against the “frugal “ countries (the Netherlands, Sweden, Austria, etc.) for the subject to be mentioned.” The challenges we must face in terms of competitiveness will require significant investments, mobilizing both public and private financing. We are determined to explore and take advantage of all instruments and tools to achieve our objectives, “ states the declaration. Coded language masking a lack of consensus around a strong ambition for new common financing.
Instead, the text refers to the European Union budget as the main source of public funding. An embryonic budget , already under pressure from traditional EU priorities, including agriculture and regional cohesion. A competitiveness fund – not quantified – is part of the commitments of the new Commission. Its previous version, set up under the leadership of the former Industry Commissioner Thierry Breton, had to be limited to 1.5 billion euros, while Draghi estimates the necessary investments at 800 billion… per year.
“The EU budget represents 1 % of GDP, the needs I am talking about correspond to 5 % – and this is a conservative estimate, “explained the former head of the ECB at the end of September, during an event organized in Brussels by the Bruegel Institute. He then insisted on the fact that the national budgets of the Member States are often constrained by the weight of deficits and debt, like France. At Bercy, they are well aware of not being in a favorable position to ask European partners for more financial efforts. To defuse this subject, taboo for some, Draghi insisted on not making the question of a common debt a prerequisite, while recalling that the “consensus” on austerity had contributed to “weaker growth”.
Faced with the declared emergency, the Europeans’ response lacks determination. Negotiations on the EU’s next multiannual budgetary framework are not due to begin until 2025, with entry into force in 2028. Let us recall that Emmanuel Macron recently mentioned a two-year window for Europe to pull itself together, at the risk of sinking.
Much of the solution lies in Germany’s position, as was already the case with Angela Merkel’s U-turn on the principle of a massive post-Covid recovery plan for Europe financed by common debt. The fall of Olaf Scholz’s tripartite coalition on Wednesday was caused by disagreements over the need to invest more by reforming the sacrosanct constitutional “debt brake”. Liberal Finance Minister Christian Lindner, dismissed by the Chancellor, had greeted the Draghi report with a flat refusal an hour after its publication. Less radical, but hardly more enthusiastic, Olaf Scholz warned in Budapest that “ the discussion on Mr Draghi’s report will take a long time and that’s good.”
“With its debt brake, Germany is holding back its growth and dragging Europe down, “sighs a diplomat. A political change, probably embodied by the Christian Democrats under the leadership of Friedrich Merz, could soften the dogma. “Germany must agree to think about how to resolve some of its economic problems on a European scale. It’s not a done deal, but we may be moving in that direction, “ believes Sander Tordoir, an economist at the Center for European Reform in Berlin.
About The Author
