The head of Norway’s sovereign wealth fund, the biggest in the world, Nicolai Tangen, told The Financial Times, “We are not very ambitious.” The European Chamber of Commerce has declared that “European businesses need to regain self-confidence.”

There is an endless list of factors contributing to the so-called “competitiveness crisis” in the European Union (EU), including an excessive number of regulations and insufficient authority held by Brussels’ leadership. Companies are too small to compete on a global scale; public and private investments are too low; and financial markets are too fragmented.

“Our organisation, decision-making and financing are designed for ‘the world of yesterday,’ pre-COVID, pre-Ukraine, pre-conflagration in the Middle East, pre-return of great power rivalry,” Mario Draghi, a former president of the European Central Bank who is heading a study of Europe’s competitiveness said.

It is now impossible to take for granted cheap energy from Russia in the post-Ukraine scenario, inexpensive exports from China, and a firm reliance on United States military defence. Concurrently, hundreds of billions of dollars are being directed by Beijing and Washington toward the development of their own semiconductor, alternative energy, and electric vehicle industries as well as the disruption of global free trade agreements.

According to a McKinsey Global Institute report, Europe-based big businesses invested 60% less in 2022 than their American counterparts and expanded at a rate of two-thirds slower. In terms of per capita income, it is typically 27% less than that of the US. Furthermore, compared to other large economies, productivity growth is slower and energy prices are significantly higher.

Draghi’s report, in all likelihood, will be made public after the parliamentary election of the European Union is over. However, he has already declared that “radical change” is necessary. From his perspective, this entails a massive rise in collaborative spending; a reorganisation of Europe’s convoluted financing and regulatory framework, and a consolidation of smaller businesses.

The inherent difficulties in coordinating the actions of over 22 nations have gotten more acute due to the speed at which technology is developing, the escalating number of international conflicts, and the growing reliance on national policies to direct business. Imagine if the federal government’s ability to raise money to finance the military was restricted and each state in the United States retained its national sovereignty.

Europe has started moving in the right direction already. The European Union first proposed an industrial defence policy, and it passed the Green Deal Industrial Plan in 2023 to expedite the energy transition. However, compared to the resources that China and the United States are using, these efforts are insignificant.

According to an analysis released by the research firm Rystad Energy, the bloc “is set to fall far behind its ambitious energy transition targets for renewable energy, clean technology capacity and domestic supply chain investments.”

Draghi believes that for the European Union to stay up, public and private investment in the digital and green transitions alone needs to increase by half a trillion euros annually ($542 billion).

The European Commission, the EU’s executive body, ordered both his report and Letta’s to aid in directing decision-makers when they convene in the fall to draft the bloc’s next five-year strategic plan. A considerable portion of people still favour free markets and are wary of government interference in Europe and other regions.

However, there is a growing consensus among Europe’s most powerful politicians, business executives, and officials regarding the necessity of more assertive group action.

They contend that Europe cannot effectively compete if public funds are not consolidated and a single capital market is not established. This will prevent the continent from investing in crucial areas like energy, defence, and supercomputing.

Furthermore, it cannot compete with the economies of scale enjoyed by enormous foreign corporations that are better positioned to gobble up market share and profits if smaller businesses are not consolidated.

According to Draghi, Europe possesses at least 34 major mobile networks, while China and the United States have four and three, respectively.

Letta claimed that during his six-month research trip to 65 European cities for his report, he witnessed first-hand the peculiar competitive shortcomings of Europe.

“By high-speed train between European capitals” was not an option, he declared.

This stark contradiction serves as a metaphor for the issues facing the single market. However, there may be political pushback to the suggested fixes. Concerns about jobs, living standards, and purchasing power are major issues for many politicians and voters throughout the continent. Giving Brussels more power and resources, though, is something they are cautious about.

Furthermore, they frequently find it difficult to witness the demise of well-known administrative guidelines and business practices or the merger of national brands with competitors.

Another concern is that there might be an increase in red tape. In 2024, in protest of the numerous environmental regulations imposed by the European Union that govern their use of pesticides and fertilisers, planting schedules, zoning, and much more, irate farmers in France and Belgium blocked roads and dumped truckloads of manure.

