Ministers Adlercreutz and Roswall: We need to do whatever it takes to boost Europe’s competitiveness

Europe is facing strong economic headwinds. With vulnerable supply chains, high energy costs, and substantial investments needed to reach net-zero, the EU has reached a point where we cannot afford to ignore our competitiveness problems.

To tackle the pandemic and Russia’s full-scale invasion of Ukraine, the EU’s policy response has often been swift but also short-term. In many ways, this is natural – when there is a fire raging, you need to put it out. 

However, there are no quick fixes to our long-term competitiveness crisis. While it may have been necessary to loosen state aid rules in the midst of the pandemic, opening the door permanently for a European subsidy-race will tear our Single Market apart. Moreover, going down that path does not offer a sustainable way for the EU to compete with the U.S. or China, whose financial firepower cannot be matched even by the biggest European economies.

Instead of playing by someone else’s rules, the EU has to build on its own strengths – in particular the Single Market, an ambitious trade policy, and an openness to adopt new innovations quickly and broadly. In short, we need an EU approach to competitiveness that does not simply react to the moves of other major economies.

We believe that the starting point for such an approach has to be to raise productivity. If we are not able to produce more per hour and per person thanks to innovations, jobs will move elsewhere and Europe risks becoming an open-air museum with mere remnants of old industry.

For this reason, it is worrying that the average productivity growth in the EU has been weaker than in other major economies for almost 30 years. At the same time, we are also investing less in research and development than the U.S., China, Japan, and South Korea. 

This means that the EU is losing ground when it comes to the innovation, production, and adoption of key technologies such as artificial intelligence, quantum computing, and biotechnology. Since many of these technologies have both civilian and military applications, our competitiveness deficit may also lead to a security deficit. 

Therefore, Sweden and Finland will work intensely to make sure that competitiveness is at the heart of the Strategic Agenda that the leaders will adopt at the European Council in June, and which will guide the work of the incoming Commission. 

In particular, we believe that the following issues need to be addressed: 

• Reinvigorate the Single Market. To quote Hamlet, the desire to deepen the Single Market has been “more honoured in the breach than the observance”. The lack of a comprehensive growth strategy for most of this term has only added to our problems.
  
  The next Commission needs to adopt a forceful agenda for better regulation. In this context, the Commission’s recent pledge to reduce reporting requirements for companies by 25 percent at the EU level is important – as a first step. In addition to this, the Commission also has to live up to its promise to conduct ‘competitiveness checks’ on all new EU policy and take the total impact of all EU legislation on companies into account. The goal must be to make the EU the best place in the world to do business.
   
• Mobilise private capital. If we are serious about creating high-tech, net-zero societies that are capable to protect our security interests, we have to mobilise massive amounts of private capital. This is the only way in which we can move resources to more productive and innovative sectors of the economy.
  
  This means that the work to create a Capital Markets Union to facilitate cross-border investments must accelerate. However, a lot of work has to be done at the Member State level, where capital markets are often too small and too shallow. Thus, Member States have to do their part in realising a Capital Markets Union by creating better incentives, such as tax breaks and pension schemes, to put savings into productive use. Dormant savings accounts make for a dormant economy.
   
• Trade to strengthen our voice in the world. As the EU’s former Brexit negotiator Michel Barnier recently put it, the Single Market is the only reason why the U.S. and China respect the EU. 
  
  Seen in this light, pursuing an active and open trade policy is good for the EU’s geopolitical standing in the world, as well as for our economies. By entering trade agreements with more partners across the world, we de-risk and decrease our dependencies while also making sure that we gain influence. Another term with only one or a few trade negotiations concluded would undermine the EU’s global role. Instead, we must push forward in our negotiations with partners like Mercosur, Australia, and India.    
   
• More ‘Deal’ in the Green Deal. Now that the Green Deal and the EU’s Fit for 55 package have reached the finish line of the legislative process, we need to focus on two things going forward: proper implementation and creating an even stronger business case for the green transition. 
  
  It is especially important that our common legislation opens the door to all carbon-neutral sources – including nuclear energy, sustainable and circular bioeconomy solutions, and carbon capture storage. For instance, regulatory clarity is needed to attract investment in permanent negative emissions from bio-energy carbon capture and storage (BECCS). To reach our climate targets, we have to be agnostic, not dogmatic, in our approach.

Twelve years ago, then ECB President Mario Draghi famously stated that the ECB was ready to do “whatever it takes” to save the euro. Today, Draghi has been tasked to write a report on the EU’s future competitiveness.

Regardless of what proposals he puts forward after the European elections in June, we certainly hope that the “whatever it takes” spirit to restore the EU’s competitiveness will prevail. We have no time to waste to save our future wealth, growth, and jobs.

Anders Adlercreutz, Minister of European Affairs, Finland
Jessika Roswall, Minister of EU Affairs, Sweden