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(Bloomberg) — French President Emmanuel Macron delivered a pessimistic outlook for the European Union, warning that lack of investment and too much regulation would make the bloc uncompetitive.
Speaking at the Berlin Global Dialogue, Macron said Washington and Beijing outstrip the EU in both economic output and investment, and Europe won’t be able to compete with other countries unless it moves quickly to complete a banking union and make global trade rules more fair.
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Former European Central Bank President Mario Draghi issued a similar alarm last month, warning that the EU faces an “existential challenge” if it doesn’t radically transform its economy – including the possibility of issuing joint bonds — to boost competitiveness.
“The EU could die, we are on a verge of a very important moment,” Macron said in a panel discussion with Bloomberg’s Stephanie Flanders. “Our former model is over — we are over-regulating and under-investing. In the two to three years to come, if we follow our classical agenda, we will be out of the market.”
Macron said that Europe’s model is out of date and the economy needs to be reinvented to account for a new, more complicated reality. He said the bloc can no longer rely on low-cost energy from Russia or the American defense umbrella, saying that “everything now is shaken.”
In his much-anticipated report, Draghi said that Europe would need to boost investment by about 5 percentage points of the bloc’s GDP — a level not seen in more than 50 years — in order to transform its economy so that it can remain competitive.
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The bloc has steadily become less competitive in part due to energy dependency and its lack of raw materials. And the EU continues to be hampered by the inability of its telecom and defense industries to harness economies of scale and be better prepared for a more nimble security stance.
“We are at risk, to be honest.” Macron said. “Our own model has completely changed and has to be reset.”
Macron also called on the bloc to rally behind cross-border mergers to create companies that can compete with U.S. firms. The issue came to the fore last month after German Chancellor Olaf Scholz slammed a possible takeover of Commerzbank AG by the Italian lender UniCrerdit SpA.
“We have to accept to have European champions and not 27 European champions,” he said.
—With assistance from Stephanie Flanders, Jenny Che and James Regan.
(Updates with Macron comments in the eighth paragraph.)
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