The Circle warns of the danger of EU fragmentation: "It does not know how to agree"

BarcelonaThe Cercle d'Economia approaches its annual conferences, increasingly focused on the health of the European project, with a touch of pessimism. In the opinion note prior to this year's meeting, which will be held between June 1 and 3 at the Palau de Congressos de Catalunya, the entity warns of the "fractures" and "divisions" that risk the Twenty-seven's ability to become autonomous in an increasingly fractured world.

The organization chaired by Teresa Garcia-Milà picks up, like the rest of the Catalan economic world, the gauntlet of proposals such as the reports by former Italian prime ministers Mario Draghi and Enrico Letta. However, it maintains that the Twenty-seven do not suffer from a knowledge problem, but rather from "political will and execution capacity." "Europe knows what it has to do. What it doesn't know is how to agree to do it," they argue.

The Cercle's note regrets that Europe has not managed to operate jointly, especially now that the "need for change" has become evident. The "geopolitical fragility" of all global powers, as well as the "technological transformation of a scope that is still difficult to gauge," force the Twenty-seven to reposition themselves in the world, and the organization considers that the necessary foundations have not yet been laid to do so. Building, they warn, "will not be easy"; as the great political division they observe in the community environment is between pro-European and Eurosceptic forces, which is reproduced on both sides of the traditional party system. "This fracture cuts across all debates, and is the main obstacle to progress," they add.

In this regard, Garcia-Milà places Spain in a kind of political bubble. The president of the Cercle has declared herself "calm" regarding the advent of Eurosceptic political positions in the State, even if early elections were to be called. "We are a central country in Europe. The majority of the Spanish population is very pro-European," the economist valued.

The path to industry

Despite the bad political mood, the Circle observes certain executive projects in Brussels that are on the right track. Garcia-Milà's team celebrates the roadmap drawn by the Industrial Acceleration Regulation, which proposes a horizon of 20% of industry's weight in GDP and better control of trade borders.

However, they warn of several immediate limitations to applying the project. The biggest, in the Circle's view, is the "pending subject" of the internal market, still an economic patchwork that does not seem to find a way to unify itself. "The single market is far from being a reality in key sectors," warn the experts; such as telecommunications, energy, or banking. Without this unity, the document questions the capacity of the Twenty-Seven to fulfill one of the business objectives of the European Commission presided over by Ursula von der Leyen, such as the creation of "European champions" that can compete with large Chinese and American companies.

The economic club, in this regard, values the antitrust reform proposed by Brussels, which facilitates mergers between large continental players, although it warns that it will be limited if the market is not coordinated correctly. Without a single economic environment, "national mergers that create larger companies within a country" can be encouraged, but they will not become community powers "more competitive on a global scale." Contradictory examples of this reality are the latest major banking takeovers that Europe has seen: BBVA's over Sabadell, exclusively national, and the Italian UniCredit's over the German Commerzbank, which could create a massive international entity.

Catalonia in Europe

According to the members of the Cercle, both the State and Catalonia have essential roles in the multiple transitions that Europe must undertake. On the one hand, they highlight the "base assets" that the Spanish productive system has, from its "prominent position" in 5G connectivity and digitalization to the availability of cheap energy thanks to the renewable network. They also praise Barcelona's positioning as a capital of research and transfer in the biomedical, pharmaceutical, and biotechnological fields, as well as in deep technologies, which continue to grow in the Principality.

Conversely, they point out the general and sectoral "shortcomings" that still limit Spain's reach as an economic player within the EU. The major wound is productivity, "lower than that of European competitors." The Cercle attributes the scarce productive capacity to a poor effort in research and development, as well as to a business fabric smaller than that of the rest of the continent, where micro-enterprises account for more than 98% of the private sector.

Thus, both Garcia-Milà and the entity's general director, Miquel Nadal, have taken up the challenge of the Informe Fènix, a document prepared by various Catalan economists that points out the gaps in the Principality's productive model. According to Nadal, the study "reinforces many of the ideas that the Cercle has put on the table," such as productive shortcomings, tourism monoculture, or the failures of the migratory model. "The Spanish economy must be more intensive and less expansive," concluded the president.

To resolve this, they call on the Spanish authorities to advocate for a European industrial policy that is "coordinated, ambitious, and based on common financing instruments." An initiative that is particularly controversial in the northern and central countries of the continent, which are less fond of joint financing projects.