The European Union (EU) is going through one of the most difficult periods since its establishment, with multiple challenges facing the region’s policy-makers.
While many countries are struggling to recover from the worst financial and economic downturn since the Great Depression and some economies are even facing sovereign default for the first time in 60 years, political discontent is mounting. Some gloomy forecasts portend a lost decade for growth unless decisive action is taken at scale and speed to address the bottlenecks to reform that are strangling economic development. However, amid all of the short-term fire fighting, it is critical not to lose sight of the fact that to address the underlying concerns in the region, Europe must become more competitive.
The 4 Europes The competitiveness divide in Europe
Europe 2020 Competitiveness ReportThe World Economic Forum’s Europe 2020 Competitiveness Report focuses on measuring Europe’s performance in becoming smart, inclusive and environmentally sustainable. It is the first in a series to measure the region’s performance against the European Commission’s own Europe 2020 growth strategy and especially around seven flagship initiatives: enterprise environment, digital agenda, innovative Europe, education and training, labour market and employment, social inclusion and environmental sustainability.
What are competitive economies?Competitive economies are those that are able to provide high and rising livings standards, allowing all members of a society to contribute to and benefit from high levels of prosperity.
What are the main findings and recommendations of the Europe 2020 Competitiveness report?The report researches and monitors to what extent the EU is making progress to achieve these competitiveness goals. In brief, the main findings of the report show that:
- In comparative terms, the EU tends to perform better than other advanced economies (United States, Japan and Canada) in ensuring inclusive and sustainable societies…
- But it lags behind in terms of becoming a smarter place, hindering therefore its capacity to shift towards truly differentiated, higher value added activities and sustain its economic competitiveness.
- A more nuanced analysis shows that in terms of inclusion, Europe provides better social cohesion policies but fails to provide the right conditions for gainful employment for large shares of its population.
- The EU underperforms in every single pillar that builds a smarter, knowledge-intensive society.The gap is evident in building a highly skilful, digital savvy, innovative economy with favourable business conditions for entrepreneurship.
- The aggregate data for the EU masks large national disparities. A tale of four very different Europes emerges and shows the important competitiveness divide in the EU, with the Nordic countries leading the way internationally and several southern, central and eastern European countries falling behind.
- In general, accession and candidate countries, with the exception of Iceland, have a low competitiveness profile, lagging in virtually all analysed dimensions. Preparing them for accession will require the addressing of their specific competitiveness weaknesses.
- High levels of economic prosperity cannot be sustained without high levels of competitiveness.
- While addressing fiscal imbalances is crucial for short-term stability and to regain confidence, improving competitiveness is essential to supporting medium- and long-term prosperity.
- The European Union on average trails the world’s most advanced economies on building a smarter economy, hindering competitiveness. Building a knowledge-based society should be a priority to build a truly differentiated offer.
- A competitiveness divide exists in the European Union. The likely result will be a lack of sufficient economic and social convergence across Member States.
- In general, candidate countries face important competitiveness challenges.
- There are no necessary trade-offs between building a smart economy and achieving an inclusive or environmentally sustainable society.
- Fragmentation in the internal market for tradable services, insufficient openness to trade and administrative and cultural barriers for an effective free movement of people hinder overall competitiveness in Europe.
- There is a sense of urgency and scale to undertake the necessary investments and implement the necessary reforms to boost competitiveness and avoid a lost decade for Europe. Innovative financing mechanism need to be further explored.
- The necessary reforms will require political leadership to overcome vested interests and to create shared commitment by all agents of the economy so that the effects of the reforms are perceived as fair and worth the necessary pain.
- Efforts to raise competitiveness need to be coordinated and sequenced in a way that they generate public support within the political cycle.