How can we maintain Europe's competitiveness not compromising Europe’s social model that worked quite well until now? How to deal with the rapidly changing environment? How to address the reality that artificial intelligence has advanced to a point, where machines can soon outsmart humans in some specific tasks?
These topics were permeating this year's Brussels Economic Forum organised by the European Commission on May 4.
The European Commissioner for Economy, Paolo Gentiloni, emphasised that Europe must preserve its social path, addressing the tremendous need for investments while transitioning into a digital economy.
"It has to be compatible. I don't think we have an alternative. Our social model proved to be quite effective and strong. We passed through two historical crises (with) the pandemic: health dimension and the pandemic economic dimension. And in both aspects, I think our social model proved to be effective…Of course, we need a mountain of investments, but not at the expense of our social model," he said.
Kristalina Georgieva, the Managing Director of the International Monetary Fund, emphasised at the Forum that after decades of increasing global integration, there is a “growing risk that the world may split into rival economic blocs.”
“And that’s a scenario that would be bad for everyone, including for people in Europe. This risk is rising at a time global growth is weak by historical standards—both in the near and medium term,” she said.
IMF projects that global growth will remain around 3 percent over the next five years—our lowest medium-term forecast since 1990.
“Turning to the European Union, like most advanced economies it is faced with the same dual challenge of slowing growth and still high inflation. We project EU growth would fall from 3.7 percent last year to 0.7 percent this year before modestly recovering afterwards. At the same time we expect inflation to decline from over 9 percent last year to over 6 percent this year and, in most countries, not to return to targets until 2025,” K. Georgieva said.
In her words, fortunately, Europe has proven to be resilient, yet, without addressing long-term challenges — demography, productivity, inclusion — we will not be able to raise incomes and create opportunities.
“How do we avoid this scenario? First, improving productivity and opportunities for all. This requires structural reforms and investing in people, technology, and innovation,” she said.
In Europe, for example, governments must create an enabling environment for innovation and investment. This means streamlining regulations, improving education, spending more on research and development, and expanding digital and green infrastructure, the IMF executive said.
“It is equally critical to ensure that everyone is equipped to take advantage of new technologies and find work as economies evolve. This goes with improving equality of opportunity and inter-generational equity by: making labor markets agile enough to match workers with firms and ensure people willing to work hard can find good jobs; investing more in education and skills, reducing labor market duality—where young workers, for instance, get stuck with only temporary contracts; modernizing social safety nets as labor markets change—such as with the rise of self-employment—so people don’t fall behind; provide the right incentives for more female labor market participation and for older workers to stay in employment longer,” Kristalina Georgieva of the IMF accentuated.
Accelerating the green transition is not only critical in its own right but is also key to boosting energy security and investment opportunities, she added.
The Brussels Economic Forum (BEF) is the flagship annual economic event of the European Commission. For over 20 years, it has gathered high-level European and international policymakers, academics, civil society and business leaders to identify key challenges and debate policy priorities for the European economy. It saw over 500 participants this year.