The European Union must find new levers of growth in a changing world where competition and geopolitics dominate, Eurogroup boss Paschal Donohoe told Euronews.
Donohoe, who leads the group of euro area finance ministers, said the European economy now requires a combination of internal market reform and diversified external ties. Caught between Trump’s tariffs and escalating tensions with China, Europe is looking for ways to boost its powerful single market and multiply its trading partners.
“The responsibility for European growth lies, first and foremost, here in Europe,” he said in Euronews’ interview series 12 Minutes With. “That means making the single market more of an ingredient in the future than it has been in the past. We need to do more and faster.”
In her second mandate as Commission President, Ursula von der Leyen has made competitiveness the centrepiece of her agenda. The Commission is looking to cut red tape, simplify regulation and reduce barriers within the single market, which comprises all member states and is the world’s largest trading bloc with 450 million consumers.
Still, the EU is facing criticism that its excessive reporting standards and regulations, coupled with complications in doing cross-border business and slow digitalisation, are impacting European companies and their ability to compete globally.
Former European Central Bank president Mario Draghi, who penned a highly influential report on how to improve competitiveness in the EU last year, has repeatedly argued that the European Union is de facto implementing a tariff policy on itself unless it can reverse these regulatory hurdles and its internal barriers.
Draghi is very influential in diplomatic circles in Brussels, the 27 capitals and the European Commission, where he is seen as one of the most powerful EU voices.
Changing rules of trade
Speaking to Euronews, Donohoe said he is determined to intensify progress when it comes to completing the EU’s Savings and Investment union, which would integrate the different European capital markets and bolster cross-border financial opportunities.
Completing the Savings and Investment Union was a key demand from member states for Donohoe to secure a third term as Eurogroup chief.
“There is an acceleration of activity on the development of capital markets at a national level, and I see the work at the EU accelerating too; there is momentum,” he said. “We all know we’re not growing at the pace and speed that others are. This depends on us.”
Asked whether the impact of the tariffs imposed by US President Donald Trump had been fully digested by the European economy, Donohoe said the short-term effects had not been as severe as expected.
But he acknowledged the new trade terms with the US, which effectively tripled tariffs to 15% on the EU, mean there will be implications in the medium-term picture.
“Speaking as Finance Minister for Ireland, there is little doubt that the impact of the tariffs is going to have an effect. We have already acknowledged that,” he said. “When the rules of trade change, for an open, trade-intensive part of the world like we are, it is going to have an effect. We will have to find new tools to offset that.”
To do that, the EU has launched an aggressive trade campaign to cut deals with new partners. So far, it has upgraded trade ties with Mexico, Indonesia, Chile, and launched talks with the United Arab Emirates.
The EU is looking to sign the Mercosur trade agreement with Brazil, Argentina, Uruguay and Paraguay, and the basis for a free trade agreement with India could come before the end of the year.
“We have to develop new trade agreements with the rest of the world,” Donohoe added. “We will need more of that diversity in the future.”