Central Banks

ECB’s Lagarde: Europe is falling behind in innovation and productivity compared to the U.S

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A summary of a speech from EU Lagarde at College des Bernardins:

Current Challenges

  1. Technological Lag:

    • Europe is falling behind in innovation and productivity compared to the U.S. and China.
    • EU specializes in outdated technologies; only 4 of the world’s top 50 tech firms are European.
    • Lack of unified digital market and venture capital investment hinders technological progress.

  2. Geopolitical Shifts:

    • Global trade fragmentation and competition with China threaten Europe’s open economy.
    • EU’s declining world trade share and increased reliance on foreign venture capitalists for tech funding.

  3. Economic Pressures:

    • Slowing productivity growth reduces tax revenue potential, threatening funding for pensions, climate, and defense needs.
    • Estimated €1 trillion annually required for climate, innovation, and security investments.

Proposed Solutions

Adaptation

  • Economic Integration: Unlock single-market potential; address internal trade barriers (e.g., equivalent to 44% tariffs on manufacturing).
  • Capital Investment: Redirect €8 trillion in EU savings toward innovation and technology development.
  • Skills Development: Focus on digital and advanced skills to empower individuals and enhance inclusion in the digital economy.

Anticipation

  • Technology Impact: Prepare for AI-driven automation by prioritizing reskilling and adult learning.
  • Geopolitical Unity: Treat the EU as a single, unified economy with shared interests in climate, defense, and social welfare.
  • Public-Private Partnerships: Collaboration to fill education and training gaps, enabling workers to adapt to rapid technological changes.

Call to Action

  • Regain lost ground in productivity and competitiveness.
  • Pool resources for collective challenges (e.g., green transition, security).
  • Balance social welfare and technological progress to sustain Europe’s unique economic model.

Conclusion

  • Europe must adapt to modern challenges with a renewed focus on unity and innovation, quoting Marcus Aurelius: “What stands in the way becomes the way.”

Meanwhile the EURUSD is continuing it’s stretch to the upside with the price moving to a new high at 1.05941. That has the price above the swing area target at 1.05926 and looks next toward the 1.0600 to 1.0610 swing area (see post here).

This article was written by Greg Michalowski at www.forexlive.com. Source