By Peter Bergman (MoneyAmped.com)
Leading a small Belgian firm that manufactures and recycles batteries for clients in Europe, Rahul Gopalakrishnan is at the forefront of the continent’s push for sustainable development.
However, when it comes to one of the European Union’s key policy objectives, Gopalakrishnan worries that the actual situation for companies such as his Avesta Battery & Energy Engineering (ABEE) group falls short of the aspiration.
“Europe seems to constantly sabotage its own efforts,” the 37-year-old individual from India expressed to Reuters. He mentioned that he was lacking sufficient government assistance to compete with Chinese competitors and was also facing challenges due to regulations such as the suggested EU prohibition on “forever chemicals” – a form of contaminant found in lithium-ion batteries.
His issues highlight the dilemma Europe faces as it tries to recover economically from the United States’ advancements over the last two decades, while also aiming to preserve the environment and enhance self-reliance.
The economy of the United States is expanding at a rate exceeding 2% annually, whereas the euro zone is experiencing a standstill. Efficiency, in terms of the results achieved per hour worked and money invested, has also experienced a more gradual increase on the eastern side of the Atlantic over the past three decades.
When looking at the United States in comparison, the EU appears as a divided group facing issues such as long-term lack of investment, an increasingly older population, and obstacles in the free movement of labor, money, and products despite having a single market for over three decades.
The individual tasked with creating a plan to tackle these challenges is Mario Draghi, the ex-European Central Bank leader known for resolving the 2012 debt crisis by stating the ECB would take all necessary measures to protect the euro.
Draghi, who gathered with EU finance ministers in the Belgian city of Ghent last weekend, recently mentioned that the answer included a reduced cost of capital, adjusting the regulations to support creativity, and providing state aid when needed.
“We must allocate a significant sum within a relatively brief timeframe to revamp supply chains and transition our economies to carbon neutrality, with funds potentially being depleted more rapidly than they can be replenished,” Draghi stated during a speech.
Europe Needs 800 Billion Euros a Year to Narrow the Gap With the US
According to EU institutions, Europe is projected to require 650 billion euros ($704.08 billion) in primarily private investments per year until 2030, followed by 800 billion euros annually until 2040.
The goal is to narrow the technological divide with the United States, which houses top tech companies, and to enhance Europe’s self-sufficiency by supporting domestic industries that manufacture renewable energy and the microprocessors it currently imports from Asia.
Instead of attracting investment, Europe is actually losing capital, with around 330 billion euros flowing out last year, as Europeans invest their savings overseas, especially in the significantly larger U.S. stock market.
Investment from the public sector is also less compared to the United States, where financial support from the government has resulted in innovations like the Internet.
The finance leaders of the EU in Ghent proposed a well-known remedy for the issue: removing any existing obstacles among member nations to transform them into a complete unified market.
“It is crucial to guarantee that companies, particularly smaller enterprises, aiming to expand rapidly, have the necessary access… to the suitable financing,” stated Paschal Donohoe, the president of the Eurogroup of EU finance ministers, during an event in Ghent.
However, the proposed capital market union has faced delays due to nations determined to maintain their rights. Germany quickly shot down the most recent French suggestion for a select group of nations to progress.
Importance of Quick Resolution of All Business Related Problems
Should a more cohesive alliance materialize, it would not serve as a cure-all for the EU’s competitiveness issues.
Denmark is the sole European Union country that outperforms the United States in the World Bank’s Ease of Doing Business Index, which evaluates factors like starting a company or obtaining a permit. Italy falls behind Morocco, Kenya, and Kosovo.
At the moment, electricity prices in the EU are triple those in the United States and are expected to remain elevated until the EU can generate its own electricity in the coming decade.
Companies are advocating for energy subsidies and less stringent environmental regulations.
Gunnar Groebler, the CEO of steelmaker Salzgitter, expressed concerns about the high electricity prices hindering global competitiveness during the shift to renewable energy sources.
Exxon, a significant player in the oil industry, warned of potential “deindustrialisation” if the EU did not alter its current path.
Some major corporations are currently not relocating from Europe, but a few, such as French automotive supplier Forvia, are cutting jobs in the area. Other companies, like the industrial gases company Air Liquide (OTC:AIQUY), are increasing their operations in the United States.
Last week, a consortium of industrial firms requested that the EU provide funding for both capital expenditures and day-to-day operational costs, similar to the approach taken by Washington.
However, officials in Ghent have emphasized that the majority of the funds required by Europe should be sourced from private sources.
Simone Tagliapietra, a senior fellow at the think tank Bruegel, mentioned that such actions have not been taken in Europe before. “There is a genuine danger that the company could vanish once the financial support is removed.”
