On European Competitiveness

(Informal comment in one of the discussions)

European global competitiveness is a “hot topic”, intensively discussed this year in the Commission, European Parliament, EUCO and different Councils. And the Commission is taking a lot of important initiatives to boost competitiveness at the EU level: the 28^th regime, the industrial accelerator act, rules simplification, reviewing merger guidelines, to name but a few.

According to the famous Draghi report, European defence and space industries are key factors in the development of European Union competitiveness. And those industries have their own deep structural problems, like fragmentation and lack of a common market, which makes them less competitive. But to better understand the problems with European Union competitiveness, we need to remember that the European Union is not a unitary or federal state.

There is a common understanding that the EU is losing global competition to the USA and China. And usually everybody is keen to blame the European Union institutions, their overly bureaucratic approach, their heavy policies and regulations, which according to prevailing opinion are major obstacles to European Union competitiveness.

Of course, there is a lot of truth in this prevailing opinion, and that is why the European Commission is pushing for “simplification” to open the doors for competitiveness of the European economy.

But this general view, that the EU institutions and their policies are the major obstacle to Europe’s competitiveness,  is not fully correct in some important details.

The EU is a community of different Member States, which are quite different in the performance of their economies and their global competitiveness.

The best way to see that difference and to draw the right conclusions about the real problems of European competitiveness is to look into the most popular,  publicly available annual Global Competitiveness Rankings, produced by the International Institute for Management Development (IMD). The IMD started to produce those rankings back in 1989, so it creates the possibility to see how individual rankings have changed during the last 35 years.

The latest 2025 ranking of 69 countries shows that EU Member States have quite different levels of success. Let’s look at the best 16 countries:

1. Switzerland;
2. Singapore;
3. Hong Kong;
4. Denmark;
5. UAE;
6. Taiwan;
7. Ireland;
8. Sweden;
9. Qatar
10. the Netherlands;
11. Canada;
12. Norway;
13. USA;
14. Finland;
15. Iceland;
16. China;

This list of the best 16 countries shows that some European countries (including EU Member States) are not doing so badly in their global competitiveness. Among the 10 best countries are Switzerland (1), Denmark (4), Ireland (7), Sweden (8), Netherlands (10). If we remove from this list  “special” economies like Singapore (2), Hong Kong (3), Taiwan (6), Qatar (9), then the whole list of top 10 countries would be heavily dominated by European countries, and especially Nordic Western European countries: Switzerland, Denmark, Ireland, Sweden, Netherlands, Norway.

It’s important to see that the USA is only on the 13th place. China – on 16th place.

Conclusion: if all the European countries would follow Northern Western European countries – the European Union would be among the global leaders of competitiveness!

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The problem with EU competitiveness is that among the countries with the lowest global  competitiveness, there is quite a big number of  EU Member States, especially from Central Europe. The poorest performance in the list was shown by Venezuela – 69th place. The worst performing EU Member States are not far below: 

69. Venezuela
70. Slovakia
71. Bulgaria
72. Croatia
73. Greece
74. Romania
75. Hungary

The best performing Central European Member States – Lithuania (21), Czech Republic (25). If Central European Member States would make major progress with their national competitiveness – the EU would make a big step forward! There are examples to follow – Nordic countries or some Central European countries (Lithuania, Czech Republic, Estonia).

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Additional attention should be paid to the 4  “biggest economies” of the EU. They are in the middle of the list:

19. Germany
20. France
21. Spain
22. Italy

Again – to catch up with their competitiveness, the example for the “Big 4” to follow could be European North Western countries, not only the USA or China.

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It’s important to see that USA competitiveness has started to deteriorate in recent decades (place in the ranking in different years):

 CONCLUSIONS: 

1. To speak about “EU competitiveness” is not very precise: there is a big difference between different regions of the EU. Northern Western Europe is among the leaders of global competitiveness rankings, however the majority of Central European countries are among the countries lagging behind.

2. It appears that existing EU policies are not an obstacle for Northern Western European countries to be among the most competitive globally. Also EU wide policies are not the reason why big number of Central European countries are lagging behind. In my personal opinion – the problems with the governance of those countries is the main reason why they are lagging behind.

3. To develop EU competitiveness, it would not only be important to stress “horizontal” EU policies (development of Single Market, simplification, support to innovation), but it’s also very important to push lagging Member States to make individual progress in the development of their competitiveness.

4. It’s important to see that various academic analyses, which present statistical evidence showing EU competitiveness or productivity is slowing down, show that this slowing down started around 2005-2010, exactly after Central Europe joined the EU. It will take time for Central Europe to catch up with the EU average.

5. In the development of EU competitiveness, the EU can learn a lot not only from USA, but first of all from Northern Western European countries, like Denmark, Sweden, the Netherlands.