Just a few days out from the European elections, we find ourselves facing quite the paradox. The relevance of the European Union has never been more clearly demonstrated than during the current parliamentary term. During the healthcare crisis precipitated by COVID-19, the EU launched an €806 billion recovery plan. The beginning of the war in Ukraine in 2022 prompted the European Union to take decisive action, marking its emergence as a geopolitical force. During the energy crisis, the EU’s measures averted blackouts and supported the economy. And yet, as one of the most intense political cycles in EU history comes to an end, there is a worrying rise in Euroscepticism across member states. Politically, the Union could be significantly weakened after the 9 June elections, which would be tragic, especially in view of the unease ahead of the Hungarian presidency, set to begin on 1 July. We need a strong Europe now more than ever.
The EU is far from perfect, but Eurosceptics are fighting the wrong battle. To tackle today’s challenges, we don’t need less Europe. We need a more unified Europe that is greater than the sum of its parts. Strengthening the economy, independence, and competitiveness of Europe is crucial for the wellbeing and prosperity of its citizens. This includes perfecting the single market to benefit businesses and value creators, to create jobs and to boost investments and Europe’s potential for innovation.
To understand what businesses expect from the next European mandate, the Chamber of Commerce surveyed Luxembourg entrepreneurs as part of our Economic Barometer for the first half of 2024. The survey polled 711 business leaders with six or more employees, representative of the Luxembourg economy. We asked them: “As an entrepreneur, what do you believe the priorities of the European Union should be over the next five years?” Respondents could choose three priorities from nine proposals. The main takeaways from the survey are presented below.
| Selon les entreprises, les priorités de l’Union européenne durant les 5 prochaines années devront être | According to these businesses, the European Union’s priorities over the next five years should be: |
| Un allègement de la réglementation | Reducing the regulatory burden |
| La réindustrialisation de l’Europe | Reindustrialising Europe |
| Le renforcement de la souveraineté énergétique | Strengthening energy sovereignty |
| Le soutien en faveur de l’investissement dans la transition environnementale | Promoting investment in the environmental transition |
| L’achèvement du marché unique (harmonisation des législations) | Completing the single market (harmonising legislation) |
| Le soutien en faveur de l’investissement dans la transition digitale | Promoting investment in the digital transition |
| La mise en place de mesures protectionnistes | Introducing protectionist measures |
| L’élaboration d’une stratégie talents | Developing a talent strategy |
| Autre | Other |
Source : Luxembourg Chamber of Commerce Baromètre de l’Economie for the first half of 2024
Reducing the regulatory burden
Unsurprisingly, 49% of business leaders ranked “reducing the regulatory burden” as one of their top three priorities. This was by far the most frequently given response. Overregulation has become a significant obstacle for European entrepreneurs. To recite a now famous and barely exaggerated quote: “America innovates, China replicates, Europe regulates.” While everyone considers some standards, especially environmental and social ones, to be necessary, excessive regulation can handicap businesses both within Europe and internationally. Mechanisms such as the border adjustment mechanism, which help to create a level playing field by “exporting” these requirements, are interesting initiatives, and other initiatives aimed at reducing this burden need to be added to restore European competitiveness. To aid the effort to stop the tsunami of new rules and standards, the Chamber of Commerce’s manifesto for the European elections proposes a rethink of the regulatory process and adopting the perspective of the user. We urge future parliamentarians to reduce the administrative burdens linked to corporate reporting by 25%.
Reindustrialising Europe
43% of respondents think that “reindustrialising Europe” should be a priority for the Union over the next five years. During the pandemic, Europe became aware of its absolute dependence on China for the supply of certain vital products, particularly pharmaceuticals. The European Union still sees China as a partner, but since 2019, it has also described China as a “strategic competitor and systemic rival”. The deteriorating geopolitical climate, particularly the war in Ukraine and the China/US rivalry, has heightened the need for European reindustrialisation.
And Europe is now taking action to do just that. It’s just a bit unfortunate that this realisation has come so late. The European manufacturing sector’s share of GDP declined from 18% in 2000 to 15% in 2022[1]. And now European industry is being hit hard by the difficulties of its flagship, Germany, which has put a significant share of its production capacity on ice. Reindustrialising Europe won’t be easy. It will require a competitiveness boost and reliable, affordable energy. A forthcoming report due after the elections by Mario Draghi is expected to outline a strategy to defend traditional industries (automotive, steel, chemicals, etc.) and enhance energy independence.
Strengthening our energy sovereignty
Energy prices have significantly impacted European industry’s competitiveness and the European economy as a whole. So it’s no surprise that “strengthening energy sovereignty” was the survey’s third most popular response (36%) among Luxembourg entrepreneurs. Again, recent events have shown how excess energy dependence can be an economic handicap.
The economic impact of the end of Russian gas supplies via the Nord Stream and Yamal pipelines starting in February 2022 has been astronomical. The ensuing surge in energy prices set off an inflationary spiral for which we are still paying, necessitating costly government responses and considerably weakening businesses of all sizes. The European Union has since succeeded in diversifying its gas supplies, thanks in particular to massive imports of American liquefied natural gas[2]. While the EU has also accelerated energy efficiency and renewable energy projects, it still lacks a cohesive energy policy to ensure autonomy and guarantee competitive prices. Differing views on technologies, particularly between pro- and anti-nuclear countries, remain a challenge. In his report on the internal market, Enrico Letta also points to the risk of a “backslide” on energy policy following the efforts made in the wake of the war in Ukraine. But the European Union will have to address a number of issues, starting with hydrogen, if it is to develop a Union-wide policy and become a leader in this field.
Making a success of the dual transition
26% of Luxembourg entrepreneurs believe that “promoting investment in the environmental transition” should be among the top three priorities of the European Union over the next five years, and a further 22% cited “promoting investment in the digital transition”. This dual transition constitutes a major challenge for the European economy. The EU suffers from underinvestment in Research and Development and a lack of international digital champions. Once again, there has been a feeling in the past that Brussels was devoting more energy to regulating the sector than to stimulating it. Enrico Letta’s report proposes an exciting fifth freedom of movement within the single market that must be explored, covering research, innovation, data and skills.
The European Union has set itself a very ambitious roadmap for the environmental transition. Its Green Deal aims to reduce net greenhouse gas emissions by at least 55% by 2030 compared with 1990 levels, with the ultimate goal of carbon neutrality by 2050. As we are already experiencing the effects of global warming, these goals are non-negotiable. But these ambitions must be balanced with strategies to protect European competitiveness. Europe should not have to sacrifice its economy to achieve its environmental transformation. The debate on electric cars and the end of combustion engines by 2035 perfectly illustrates what is at stake: we must have the courage to step on the brakes if the European car industry is weakened by this timeline.
Completing the single market
Finally, 22% of the business leaders questioned in our survey mentioned “Completing the single market” as a priority, i.e. harmonising legislation at European level to facilitate a much smoother flow of goods, services, capital and people. The European Parliament’s report on the cost of “non-Europe” – an expression that refers to the current gaps, fragmentation and protectionism in the internal market, as well as policy areas that have yet to be fully exploited – puts the cost at €2.8 trillion a year by 2032. There is enormous untapped potential here, which Europe can ill afford to ignore given that its economic and demographic weight on the global stage is decreasing year by year.
Despite the challenges, I am convinced that “Old Europe” still has a future. However, it has to respond to the aspirations of businesses by making a paradigm shift in its economic policy.
[1] Source: World Bank
[2] Between 2021 and 2023, European gas imports from the United States increased from 18.9 billion m³ to 56.2 billion m³, according to the European Commission.