For far-right political parties seeking to capitalise on economic concerns, blaming Brussels is also a handy strategy. The European Union has been dubbed the “enemy of the people” by the anti-immigrant National Rally party in France.

According to the current political undercurrent, right-wing parties are gaining big time in the European Parliament, further fracturing the legislative body. Government officials at the federal level tend to defend their rights. The European Union has been working to establish a single capital market for the last ten years to facilitate international investment.

However, a lot of smaller countries, like Sweden, Ireland, and Romania, have resisted changing their laws or giving up control to Brussels because they fear it will hurt their own financial sectors.

The consolidation of power worries civil society organisations as well. Thirteen European organisations released an open letter in May 2024 alerting readers to the dangers of increased market consolidation, which they said would hurt workers, small businesses, and consumers while giving corporate giants undue power and driving up prices.

Europe has been lagging behind the rest of the world for over ten years in many competitiveness metrics, such as capital investments, research and development, and productivity growth. However, McKinsey claims that it is a global leader in lowering emissions, reducing income inequality, and promoting social mobility.

Also, choice plays a role in some of the economic differences with the United States. Because Europeans choose to work fewer hours on average over their lifetime, the difference in per-capita GDP between Europe and the US is half. Others caution that if Europeans wish to keep their standards of living, they may no longer have the luxury of making such decisions.

According to Simone Tagliapietra, a senior fellow at the Brussels-based research group Bruegel, policies controlling energy, markets, and banking are too dissimilar.

“If we continue to have 27 markets that are not well integrated. We cannot be competing with the Chinese or the Americans,” he remarked.

Europe’s recovery remains firmly on course, driven by internal demand. All of the major economies performed marginally better than predicted till April 2024, which shows growth that is slightly above expectations, according to the most recent GDP data for the euro area. The healing process is propelled by a rise in both consumer and business optimism. Household finances are fortified by persistent job markets, resulting in a rebound of incomes.

In various countries, disinflation is ongoing and is preparing the ground for interest rate cuts. As of April 2024, the inflation rate in the euro area has stayed the same at 2.4%. Additionally, the core inflation rate has noticeably decreased.

The post Is Europe becoming uncompetitive? appeared first on International Finance.

Under a draught European Union law proposed by European Commissioner Mairead McGuinness, banks in the 27-country union will have to offer and accept “instant payment” (IP) services at the same price or less than what they charge for regular credit transfers.

In comparison to regular transfers, several banks already charge significantly more for IP transfers—up to 30 euros (USD 30) in some situations.

According to a statement from McGuinness, the shift from “next day” transfers to “10 seconds” transfers is seismic and equivalent to the switch from mail to e-mail. He also noted that transfer delays cause 200 billion euros in daily transit to be held up.

Many regions of the world, including the European Union, have implemented instant payments; however, voluntary adoption in the area has plateaued, with just two-thirds of banks providing IP, which only accounts for around 13% of all credit transactions.

Visa and Mastercard from the United States dominate international card payments. Brussels hopes that IP will increase competition along with changes like “open banking,” which allows fintech companies to use a customer’s bank information to provide various services.

IP contributes to broader developments like the upcoming digital euro.

According to Valdis Dombrovskis, executive vice president of the European Commission, “we intend to expand euro quick payments internationally at a later date.”

According to Tom Greenwood, CEO of immediate payments gateway Volt, “by enforcing instant payments, the largest barriers to open banking payments becoming widely accepted are quickly addressed.”

If payday falls on a weekend, the ability to accept and send prompt payments around-the-clock through IP is essential. IP enables firms to manage their cash flows by receiving payments immediately after a transaction.

Safety Issues
The proposed regulation, which needs the consent of European Union member states and the European Parliament to become effective, would give banks outside the euro region 24 months to start offering euro IP services while requiring them to receive euro IPs within six months and be able to send them within a year.

The card companies’ representative group, Payments Europe, stated that markets should determine how much IP transactions should cost and that the six-month compliance deadline is “too short and could jeopardize the safety and security of transactions.”

