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As head of a small Belgian company that manufactures and recycles batteries for customers across Europe, Rahul Gopalakrishnan is leading the continent as the EU seeks to meet its environmental goals despite the prospect of stagnation. We are at the forefront of promoting green growth.
But even as one of the 27-member European Union’s main policy goals, Gopalakrishnan said the reality for companies like the Avesta Battery & Energy Engineering (ABEE) group he heads is the goal. I’m worried that it won’t match.
“Europe always has the ability to shoot itself in the foot,” the 37-year-old Indian told Reuters, adding that it doesn’t have enough state support to fight its Chinese rivals and that EU proposals He added that they also had to contend with regulations such as a ban on “Forever Chemical” – A type of contaminant used in lithium-ion batteries.
His concern is that Europe, while striving to protect its environment and become more self-sufficient, wants to square that circle as it seeks to regain the economic footing it lost to the United States over the past two decades. Showing.
While the eurozone is stagnant, the US economy is growing at an annual rate of more than 2%. Productivity, or output per hour worked and euro invested, has also grown more slowly over the last 30 years on the eastern side of the Atlantic.
Compared to the US, the EU is a fragmented bloc that suffers from chronic underinvestment, a more rapidly aging population, and despite 31 years of a single market, freedom of labor, capital and goods. flow is obstructed.
The ECB is responsible for creating a blueprint for overcoming such hurdles, having declared it would “do whatever it takes” to save the euro and end the 2012 debt crisis. Mario Draghi, former president of the European Central Bank (ECB).
Draghi, who met with EU finance ministers in Ghent, Belgium, over the weekend, recently said that solutions need to keep the cost of capital low, rewrite rules to encourage innovation and provide state aid where needed. said.
“Rebuilding supply chains and decarbonizing the economy will require huge investments in a relatively short period of time, and the capital is likely to be destroyed faster than it can be replaced,” Draghi said in a speech.
hundreds of billions
EU institutions estimate that Europe will need 650 billion euros ($704.08 billion) annually in mainly private investment until 2030, and 800 billion euros annually thereafter until 2040.
The aim is to narrow the technology gap with the United States, home to the world’s leading tech giants, and make Europe more self-reliant by fostering local sectors that produce green energy and chips imported from the Far East.
But instead of generating investment, Europe is draining capital (about 330 billion euros last year), as Europeans deploy their savings abroad, especially in the much larger US stock market.
Public investment is also lower than in the United States, where government funding has led to inventions such as the Internet itself.
EU finance chiefs in Ghent offered a familiar solution to the problem. The idea is to remove remaining barriers between member states and transform them into a full-fledged single market.
“We need to ensure that companies, especially small and medium-sized enterprises, that aim to grow faster have access to adequate finance,” EU finance ministers and Eurogroup chairman Paschal Donohoe said in Ghent.
However, this so-called capital market union has been stalled for many years by countries that want to maintain their privileges. France’s latest proposal for a minority of countries to move forward was immediately rejected by Germany.
Is it for business?
Even if it eventually materializes, a closer union will not be a panacea for the EU’s lack of competitiveness.
Denmark is the only EU member state to rank higher than the United States on the World Bank’s Ease of Doing Business Index, which tracks the practicalities of establishing a company and obtaining permits. Italy also falls short of Morocco, Kenya, and Kosovo.
Meanwhile, electricity prices are three times higher than in the US and will remain high until the EU is able to generate its own electricity within the next decade.
Businesses are lobbying for less energy subsidies and environmental regulations.
“In the transition to renewable energy, we are facing globally uncompetitive electricity prices,” said Gunnar Gröbler, CEO of steelmaker Salzgitter.
Oil major Exxon even raised concerns that “industrialization” could occur unless the EU changed direction.
Few large companies are leaving Europe so far, but some, like French auto parts supplier Phobia, are cutting jobs in the region. Industrial gas companies such as Air Liquide are expanding their operations in the United States.
Industry groups last week called on the EU to subsidize operating costs as well as investment, as the US government does.
But policymakers in Ghent made it clear that the bulk of Europe’s financial needs should come from private sources.
“This has never happened in Europe,” said Simone Tagliapietra, a senior researcher at the Bruegel think tank. She said: “There is a real risk that businesses will disappear if the subsidy disappears.”
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