Page 34 - bne IntelliNews monthly magazine December 2024

34 I Central Europe bne December 2024
Draghi report recommendations could lift eastern EU members’ economies, says EBRD chief economist
Clare Nuttall in Glasgow
Europe is facing a critical moment as it grapples with rising energy costs, increased regulation and intensifying global competition, warned Beata Javorcik, chief economist at the European Bank for Reconstruction and Development (EBRD).
In a recent interview with bne IntelliNews, Javorcik outlined
the challenges that are eroding
the continent’s competitiveness, particularly in the face of competition from the United States and China, and stressed the need for action along the lines of the recommendations in the September 2024 report by Mario Draghi on the future of EU competitiveness.
“In European cities, there is a view that Europe is in crisis and losing competi- tiveness,” Javorcik said. Recent events, such as Volkswagen's announcement of a factory closure in Germany, reflect the severity of the situation. Javorcik linked this trend not only to energy costs but also to increasing competition from China, which has become a significant player in global markets.
Regulatory burden straining businesses
A key issue highlighted by Javorcik is regulation of European companies. While many of these regulatory measures are well-intentioned, the sheer volume of directives is creating a burden that European businesses struggle to bear.
“There is a sense that a tsunami of regulation is sweeping through Europe,” she said. “Even if each directive is well-meaning and makes sense, the sheer number imposes a big burden
on European firms, and that erodes competitiveness.”
www.bne.eu
This erosion is contributing to a broader sentiment that now is the time to act. “This feels like a now or never moment,” Javorcik said, expressing concerns that unless decisive steps are taken, Europe’s economic standing could continue to decline.
The Draghi report’s wake-up call
Javorcik’s comments were made shortly after the publication of the Draghi Report, a hard-hitting assessment of Europe’s economic future, authored by former Italian prime minister Mario Draghi. The report, which calls for an €800bn annual investment to rejuvenate Europe’s productivity, has sparked debate across the continent. Draghi warned that Europe is facing a “slow and agonising decline” unless it can overcome long- term stagnation and boost competitive- ness through massive investment.
Javorcik believes the Draghi Report
has shaken up the European elite and achieved its purpose of creating a sense of urgency. “The Draghi report has shaken Europe up,” she said. "The report is a statement of the problem. It shocked.
I think that was its purpose: to shake up the European elite and create a sense of urgency, and it succeeded.”
While the report has been seen by
some as primarily focused on Western Europe, Javorcik argued that it is equally relevant for the newer EU members of Central and Southeast Europe.
“Some in Eastern Europe perceive it as pertaining mostly to the West, but I don’t think that’s the right perspective,” she said.
“The focus is on the lack of competitive- ness and need for greater innovation, dynamism and productivity growth. Eastern Europe registered spectacular growth over the last 30 years, but those old sources of growth are depleted. The East now needs to grow based on its own innovation.”
No magic bullet
The Draghi Report highlights several areas of concern, including excessive regulation and the difficulty of scaling up startups in Europe. Despite Europe generating innovative ideas, Javorcik
The Berlaymont building illuminated with the logo of 20th anniversary of the 2004 EU enlargement. / European Union, 2024