The EU urgently needs a safety net to reduce its exposure to outside dangers and encourage stronger value creation. A European Economic Security Council and a Futura Fund worth €50 billion are some of the ways the continent can reenter the global competition. Next week, the European Commission will be presenting a proposal around the screening of outbound investments and, connected to that, export controls for four crucial technologies, including microchips. During an EPC conference in Brussels, Pawel Swieboda, the senior visiting fellow at the European Policy Center (EPC), already offered some insights into these proposals. The Commission’s initiative is part of a package of tools aimed at de-risking its trading ties with China. Swieboda called it “Europe’s make-or-break moment”.
Europe is now entering its third economic history period, Swieboda explained. The first one could be dated to the post-war reconstruction, the launch of the single market. The second started in 1989 with the historic enlargements and Europe’s involvement in shaping globalization. “But little remains of that world today. We are in a different reality from the point of view of how shock-prone, conflictual, and weaponized the global environment has been. We need to draw our lessons from it, and there is a need for a paradigm shift.”
Does it mean that Europe will become protectionist? No, says Swieboda. “It would be crazy for the EU, whose DNA code is anchored on openness. But we must build a safety net into how we operate globally in economic affairs. And the safety net is about reducing undue exposure to risk and – equally important – identifying new areas where we can see value creation. So, we cannot be delusional concerning global governance assets today, however much we would wish for this to be. Otherwise, we need to make a sober assessment of what works and what doesn’t.”
Next week’s proposal is all about why the EU should perform a common economic security threat assessment analysis. Although “a lot of that is happening already”, it’s in niche areas like inward and outward investment. “But we need something much more comprehensive than this because security risks are different for different member states.”
Swieboda said it’s crucial to have resilience and economic security in the scheme right from the start. “We cannot afford to develop our policies and then add the economic security dimension; it all has to happen from the outset. A lot of our thinking focuses on doubling down on scale speed and directionality because if there is one single weakness of the EU model, we have had a particular difficulty with scaling.”
One of Europe’s big challenges is finding the money to scale the most promising start-ups and other initiatives. Although R&D investments are growing in Europe, Swieboda said that the pension funds should play a much bigger role. In a new ‘Futura Fund’, Europe should gather around 500 billion euros through the issuance of EU-level debt and by drawing in big institutional investors like pension funds. “Growth in Europe has been quite impressive in the last year. Nevertheless, we do have to find a way for Europe to scale better. The commission already referred to the need for further common borrowing, which we will propose in Futura Funds. Common borrowing is part of that, but it also draws on institutional investors such as pension funds, the dormant in Europe, which is of massive proportions. It’s still not being utilized to the right effect. U.S. pension funds fund ten percent of the German technological unicorns, and only 0.01 percent are funded by German pension funds. This is just a small fact to reflect upon as we think about these issues.”
The three – or four – Ps
A reset of the single market is also an opportunity, Swieboda said. “In areas where Europe has a competitive advantage, we propose remembering the three Ps from the Commission’s Economic Security Strategy: Promote, Protect, and Partner. We are adding a fourth P, and that’s to Prepare because we are strongly convinced that a lot has to be done in the area of anticipation, preparing the ground, and analysis.”
Looking at it from an institutional perspective, the EU needs to create an Economic Security Council, a platform through which the relevant actors can converge. “Other countries have developed their own approaches. Japan has a Minister for Economic Security. The White House has just set up a task force for supply chains. The EU cannot afford to do a patchwork approach like before. We need to have a clear-cut institutional solution on these matters.”
Starting with the framing paper next week, the EPC will look into some sectorial challenges in digital and tech, energy, and health. “We will then look at the single market and economic security, what needs to be done, and we will look at the institutional dimension. And we will develop recommendations for the next Agenda 2024-2029 before taking this a bit outside of Europe towards like-minded countries that also need to be involved and kept on board.”
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