The Circle warns of the danger of EU fragmentation: "It doesn't know how to agree"

BarcelonaThe Cercle d'Economia is approaching its annual conferences, increasingly focused on the health of the European project, with a tinge of pessimism. In the opinion note prior to this year's meeting, to be held between June 1st and 3rd 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 acknowledges, like the rest of the Catalan economic world, the proposals put forward, 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 from a lack of "political will and capacity for execution". "Europe knows what it needs to do. What it doesn't know is how to agree on doing it," they argue.

The Cercle's note laments that Europe has not managed to operate jointly, especially now that the "need for change" has become apparent. The "geopolitical fragility" of all global powers, as well as the "technological transformation of a scope that is still difficult to gauge," are forcing the Twenty-Seven to reposition themselves in the world, and the organization believes 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 runs through all debates, and it is the main obstacle to progress," they add.

The path to industry

Despite the poor political climate, 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 implementing the project. The biggest, in the Circle's view, is the "pending assignment" of the internal market, still an economic patchwork that doesn't seem to find a way to unify. "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 chaired by Ursula von der Leyen, which is the creation of "European champions" capable of competing with large Chinese and American companies.

The economic club, in this regard, values the antitrust reform that Brussels has proposed, 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 incentivized, but they will not become community powers "more competitive globally." 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

In the opinion of the Circle's members, 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 possesses, 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.

They point out, on the other hand, 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 Circle attributes the low productive capacity to poor investment 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. 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 particularly stirs controversy in the northern and central countries of the continent, which are less fond of joint financing projects.