European Economy: Facts and Fallacies.
Challenging times have exposed fresh vulnerabilities in Europe's economies, which, if addressed, could spark a new era of competitiveness and growth.
McKinsey released a report titled Accelerating Europe: Competitiveness for a New Era in early 2024, focusing on strategies to enhance Europe's economic resilience and drive sustainable growth.
Europe stands as a global leader in sustainability and inclusion, yet its per capita income remains 27% below that of the United States. Bridging this prosperity gap hinges on accelerating economic growth through enhanced global competitiveness.
The region faces heightened urgency in a shifting geo-economic landscape, with competitiveness challenges spanning seven critical arenas, including energy, technology, and supply chains. Strengthening these areas is essential, with an estimated €500 billion to €1 trillion in annual value at stake by 2030—three to six times the annual incremental investment required for achieving net-zero emissions. Successfully addressing these issues is vital to securing future growth while upholding Europe’s unique model of sustainability and inclusion.
To thrive, Europe must pursue an integrated competitiveness agenda, uniting business leaders and policymakers in ambitious efforts. Key strategies may include:
- Doubling public and private innovation spending, especially in AI, tailored for development and adoption.
- Scaling up Europe’s leading firms by creating harmonized business rules akin to a "28th regime."
- Halving energy costs through new sources of power and gas.
- Accelerating workforce reskilling and attracting talent to support technological progress.
- Adding $400 billion in annual corporate investment and doubling greenfield FDI inflows.
- Ensuring access to critical materials.
- Reforming regulation and industrial policy.
Decisive action and tough trade-offs will be essential for Europe to secure its economic future.