Mounting Threats to Europe’s Economy: How Finance Can Help Strengthen It | World News

Europe is facing a new challenge as innovative, low-cost Chinese producers are disrupting its traditional industries and causing concern among policymakers. President Emmanuel Macron recently highlighted the need for Europe to increase its economic prosperity and technological sovereignty to compete on a global scale.

The European banking sector, once on the brink of collapse during the sovereign debt crisis, has made significant strides in recovery. However, the sector still faces challenges with inefficiency and national boundaries hindering progress. The proposed European banking union, first suggested in 2012, remains incomplete without a common deposit insurance scheme, leading to limited cross-border activity and consolidation.

In addition to banking reforms, efforts to create a European capital market are essential to unlock the continent’s vast savings and support small businesses and entrepreneurs. Currently, only 30% of companies’ financing in the euro area comes from tradable securities, compared to two-thirds in America. This lack of a developed capital market restricts access to finance for businesses and increases risk for entrepreneurs.

While the road to financial reform may not be as glamorous as imposing tariffs on foreign goods, it is crucial for Europe’s economic growth and competitiveness. By implementing these reforms, Europe can harness its size and potential to keep pace with global superpowers like the US and China in the race for technological supremacy. As the continent navigates these challenges, the importance of financial reform cannot be understated in shaping Europe’s future economic landscape.