Europe's Economic Crisis: Can the EU Compete with the US & China?
Published: 2024-12-10
Status:
Available
|
Analyzed
Published: 2024-12-10
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
European economic problems are structural and significant, with the EU falling behind the US and China in key industries.
"European governments downplayed weak economic growth... but now European leaders are admitting that their economic problems are structural with the US and China already far ahead in this Century's most important industries Europe needs to get its act together and fast."
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European industry is significantly older and less innovative than US and Chinese counterparts, with no major new companies created in decades and no European firms in the top 20 globally.
"The average age of the top five companies by market cap is 307 seven in the US in China it's 30 in Europe it's 96 and two of its top five companies were founded in the 19th century In the last 50 years no European company worth more than 100 billion euros has been created from scratch and now not one of the top 20 companies in the world is European."
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A significant portion of Europe's high-growth startups (unicorns) have relocated due to an inability to scale within the continent.
"A third of Europe's unicorns meaning privately held startups worth more than 1 billion Euros have left since 2008 because they were not able to scale on the continent."
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Europe lags behind competitors in R&D investment, particularly in software, hardware, and AI, posing a risk to its pharmaceutical sector.
"European industry invests less than its peers in research and development It lags way behind in software hardware and artificial intelligence and its pharmaceutical component is at risk."
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European automakers face the risk of being surpassed by US and Chinese competitors due to their lead in autonomous driving software and EV manufacturing.
"European car makers are at risk of being leapfrogged by competitors in the US and China who already have a lead in autonomous driving software and EV manufacturing."
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Volkswagen is planning to close factories and lay off over 15,000 workers, indicating significant challenges in the German automotive sector.
"Volkswagen Germany's largest private employer is reportedly planning to close three factories and cut more than 15,000 jobs."
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Chinese companies are outperforming European manufacturers in producing affordable, high-quality electric vehicles.
"Chinese competitors are tr anouncing Europe in the race to make highquality EVS that are affordable."
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The EU is implementing a 36% tariff on Chinese EVs, in addition to a 10% import tariff, to stimulate demand for European cars.
"The EU's response is to try and engineer demand for European cars by imposing a 36% tariff on Chinese EVS on top of the existing 10% tariff levied on All Imports."
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The proposed EU tariffs on Chinese EVs are considered insufficient to level the playing field due to significant cost differences in manufacturing.
"According to one analysis if that is indeed the goal then the tariffs would have to be at least 4 40 to 50% depending on the company anything less would not level the playing field because EVS can be built in China for as little as $5,000 compared to $20,000 in the EU."
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EU tariffs on Chinese EVs contradict the bloc's environmental goals, potentially hindering the adoption of affordable EVs and the achievement of emission reduction targets.
"Moreover the proposed tariffs fly in the face of the EU's own environmental goals The block wants to cut emissions by at least 55% by 2030 it is not on track to achieve this and needs to double the rate of its emissions reductions to meet that 2030 Target refusing European consumers access to Affordable highquality EVS is therefore one of the most hypocritical and backwards decisions the EU could make."
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Eurozone manufacturing activity has fallen to a 7-month low, indicating a contraction in the sector.
"This summer S&P Global reported that its Eurozone manufacturing purchasing managers index PMI which serves as a proxy for manufacturing activity fell to a 7mon low of 45.6 anything below 50 is considered contractionary."
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Mario Draghi proposes an annual investment of €800 billion in the EU to reverse its economic decline, requiring an increase from 22% to 27% of GDP.
"He says that the EU needs 800 billion EUR per year in public and private investment if it is to turn around its decline This would mean an increase in investment from 22% of GDP to 27% of GDP a level not seen since the 1970s."
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A significant portion of the proposed EU investment (€450 billion) is allocated to the energy transition, with the remainder for digital, defense, and innovation.
"it shows that 450 billion Euros should be earmarked for Europe's energy transition and the remainder for digital defense and Innovation."
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Europe is unlikely to compete with China in low-cost electronics and AI infrastructure, and faces similar challenges in clean tech sectors like batteries, solar panels, and EVs.
"he acknowledges that Europe is not going to beat China on the mass manufacturing of lowcost electronics nor the US in building data centers for cloud computing and AI This logic also seems to be true for clean tech like lithium batteries solar panels and EVS."
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Mario Draghi's proposal for the EU to issue common debt for investment is facing opposition from several member states.
"Dragy suggests that the EU issue new common debt but this is already opposed by several governments."
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Germany is actively opposing the potential takeover of Commer Bank by UniCredit, viewing it as an 'unfriendly attack.'
"Germany is trying to torpedo the Takeover of commer Bank by Italian banking giant uni credit which German Chancellor Olaf Schultz described as a quote unfriendly attack."
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EU member states, including Germany, express a desire for financial integration but become hesitant when their national 'champions' face potential takeovers.
"All member states not only Germany are calling for greater financial integration but when faced with potenti potential takeover of national champions they start having second thoughts."
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Rising political instability and fragile governments in key EU nations like France and Germany limit their ability to support unpopular EU-wide policies.
"Political instability is on the rise in Europe and president macron and Chancellor schults are leading quite fragile governments they have little leeway to support any EU policies that are unpopular at home."
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France and Germany have conflicting interests, particularly regarding China trade and the automotive industry, impacting their alignment on EU policies.
"We just don't have the same interests we don't have the same priorities France's automobile industry doesn't export in China or very little whereas things like the crisis at Volkswagen worry everyone in Germany."
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The EU is poorly positioned to compete with the US and China as a bloc due to fragility, populism favoring national control, and fragmented resources, hindering its ability to achieve economies of scale.
"The union currently appears fragile and ill-prepared to compete with the US and China as a block Weak growth and inequality have contributed to the rise of populism which tends to prioritize National control This comes at the expense of less growth if each country insists on having its own national champions of Industry they enjoy more National control but Europe's resources and talent will remain fractured and unable to compete with Chinese and American economies of scale."
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Europe risks becoming economically irrelevant if it cannot compete effectively as a bloc against the rapidly advancing US and China.
"The US and China are racing ahead at full speed and their competition is reshaping the world whether we like it or not Europe is likely to be eating their dust and Fading Into irrelevance if it is not able to compete as a block."
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The EU faces a potential existential threat from Russia, adding to its existing economic and geopolitical challenges.
"The continent also has to deal with what could be an existential threat from Vladimir Putin and Co in the East."
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