Rivalry or Struggle for Superiority
Europe faces a challenging landscape in the global economic competition, with countries like South Korea, Israel, and the USA investing more in research and development relative to their economic output. This puts Europe under pressure to assume a leading role in areas such as the platform economy and artificial intelligence, or risk facing adaptation pressure.
A strategic foreign trade policy is crucial for Europe to avoid losing ground. The countries identified as economic partners for developing this policy include Indonesia, the Mercosur states of South America, the United States, and members of the Eurasian Economic Union plus Mongolia. A recent tariff agreement with the US and an expected CEPA agreement with Indonesia in 2026 are promising steps in this direction.
However, Europe's competitiveness is also threatened by an increase in public debt in some European countries, which could jeopardize Europe's debt sustainability. To counteract this, significant efficiency gains could be achieved through the completion of the European Single Market, reducing high capital outflow. Comprehensive reforms are urgently needed in the European Single Market, including the completion of a banking and capital markets union.
Moreover, Europe needs a competitive tax system, moderate energy prices, and well-trained skilled workers to provide a conducive environment for companies to develop freely and in competition. Without these conditions, Europe risks losing out to economic powers like China, Japan, and the Gulf states, which are offering themselves as new, attractive partners to emerging markets.
To tackle major challenges such as strengthening Europe's defense capabilities and transitioning to climate neutrality, more private capital is essential. Balanced social security contributions are necessary to ensure that the cost-benefit calculation of highly qualified immigrants favors Germany and Europe. An attractive immigration system for qualified immigration is also needed in light of demographic change.
The EU and Germany must make forward-looking decisions in prioritizing budget funds and providing further incentives for companies to invest in research and development. Successful economies are characterized by a thriving research and innovation landscape, and Europe can pursue its goals of security, human rights, and climate protection when European companies lead in certain economic sectors.
In conclusion, the competitiveness of the German and European economy is the foundation for prosperity and freedom. By focusing on strategic foreign trade policies, completing the European Single Market, promoting research and development, and attracting qualified immigrants, Europe can strengthen its position in the global economic competition.
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