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European economic competitiveness and growth challenges

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2026-08-19 13:09 UTC → 2026-08-19 14:15 UTC · added ~~removed~~

Economic leaders have issued warnings regarding the structural decline and erosion of the European growth model. A strategic report by Mario Draghi, commissioned by the European Commission, highlighted a decline in competitiveness driven by stagnant productivity, high energy costs, and a fragmented single market. The report cautioned that without radical policy changes, Europe risks falling behind the United States and China as talent and innovation migrate elsewhere. Expanding on these concerns at a World Economic Forum event in Geneva, European Central Bank President Christine Lagarde characterized the rise of artificial intelligence as the ‘second digital revolution.’ She noted that while Europe possesses significant scientific potential and a highly skilled workforce, it largely missed the commercial benefits of the first digital revolution. Lagarde emphasized that the traditional growth model—once supported by globalization, cheap energy, and a rules-based order—is eroding. She pointed to rising protectionism, noting that over 2,500 trade restrictions were implemented globally last year. She further highlighted that energy costs for energy-intensive industries in Europe are more than double those in the United ~~States.~~ States and approximately 50 percent higher than in China. Additionally, she noted that China now competes directly with the eurozone in nearly 40 percent of sectors where the EU previously held a comparative advantage. To compete with the United States and China, Lagarde argued that Europe must overcome market fragmentation to allow companies to scale and access capital. She stressed the necessity of transforming scientific achievements into successful commercial products, noting that while the EU holds 15 percent of the world’s researchers, it must ensure it does not miss the current technological shift. ~~She specifically noted that eurozone companies expect AI-related investments to reach 9 percent of total investment this year.~~

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