Editorial: The systemic importance of the European economy has steadily decreased in recent years

The world threatens to fall into two blocks. No other economy is hit as hard as Germany. The country must reinvent itself economically.

Author of the editorial

Sebastian Matthes is Editor-in-Chief of the Handelsblatt.
Düsseldorf Hardly a conversation goes by with politicians, managers or entrepreneurs these days in which the word “turning point” is not mentioned at some point. Not a conversation in which the new unity of Europe and the entire West is not invoked and the end of old political certainties is not established.
That seems almost an understatement, because the coordinates are also shifting economically – and that is without a doubt a threat to the German business model in particular, as our big cover story shows. In the past few decades, Germany has offered precisely those capital goods that the world urgently needs: machines, production facilities, infrastructure, but of course also cars. Germany was something like the hardware store for the global industrial boom. The outfitter of the world.
But this old world with its open borders, at most moderate trade restrictions and economic interdependencies – this world is under threat. It could break up into new blocs that isolate themselves politically and economically: the West on the one hand and the new bloc of China and Russia on the other. The technology war with sanctions and supply bans between China and the USA in recent years gives a first glimpse of what the global economy could still face.

Europe must also reinvent itself economically

Now you can have a long discussion about dependencies that are dangerous for Europe and especially Germany, with energy, semiconductors and many raw materials of the high-tech industry. But the debate must not end there. Europe must also reinvent itself economically. Other regions have long been leaders in important fields of innovation such as software, artificial intelligence and electromobility. The systemic importance of the European economy has steadily decreased in recent years.

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For many years the EU was at odds, indecisive and slow. But if Europe has proven one thing in recent weeks, it was its ability to act together: within hours, the countries of the EU agreed on a historically unprecedented package of sanctions against Russia, a strategy for the continent's future gas supply and a plan for agreed on how to deal with millions of refugees from Ukraine.

More on the subject:

Ukraine war, China fears, globalization crisis – the German economy is facing a turning pointInterview with US economist Joseph Stiglitz: "We are experiencing a crisis in a completely new dimension"How the world is suffering from the Chinese staying awayProduction stops and supply gaps: This is how the War the economy in crisis
European economic politicians should now use this energy to also revitalize the continent economically. But not with a misunderstood industrial policy that is limited to subsidizing or even rescuing industries and companies that have reached the end of their life cycle anyway. But with an EU-wide coordinated economic policy that focuses on education, research and entrepreneurship – with a focus on those fields in which Europe definitely has opportunities: A low-CO2 industry is certainly just as much a part of it as sustainable mobility, deep tech , semiconductors and a digital economy that handles user data responsibly.
If Europe has had one experience in this crisis, then it is this: only cohesion can make Europe strong. But this cooperation must not end with security policy – Europe must also move much closer together economically.
The idea of a joint venture capital fund for European tech start-ups is a start. But there are many other areas in which closer cooperation would ensure growth and prosperity: in the construction of trans-European power lines and hydrogen pipelines that transport green energy from the south and the far north to the industrial centers. For cross-border research clusters or educational projects. And of course the European partners must finally complete their internal market, which represents a real power factor in the global economy. All this will then create attractive conditions not only for investors – but also for the workforce, which is missing in all corners of the economy.
If this economic solidarity succeeds, Europe can find new economic strength. But if that doesn't succeed, the continent will be dwarfed into a pure sales market for the rest of the world.
More: Follow the current events in the Ukraine war in the Newsblog

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