European business chiefs on Tuesday warned that the region risks falling behind its U.S. and Asian counterparts, if it fails to innovate and adapt to a fast-changing world that is expected to see an acceleration of global policy changes during President Donald Trump’s second term in office.
Europe was “always lagging behind” its counterparts in Asia and the U.S. when it comes to innovation, Mario Greco, the chief executive of Zurich Insurance, told CNBC from the World Economic Forum in Davos, Switzerland.
“In a world which is going very fast forward, with lots of innovation, it’s a wake up call, again, for Europe. And I hope that Europe takes it seriously,” Greco said.
“Take all the developments in AI [artificial intelligence] and digital. Europe has not invested in that, as America and China have done. It is also the integration of financial markets in Europe. It is still [an issue of] how complicated it is to do business in Europe … And this is why I’m saying it again, Europe needs to wake up,” Greco added.
Greco added that Europe had become too preoccupied with regulation and that it was stifling progress, particularly in new technologies needed to drive growth — and as we enter the Trump 2.0 era of “America First” policies that mean the region will need to further defend its economic interests.
President Donald Trump signed a slew of executive orders on his first day in office Monday, including withdrawing from the Paris climate agreement and revoking a 50% electric vehicle target, as well as moves to crack down on immigration.
On the global front, along with stating that tariffs of 25% could be levied against Mexico and Canada as soon as early as February, Trump also sent a warning signal that the European Union needed to buy more American goods, as well as oil and gas, or it would be a target for tariffs.
An employee stands at a blast furnace in North Rhine-Westphalia, Duisburg, Germany. In November, Thyssenkrupp Steel announced that the number of jobs in the steel sector would be reduced by 11,000 to 16,000 within six years.
Picture Alliance | Picture Alliance | Getty Images
Novartis CEO Vas Narasimhan told CNBC that the Trump 2.0 era was “a big moment for Europe,” during which the region needs to deregulate and boost competitiveness.
“Europe has to decide now, in a world where the U.S. is so heavily deregulating and trying to increase competitiveness, is Europe going to continue to sit on its hands, continue to increase regulation in the [European] Commission, increase regulation in the various individual countries, or are we finally going to get a more pro-competitive, pro-innovation environment in Europe?,” he asked.
“We’ll have to see. History suggests that while there’s a lot of talk, not a lot of action comes out of the [European] Commission. And right now, this is the moment. Because, if not, I think Europe will be even further left behind versus the U.S.,” he said.
Boost competitiveness
European policymakers appear to be aware of the urgent need to innovate and deregulate in the face of burgeoning economic competition and rivalry from the U.S. and China.
“The new Trump administration should be a wake-up call for Europe,” according to Belgian Finance Minister Vincent Van Peteghem, Reuters reported Monday. “Rather than focusing on retaliation [against U.S. tariffs], we should focus on the challenges of Europe — the decreasing competitiveness and the increasing productivity gap that we face,” he said.
ING CEO Steven van Rijswijk said that Europe needs more simplified and harmonized regulation across the bloc in order to boost competitiveness and labor productivity, a growing bugbear for the continent. He noted that more investment was also needed.
“There are a lot of investments that are needed to be made in infrastructure, a lot of investments that need to be made in the strategic autonomy of Europe when it comes to tech infrastructure, those are the things that need stimulation,” he told CNBC on the sidelines of WEF.
Speaking during a panel discussion on the future of growth, Banco Santander Executive Chair Ana Botín said governments needed to develop frameworks to kickstart growth “the right way, with redistribution [and] thinking about what AI means.”
“We are not a museum,” she said of Europe. “We are at risk of becoming a museum. But who develops the latest vaccines? A lot of the innovation is actually happening in Europe. We have a huge amount of startups, the issue is they start here and then they go to the United States.”
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— CNBC’s Karen Gilchrist and Chloe Taylor contributed reporting to this story