Europe's economy in crisis: Where is the innovation?

Europe is facing significant economic challenges, characterized by a pronounced industrial recession and high uncertainty about the economic future. According to that IPG Journal There were declines in production, reluctance to invest and increasing global competitive pressure. These problems are compounded by high energy prices and significant investment risks.

A growing innovation gap between Europe, China and the USA, particularly in the key technologies of green and digital transformation, is of particular concern. In order to counteract this problem, a forward-looking economic policy is required that combines short-term stability with long-term innovation strategies. Well-known economic policy concepts such as tax cuts and reductions in bureaucracy are discussed as solutions to the current challenges, but are considered outdated.

The technological lag in Europe

Europe's industrial landscape is undergoing profound change, influenced by digitalization, decarbonization and geopolitical shifts. China's massive investments in robotics, artificial intelligence and green technologies are leaving Europe behind. In addition, the USA is setting new standards in digital platform technologies and artificial intelligence, supported by billions in investments.

Europe is at risk of losing out in the global race for digital technologies and jobs. The US Inflation Reduction Act (IRA) promotes the production of hydrogen, batteries and climate-neutral industrial processes, which further increases competitive pressure on European industry. To meet these challenges, a rapid and bold transformation of the European economy is necessary, supported by targeted investments in education, research and the development of digital skills.

A sustainable economic policy must focus on the issues of climate neutrality, technological sovereignty and social stability. This requires clear political guidelines to create security and trust in the economic course. Regulation and funding must be aligned towards a common goal in order to efficiently support the required change.

In addition, Europe’s digital sovereignty is a central concern. Again Center for European Economic Research reports, powerful computing capacities are crucial for the development of digital technologies and AI applications. Europe is currently dependent on US digital companies, which is why investments in its own digital infrastructures are necessary in order to strengthen digital sovereignty and expand competencies. Public investment should be complemented by private funding, for example through the European High-Performance Computing Joint Undertaking.

A central focus is on the implementation of the AI ​​regulation in the EU member states in order to promote the balance between legal certainty and innovation potential. Initiatives such as the European Health Data Space aim to develop better diagnostics and therapies by pooling data, highlighting the importance of simplified and harmonized regulation that helps small and medium-sized companies develop AI solutions in a legally compliant manner.