This is particularly true of countries that share similar values and interests with the EU, such as the U.K., Canada, Japan, South Korea and Australia, but there’s also a chance to strengthen trade relations with others. Talks are already underway with India, and opportunities to balance trade with China, which has been severely affected by U.S. sanctions, are also emerging.
According to economists from the European Central Bank (ECB), expanding trade with third countries like this could help offset the impact of conflict with the U.S. However, there’s also a catch. Europe won’t become an attractive partner simply because it’s reliable and avoids rash, unpredictable decisions. A strong economy is key to forming successful partnerships — unfortunately, the EU doesn’t have one today.
After the alarming competitiveness report from former ECB President Mario Draghi, which was widely accepted in the European Parliament, EU leaders appear reluctant to implement necessary changes. Paradoxically, one reason for this could be the bloc’s slightly positive economic growth outlook, supported by higher state spending in Germany and increased defense spending across much of the bloc, under the “Buy European” principle.
But it is a fatal mistake to believe this will solve the problem. These measures increase debt, and temporary incentives can’t replace the fundamental reforms Draghi called for.
Moreover, the fear that leaders will put these changes on the back burner is very real, as was evident at the recent European Council meeting, where the main economic agenda just included simplifying legislation, attempting to reduce energy prices, and creating a union of savings and investments. Focusing on such regulatory changes — which are mostly aimed at cutting red tape — risks overshadowing the substantial reforms needed to truly benefit the Europe’s economy.
The meeting’s competitiveness agenda also avoided most important “reform topics,” and discussions lacked clear substance that could deliver quick improvements. For example, there was no mention of countries supporting agreed trade facilitation deals or of reforms like removing barriers to the single market.