Christel Delberghe, director general of EuroCommerce, which represents the retail and wholesale sector, stated that this would “increase competition in payment services and provide consumers and merchants with an additional, efficient and less expensive choice in paying for goods and services both in-store and online.”

Banks must check their IP customers daily for compliance with the most recent European Union sanctions list, which has grown since Russia invaded Ukraine.

Since they lack direct access to payment networks, non-bank payment companies are now barred from participating in IP payments. According to a European Union source, Brussels intends to change its regulations to let them compete with banks in this market.

The post Bank’s rapid payment mode brings cheers to businesses & consumers appeared first on International Finance.

Lewis Crofts and Matthew Holehouse

October 20, 2016: Before UK and EU officials get down to the detailed work of unpicking laws and drafting the transitional measures to govern Brexit, they may first have to deal with the €40 billion the UK should pay into EU coffers to serve out its time as a full EU member.

The money is expected to become a negotiating chip with UK officials under pressure to curtail payments to a club it will no longer be a member of.

UK premier Theresa May is planning to start formal exit talks by the end of March next year, triggering two years to negotiate divorce terms. Those talks will have to resolve questions over UK businesses’ continued access to the EU market and restrictions on the movement of EU citizens on British soil.

Curbing immigration and ensuring full market access are often presented as a trade-off, forming the main axis to the negotiations. More of one means less of the other. But this misses the point.  A much more incendiary area will be the outstanding bill the UK has to pay.

MLex understands officials are working on a figure of potentially €40 billion covering the period to the end of 2019, when the country is expected to leave the union.

EU leaders have stressed that during negotiations, the UK will remain a full EU member, enjoying the same rights and being subject to the same obligations as other states. This clearly means it must pay its bills.

But in reality, the UK government could put the budgetary contributions at the forefront of negotiations, in the hope of gaining leverage. At least, that’s what Brussels officials are expecting.

The EU will be keen to obtain the funds, but May will come under public and political pressure to scale back payments.

According to a ‘landscape’ assessment from the EU’s Court of Auditors published in November 2014, the EU’s ‘debts’ — comprising undelivered spending commitments, purchases and staff pensions — ran to €326 billion. The spending is not covered by the current seven-year budget.

The UK’s contribution to the total EU budget is 12.3 percent, which puts its share at €40 billion.

There are two clear types of payment at stake: one to settle its outstanding liabilities up to the end of EU membership, and another that may feature future payments after Brexit.

The latter could cover the costs of access to the EU’s single market or the UK’s continued participation in certain European programs for, say, research and development or regional support.

In reality, negotiations are likely to blur the distinctions between those two pots.

A central plank of the Leave campaign in the referendum was the claim that EU membership cost UK taxpayers £350 million a week. Leaving the EU would mean UK ministers could themselves choose how to spend this money, the Leave camp argued.

To date, Theresa May and her ministers have conspicuously said nothing about whether the UK will continue to make payments to the budget.

Asked about budget payments, May’s spokeswoman said she would not give ‘a running commentary on all the minutiae’ of the negotiations, which will cover ‘a whole range of issues and angles to our relationship’.

But given the Leave campaign’s spending promise during the referendum, the prospect of continued payments of any size into EU coffers after Brexit could be politically unpalatable for many pro-Leave lawmakers.

May’s spokeswoman said that a pre-condition is that ‘the decisions on how British taxpayers’ money is spent should be a decision for the UK’.

That may leave on the table a scheme like Norway’s. Oslo pays billions into social reform and climate schemes in eastern and southern Europe as an entry fee for access to the single market. Unlike normal EU spending, however, the schemes are directly approved and audited by Norwegian officials.

And if the UK is prepared to pay its €40 billion bill, or commit to continued payments into some EU programs, it could win some leverage in exit negotiations.

Spending under the EU’s seven-year budget is pushed to its upper limits, with the migration crisis and terrorism producing lengthy bills. The hard truth is: Brussels needs the money and the UK is one of the largest net contributors to the EU budget.

Lewis Crofts and Matthew Holehouse are from MLex, the regulatory newswire

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September 16, 2016: Zipcar, the world’s leading car-sharing network, announced the launch of its new free-floating car-sharing service in Brussels, Belgium. This marks the seventh major country launch for the brand in Europe and the introduction of its most flexible car- sharing service to date.

