SOLID FINANCES
Europe is on the wrong track
Will the EU be able to succeed in the global subsidy race? Skilled labour, a leading science system and a solid infrastructure have made the single market a success story; no protectionism required.
Text: Jordi Razum
Illustrations: Emmanuel Polanco
SOLID FINANCES
Europe is on the wrong track
Will the EU be able to succeed in the global subsidy race? Skilled labour, a leading science system and a solid infrastructure have made the single market a success story; no protectionism required.
Text: Jordi Razum
Illustrations: Emmanuel Polanco
30 years after its inception it’s fair to say that the single market has been one of the most successful projects the European countries have ever undertaken. Eliminating trade barriers and establishing free movement for EU nationals has not only increased prosperity for the population quite significantly, it has also fostered integration, stability and peace across Europe. It is above all four developments since the 1980s that have made the European Union one of the strongest economic areas in the world: liberalisation of the economy, globalisation, digitalisation and the implementation of the euro. The world grew closer together, and the European single market offered companies an ideal economic environment.
That is why western governments generally agreed that further economic integration on a global level was beneficial from a geopolitical standpoint. The COVID-19 pandemic and above all Russia's invasion of Ukraine have changed that assessment. Now, it's all about economic decoupling and strengthening domestic production. Subsidy programmes worth billions and advanced protectionist measures such as the US Inflation Reduction Act or the “Make in India” initiative are supposed to make it happen. The EU entered the race without hesitation, for example by implementing the Green Deal Industrial Plan.
In that new protectionist environment the outlook for the European single market is troubling as some of its greatest strengths are under attack. If the EU makes it easier for European countries to receive government support, it facilitates cartels and strengthens big corporations while weakening the competitiveness of smaller companies. And in fact, the EU is actively fuelling the national subsidy race: according to recent data, Germany and France have availed themselves of more than 75 percent of exceptional economic assistance provided by the EU, marginalising smaller European countries and their economies in the process.
Even the supposedly positive impact on the recipients of subsidies are questionable, because more often than not, it is not a lack of financial means but rather excessive bureaucracy and slow approval procedures that are thwarting company projects. Of course it is necessary to adapt to the new geopolitical realities of the 2020s. But robbing the European single market of its greatest strengths is not the way to do it. Europe has a highly skilled workforce, a dense network of specialised companies, a leading research and science system and a well-developed infrastructure. If the European nations focus on these key assets, the single markets will continue to be a success story.
Jordi Razum is project manager for Sub-Saharan Africa at the Friedrich Naumann Foundation for Freedom.
Jordi Razum is project manager for Sub-Saharan Africa at the Friedrich Naumann Foundation for Freedom.
Also interesting
Karl-Heinz Paqué // Government is overextended
Germany will take in more than 1 trillion euros in taxes next year. And it still isn't enough. Or is it?
Jacob Wolf // Municipalities have long since run out of money
Germany's towns and villages are sinking deeper and deeper into financial difficulties. While the federal government kept bragging about the “black zero” for years, municipalities were piling up debt. The culprit is not only COVID-19, but also a lack of structural reforms as well as ill-advised savings attempts.
Margaret Heckel // Giving even when it's pointless
In 2022, the German government spent 50 billion euros on industries where, allegedly, the market mechanism fails. Alas, in many cases, that argument doesn't hold water. History has shown that it is above all sectors with strong lobbyists that benefit from government money.
Ein Angebot der
