the news for Europe just keeps getting worse the French government collapses plunging eu's second largest economy into turmoil France's political upheaval in December offered another Glimpse at fractious European Affairs Germany is under pressure and Volkswagen workers are are striking hard in my view we are already in a crisis mood our former model is over if we follow our classical agenda we will be out of the market I have no doubt the eu's eom is now fighting for survival and struggling to keep Pace with the US and China had the European economy grown as fast as
the American economy over the past couple of decades we've been generating three trillion EUR of extra income every year that's roughly the equivalent to the total GDP of France being routinely added into the economy Europe needs to have a digital era economy with companies that challenge those from China and from the US without that the Reg is at risk of being unable to afford to protect itself in a world where security is no longer guaranteed it's just a very tense moment for the world and Europe's at the center of [Music] it this is one of
the most consequential figures in global economics and in September he sounded an alarm fortiv is weak was very weak Mario dragi will this morning deliver his long awaited report on what Europe must do to regain its competitiveness Mario dragi is a highly respected Economist is former president of the European Central Bank during one of Europe's most difficult times and also LED Italy uh through through another challenging period he's become a figure that you look to in times of trouble his report warned that the US and China were innovating so expeditiously Europe needed to invest hundreds
of billions of Euros extra every year to compete possibly to survive the druggy plan got the conversation started and then of course there's Trump and then of course there's China and then there's a war in Ukraine and a war in the Middle East the conclusion was Europe has been stuck in a rut and if nothing changes in the current trajectory is maintained then Europe will probably account for less than a tenth of global GDP by 2050 which points to Europe having a much diminished role in the global economy in years to come increasing productivity is
one of solutions to this it doesn't mean making people work harder it means for the same amount of work a person creates more value to appreciate the challenge let's quickly examine one of Europe's most iconic traditional Industries Italy's Olive business is worth billions of Euros prime minister Georgia Malone's government wants the industry to grow and help the country reduce its Mammoth debt burden it's why all of Millers receive tens of millions of Euros in post pandemic EU Aid granted to Italy Some Farms spent their share upgrading their machinery [Music] productivity is one of the best
ways to grow an economy because it means for the same amount of work a person creates more value and as important as olives are cultivating them isn't as productive as developing semiconductors or solar panels two things the US and China prioritized years ago we haven't taken Frontier Technologies and dispersed them through our economy in the way that would raise incomes and raise our efficiency so by being left behind we are now poorer and we're just not keeping Pace with American productivity which is what led to the estimate that the EU economy is 18% smaller than
it may otherwise have been and that's equal to a shortfall of about3 trillion e and why one reason is the eu's jth of massive investments in transformative start prods we don't translate Technologies at The Cutting Edge into new businesses and we don't have hugely successful technology companies in anything like the way that the US does or even China to some extent one reason is we we don't have great vent Capital markets here most of the world's really big companies have been funded via this actually quite tiny asset class in Europe that sort of didn't happen
part of it also is regulation Europe really believes in regulation that's not a bad thing as I'm always told when I'm you know in Brussels is what we're doing is a blueprint for everyone else but if you put it all together you have a situation where you're not encouraging growth we are behind everywhere else in the world when people talk about billions they sound like large numbers but now we're talking about trillions in terms of the valuation of tech companies just take the biggest US ones over the last couple of years if their combined value
was a country it would have the third biggest GDP in the world after the US and China I think people are waking up to the fact that Europe really is in trouble because not only does it not have the the tech platforms but the digital era is eating into everything as we're seeing what's happening in Germany with the car industry for example that electric cars are fundamentally digital era products Volkswagen is at the the center of this difficult transition it's still Europe's biggest car maker and one of the eu's industrial engines but it didn't prepare
for an electric vehicle Revolution or that it would be led by an American startup called Tesla and later rivaled by China VW became emblematic of Germany's struggle what VW is trying to do is close up to three factories we're talking about tens of thousands potentially of job Cuts meanwhile Germany's neighbor is politically and financially deadlocked France has a number of problems high debt is one of them the deficit is very wide so that's the gap between what the government spends and what it brings in in tax revenue that's huge and it's proving very difficult to
tackle it's also over what the EU even allows which is this 3% of GDP France was well past that this year and is forecast to be for some time and it makes investors more apprehensive about buying French debt that's what this line shows the higher the line the riskier France is judged to be relative to the traditionally very safe Germany and in December that risk was the highest it had been since 2012 when Europe was in the midst of a debt crisis which is just compounding the fiscal difficulties that that it faces so until there
is a political resolution it's hard to see the French economy turning around people are waking up the fact that that France is facing a potential debt crisis and Germany on the other hand is facing a potential employment crisis where it won't have the same number of workers producing the types of thing that Germany has made itself famous for and that impacts the whole of the European Union I really don't think Europe can do anything without France and Germany reeing and doing well you need those two economies to push everyone else and everyone else trades with
them so we have no options we need them to do well put together this is the state of Europe that Mario drogy rang the alarm about the block is too reliant on traditional industry too unproductive too uncoordinated and too averse to risk this fractured political landscape in which countries look to protect their own interests over those of the Union makes change difficult so what's next where do we look for warning signs or silver linings the Euro against the dollar is a good diagnostic for where Europe is being left behind it's trended downward and traded at
equal value only a handful of times but to command geopolitical weight you need a big economy in dollar terms so Crossing that parody threshold is a worrisome indicator for economists and politicians a fall to par could embolden populist politicians who oppose the currency raising the remote but real threat of another brexit-like event Germany's right-wing afd party said it's planning an election campaign advocating this but experts including drogy have stressed that change however difficult is possible cars machines robots this kind of Precision Engineering required to create this kind of Hardware is something Europe is traditionally very
very good at particularly Northern Italy Southern Germany Switzerland these places that are very very good at making things very well may play a pivotal role in where we we produce uh high quality technological Goods going forward [Music]
