The EU’s Economic Strategy: Can It Compete with Global Giants?

15th November 2024

As the EU looks to regain economic strength, we assess its strategies for growth, challenges it faces, and its ability to compete with the US and China in 2024.

The European Union, a bloc that once epitomised the pinnacle of economic cooperation, now faces an array of challenges as it strives to assert its influence in an increasingly multipolar world. In 2024, the EU finds itself in a precarious position. Once regarded as the economic powerhouse of the Western world, it now grapples with slow growth, an ageing population, and growing economic inequality across its member states. Meanwhile, the United States and China, the two dominant global players, are continuing to pursue aggressive economic strategies that threaten the EU’s competitive edge.

The EU’s economic strategy in recent years has been marked by a determination to maintain stability while pursuing ambitious reforms aimed at stimulating growth. Yet, despite these efforts, the union faces significant hurdles in regaining the economic dynamism that once defined it. One of the key issues is the stark divergence in economic performance between member states. While countries like Germany and the Netherlands continue to perform strongly, southern Europe, particularly Italy and Greece, has struggled with stagnation. This divergence has created a series of structural imbalances within the EU, making it harder for the bloc to speak with one voice on the global stage.

In an attempt to address these disparities, the EU has implemented a series of initiatives aimed at fostering economic growth. One of the most significant of these is the European Green Deal, a comprehensive plan to make Europe the first climate-neutral continent by 2050. The deal aims to stimulate green growth by investing in clean energy, sustainable agriculture, and innovation in environmentally friendly technologies. While the Green Deal holds significant promise for transforming Europe’s economy, its success will ultimately depend on the ability of EU member states to work together and invest in long-term solutions.

The EU’s economic strategy also hinges on its capacity to adapt to technological change. With the rise of digitalisation and automation, Europe faces growing competition from countries like China and the United States, which have embraced cutting-edge technologies and reaped the benefits of technological innovation. The EU, while home to some of the world’s most advanced technological firms, has struggled to foster a thriving digital economy that can compete with the likes of Silicon Valley. One of the key factors behind this struggle is Europe’s fragmented approach to digital regulation. While the European Commission has introduced new initiatives such as the Digital Services Act and the Digital Markets Act to regulate online platforms and ensure fair competition, these regulations have been criticised for being too restrictive and slow-moving, limiting the EU’s ability to innovate in the fast-paced digital space.

In terms of trade policy, the EU has long been a champion of multilateralism and free trade. Yet, in recent years, it has faced growing challenges to this approach, particularly as the US and China have increasingly turned to protectionist measures in response to their own economic concerns. The trade war between the US and China, which began under President Donald Trump and continued through the Biden administration, has forced the EU to reconsider its role in the global trading system. On the one hand, Europe has continued to push for open trade and the reduction of tariffs, but on the other hand, it has had to consider the potential benefits of protecting its own industries in key sectors, such as technology and defence.

One of the EU’s major challenges in competing with global giants lies in its demographic trends. The EU’s population is ageing rapidly, with the median age in many member states now exceeding 40 years. This demographic shift poses significant challenges for economic growth, as an older population tends to work less and requires more resources in terms of healthcare and social services. This trend is particularly concerning in countries like Italy and Spain, where birth rates have fallen significantly in recent years. The EU has attempted to address these challenges through immigration policies designed to bring in young workers from outside the bloc. However, these policies have been met with mixed success, and the political tensions surrounding immigration continue to hinder progress in this area.

At the same time, China and the US have relatively young populations and are benefitting from rapid technological advancements. While China faces its own demographic challenges, it has invested heavily in technology and infrastructure, making significant strides in areas such as artificial intelligence, renewable energy, and high-speed rail. The US, for its part, has embraced a more market-driven approach to innovation, with private companies like Apple, Google, and Amazon leading the charge in driving economic growth. Both countries also benefit from strong domestic markets and consumer demand, which provides a solid foundation for their economic strategies.

Yet, despite these challenges, the EU has several advantages that could allow it to compete effectively with the US and China. One of these advantages is its emphasis on social welfare and quality of life. While the US and China focus primarily on economic growth, Europe’s model is one that balances economic development with social considerations, such as healthcare, education, and social security. This focus on social welfare has created a more stable and equitable economic environment, which may prove advantageous in the long term as global inequalities continue to rise.

Moreover, Europe’s commitment to multilateralism and international cooperation could allow it to play a central role in shaping the future global economic order. With both the US and China increasingly focused on nationalistic policies, the EU has the opportunity to champion global cooperation on issues like climate change, trade, and security. If the EU can successfully build stronger alliances with other global players, such as India and Brazil, it could strengthen its position as a key player in global economic governance.

However, the EU must also contend with internal divisions. The rise of populism and nationalism in many member states has created a more fragmented political landscape. The UK’s decision to leave the EU, or Brexit, has further weakened the union’s cohesion, with other countries, such as Poland and Hungary, increasingly questioning the benefits of EU membership. If the EU cannot overcome these internal divisions, it will struggle to present a united front in the face of external economic competition.

In conclusion, the EU’s economic strategy in 2024 is one of adaptation and renewal. It faces significant challenges, particularly in terms of demographic change, technological competition, and internal divisions. However, the EU also has a number of advantages that could allow it to regain its economic strength and compete effectively with global giants like the US and China. To do so, the EU must prioritise long-term investment in green technologies, digital innovation, and social welfare, while overcoming political fragmentation and ensuring unity among its member states.

As we look to the future, one might recall the words of the lesser-known English writer Samuel Butler in his novel Erewhon, where he critiques the cyclical nature of history and the tendency for societies to repeat their mistakes. The EU, much like Erewhon’s imaginary society, must avoid repeating the mistakes of the past by fostering unity, embracing change, and recognising that the future is not shaped by a single force but by the collective efforts of its people. Only by doing so can Europe hope to remain a force to be reckoned with in the global economic arena.