Europe invests a third as much in innovation as the US.

BarcelonaThere's no way to overcome this challenge. Europe invests a third as much in innovation as the US, and this gap persists, leading to a loss of competitiveness and productivity. This is the warning from Europe G, the think tank led by former Catalan Minister of Economy Antoni Castells, in its latest report. paperData from the OECD and Eurostat clearly reflect this: European spending on research and innovation (R&D) amounts to 2.3% of gross domestic product (GDP) compared to 3.5% in the United States. This 35% difference "explains the lag in productivity, business profitability, and technological leadership," the authors assert.

In this paper, This group is calling for a doubling of EU funds allocated to innovation, reforms to competition policy, and greater political integration "if Europe wants to preserve its economic and technological sovereignty." The work carried out by Rafael Myro, from the Complutense University of Madrid, and Vicente Salas, from the University of Zaragoza, recalls the recommendations of the reports by the first president of the European Central Bank (ECB), Mario Draghi, and the former Italian Prime Minister, Enrico Letta, compiled in the Compass for Competitiveness, combining the US and Chinese perspectives. In the first case, regulation and industrial policy predominate, and in the second, competition and industrial policy. In any case, they warn that it is necessary to modify the European formula of predominance of regulation and competition. Furthermore, Europeans focus their efforts on mature sectors such as automotive and industrial machinery, while the US and China concentrate their investments on emerging technologies such as artificial intelligence, biotechnology, and semiconductors.

One of the recommendations is to double the budget of the framework program for research and development (R&D), to €200 billion, and to create a European agency in the style of the US ARPA, which once promoted advances such as the internet and GPS. One of the key conclusions is that "the balance between competition policy and public intervention must be reviewed." The objective, they explain, should be to enable "common strategies, make state aid more flexible, and design a competition policy to promote European champions in strategic sectors." Given the enormous challenge of the technological transition, which requires vast economic resources, "more powerful and coordinated European financial instruments" are needed. In the authors' opinion, "Europe cannot continue to be a global regulator without its own industrial muscle."

AI Deployment

One example of this lack of strength is reflected in the resources allocated to AI deployment. European investment is six times lower than that of the US. If this trend continues, "without real coordination among member states, the EU risks falling behind in the global technology race."

This analysis also coincides with the latest issue of the Economic Review of CataloniaDedicated to industrial reconversion, at a time of calls for greater autonomy and increased investment in the defense industry, the magazine's director, Guillermo López Casasnovas, states that "the future of reindustrialization is uncertain." He asserts that measures aimed at fostering industry are necessary, such as "decisive" funding for nascent projects, like startups, or "generous" taxation like that applied to sectors such as film production. The authors explain that industrial policy can only thrive in a European Union with "stronger institutions and a common vision." They add that "selective state intervention benefits some sectors and territories more than others and, therefore, requires political legitimacy that the EU has not yet fully developed." One of Europe G's conclusions is that industrial policy "has gone from being a marginal issue to becoming a central pillar of the European economic agenda with the goal of achieving a more competitive Europe."

In addition to Castells, the group also includes Josep Oliver, Professor of Applied Economics at the Autonomous University of Barcelona (UAB), as co-director; Rafael Myro; Martí Parellada, Professor of Applied Economics at the University of Barcelona (UB); Vicente Salas; and Gemma García, Professor of Applied Economics at the UB.