The launch is a pivotal milestone in Zipcar’s international expansion, which already includes a well-established presence in the United Kingdom, Spain, France, Austria, Germany and Turkey.  The launch represents a significant innovation in Zipcar’s offerings, and demonstrates a strategic decision to offer a range of alternative car-sharing models according to a city’s requirements.

The new service gives Zipcar members the freedom to pick up and drop off a Zipcar at any location within a set geographical area – a first for the global car club network. The service complements car-sharing models operated in other cities around the world, including round-trip and flexible one-way rentals, allowing the company to deliver on its commitment to work with city authorities and provide consumers and businesses with a practical alternative to car ownership in urban areas and congested cities.

Zipcar’s free-floating fleet will extend from 100 cars at launch to more than 250 within the first month. The Zipcars – all Peugeot 208s – can be picked up and dropped off in and around the Brussels-Capital Region, within a zone that includes 16 of the city’s 19 communes.  The service will also be readily available to Brussel’s Zipcar members travelling to and from Zaventem Airport, the city’s international airport. Members can easily and spontaneously access a Peugeot 208 via the Zipcar app, giving them access to a versatile car that is well suited to life in the city with easy handling, low emissions and room for up to five people.

The free-floating service extends Zipcar’s international offering, which currently serves the needs of its members across 500 towns and cities globally with access to a wide range of vehicles. The car-sharing network also recently reached a milestone of one million members globally, highlighting the adoption of car-sharing services across the world.

Global membership in car-sharing services is projected to grow from less than 5 million in 2015 to 23.4 million in 2024, according to independent figures from Navigant, as consumers and businesses seek a more sustainable and economic alternative to car ownership, particularly in urban areas to supplement public transport infrastructure.

Zipcar International President Nicholas Cole said, “Today’s launch in Brussels marks a significant milestone for Zipcar. Not only are we extending our operations to another world-class city, but we are also excited to be launching our newest service, free-floating car sharing. Our proven ability in offering convenient access to a car, without the hassle of ownership, meets the need of our members to help them more easily navigate the city.” He added, “This development in our offering means that we are the first global car-sharing network to offer a variety of different car club models around the world, according to different cities’ requirements. We look forward to welcoming Belgian members to our network.”

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July 24, 2014: Nearly two months after the regional and federal elections in Belgium, it seems that the political process to form new governing coalitions is nearing an end. The elections took place on May 25.

At the regional level, in Wallonia and Brussels, center-left coalitions will be in place. Both include the PS (French speaking socialists) and CDh (French speaking center), plus the FDF (French speaking federalists) in Brussels. The official launch of the new governments took place last weekend.

In Flanders, it was announced on Tuesday that a center-right coalition will be put in place. The first round of negotiations included the CD&V (Christian-Democrats) and N-VA (Flemish nationalists).

Surprisingly, the OpenVLD (Flemish Liberals) entered the coalition at the very last moment. Even if this party was not essential to build a majority, there is a natural convergence between its political program and the one of the two other parties. More importantly, integrating the OpenVLD in the Flemish government opened the door to reach an agreement at the federal level.

Indeed, as it seemed impossible to reach an agreement between the N-VA (dominating party in Flanders) and the PS (dominating party in Brussels and Wallonia), replicating the regional majorities at the federal level in order to maintain some symmetry between the different levels of power wasn’t an option.

As a consequence, the N-VA first tried to form a center-right coalition (N-VA, CD&V, MR, CDh) at the federal level. The N-VA is the big winner of the elections.

The CD&V and the MR agreed on the preliminary note written by N-VA leader Bart De Wever, but the CDh refused to enter such a government (knowing that it is part of a center left government in Wallonia and Brussels).

The only remaining option was then to replace the French speaking CDh by the Flemish OpenVLD. As the OpenVLD insisted on being in both Flemish and federal coalitions, accepting it in the Flemish government removed the last obstacle to this coalition at the federal level.

Kris Peeters, a leader of the CD&V, and Charles Michel, president of the MR, have been officially charged by King Philippe to form the new federal government.

Source: Philippe Ledent, ING

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