EU needs to ‘stay ahead of curve’ to compete with US, China: Expert

By Zeynep Duyar

Europe has “failed to catch up” with the rapid changes of the world economy, though structural transformations, market regulations, and technological advancements can “help solve it,” Sank Manukyan, international markets specialist at IS Investment, told Anadolu.

Manukyan stated that Europe needs to invest an additional $883.5 billion yearly to compete with the US and China, according to a recent report presented by former European Central Bank (ECB) President and former Italian Prime Minister Mario Draghi to EU Commission President Ursula von der Leyen.

The report, outlining how the EU can compete in the face of global developments, shows that the current model no longer works, and a readjustment is needed, Manukyan said.

“Currently, Europe lags behind in the automotive, technology, energy, and space research sectors, and the report suggests that regulations need to be changed,” he added.

- ‘Faster moving’ EU possible via regulations made on ‘top’ level

Manukyan stated that the $883.5 billion yearly investment in question can be made through a joint borrowing and market, though Germany does not comply with that plan.

“Draghi says that taxation of companies a few years old and below a certain size should be less, and even non-existent, while a framework for establishing companies should be similar to how it is in Estonia, through an online platform behind a computer screen, which would facilitate regulations and do away with making various applications to state departments,” said Manukyan.

“If regulations are made at the EU level, on the top, a fair structure concerning all member states while not requiring approval, then we could possibly see a faster moving EU,” he added.

- ‘Mechanisms to incentivize firms to stay in EU needed, otherwise they will look elsewhere’

Manukyan highlighted that China provides large subsidies to prioritized sectors, for example the Chinese carmaker BYD, which became a prominent electric vehicle manufacturer through public support.

While, in the US, certain freedoms provided to companies allow them “an ease of maneuver,” he noted.

“When one goes to the EU, there is neither joint funding nor significant financial support, as if they are saying, ‘we will regulate in advance and when you come here, you’ll play accordingly,’ and as long as mechanisms to incentivize firms are not put in place, startups would look elsewhere, and even leave the EU altogether,” he said.

“The EU should make it so that startups and firms don’t go to China or the US, and that it would be more beneficial for them to go from Germany to France, for example,” he added.

- ‘Depending on Russia for energy was wrong’

Manukyan stated that Germany’s industry relies on cheap energy, utilizing the Eastern Europe as a subcontractor, while exporting to China and sustaining as a welfare state by transferring defense spending to the US.

He noted that the cheap energy in question is no longer available.

“China is not as it used to be, they may even lead in the automotive sector, while even Eastern European countries like Poland are on the rise. Germany is falling behind for relying on subcontractors like Poland,” he said.

Manukyan mentioned that Draghi said that the EU used to have high productivity and was competitive in the field, but no more.

“Draghi noted that they will reorganize prominent sectors, such as space and defense, starting with artificial intelligence, and in the coming period, the comfort of establishing in one place and investing in another will soon cease to exist, as some limits will be drawn by politics, though it can be beneficial,” he said.

“However, depending on Russia for energy and on a cheap energy policy were wrong strategies by the EU,” he added.

* Writing by Emir Yildirim in Istanbul.