The competitiveness of European industry is stalling. It’s not an easy sell in the current political climate, but more Europe is the only way out.
When they want to show that Europe still matters, politicians pull the regulatory card. “See? Companies from all over the world want to comply with our regulations to get access to our single market! And we’re the ones who reined in those privacy-violating American tech giants!” Congratulations, but I’d rather see Europe inspire awe for very different reasons, namely as a formidable competitor.
ASML’s dazzling performance may have blinded us to the fact that the European industry isn’t doing well. In the first twenty years of this century, Europe’s share of the global industry fell from 25 percent to 16 percent. In 2008, the European and US economies were roughly the same size; today, the latter is nearly 50 percent bigger. European companies – exceptions such as ASML aside – lag in profitability, growth and investment. In emerging technologies, such as batteries and artificial intelligence, there are no European competitors going head-to-head with the big players.
It’s not a pretty picture for a region that almost a quarter century ago set out to become the world’s most competitive economy – remember the Lisbon Strategy? “Another decade like this and we’re seen,” warned the European Round Table for Industry last year. The outgoing CEO of ASML, Peter Wennink, also worries about the earning power of the Netherlands and Europe. He sees complacency and a lack of vision and leadership. A lobbyist for the Veldhoven equipment manufacturer did one better. Europe shouldn’t think it’s playing in the Champions League when it comes to economic power and geopolitical influence, he sneered at the European Commission, which likes to advertise itself as the “geopolitical Commission.”
Even though a major acceleration is needed to keep up with global industrial powers, the issue isn’t high on political agendas. Germany, where a lack of public investment in infrastructure is becoming palpable, stubbornly insists on die schwarze Null. In the Netherlands, the coffers of the National Growth Fund have already been plundered to (temporarily) ward off reinstating fuel taxes. Many fear the fund will be drained altogether.
At the European level, the urgency is more keenly felt: former European Central Bank President Mario Draghi is looking into it and will present his findings this summer. Super Mario’s hands are tied, however, because those of the European Commission are as well – it can do little more than legislate and regulate. In the end, member states decide how to spend their share of the 1,800-billion-euro COVID-19 recovery fund. Or how much they want to spend on reshoring semiconductor manufacturing – a highly anticipated strategy to double Europe’s market share ended up with a budget that matches TSMC’s capex in a single year. The EU introduces useful laws to curb CO2 emissions but fails to bolster the European green tech industry. Politicians are all talk about technological sovereignty while Europe’s PV industry is on the verge of collapse.
Europe must find an answer to American entrepreneurship and Chinese industrial policy that goes beyond regulation and protectionism. It won’t be easy in a populist-dominated political climate, in which expanding the EU’s mandate and budget is a hard sell, but a fragmented European industrial policy with only sticks and no carrots is simply not enough.