By Ovunc Kutlu
ISTANBUL (AA) - International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Thursday that Europe needs a stronger venture capital industry to be better able to support European startups so they can scale up at home.
"Europe’s core strength is the single market: fundamentally, Europe derives its prosperity, its competitiveness, and, yes, its market power from its cohesion," she told a Eurogroup meeting on a Strategy for European Competitiveness that was held in Luxembourg.
"We are all familiar with the narrative of bright ideas being born in Europe but then migrating away to grow up elsewhere -- Europe as someone else’s innovation supermarket," she added.
Georgieva urged participants to have discussions on the role of industrial policy in the context of an "overarching" and "high-level strategy" for productivity and competitiveness.
The IMF chief listed some of the EU's challenges -- an aging population, weak productivity growth, energy security, climate change and geoeconomic fragmentation.
"Preserving and sharpening Europe’s competitive edge in the face of such challenges requires not a reactive and piecemeal approach, but a well-thought-out, multi-pronged strategy," she said.
Georgieva noted that the EU and China may benefit from an open trade system and she encouraged both to cooperate and address underlying concerns.
"Trade restrictions can distort the allocation of investment from where it is optimal, raising the cost of goods and services for final users. They can also slow the green transition and trigger retaliatory actions," she added.
The IMF director also stressed the need for a more ambitious EU budget and said the EU needs to build a single European financial system, with a banking union and a capital market union.
"Europe is rich, but it suffers from what I call ‘lazy money’ -- across the Atlantic, savings work much harder. Total financial sector assets in the euro area amount to about 60 trillion euros ($64.3 trillion), not far short of the US’ 80 trillion euros. But, whereas in the US only one-third of the total sits in banks, in the euro area the banking share is two-thirds," she added.