“The single market is at the heart of Europe”

EU policy expert Marion Mühlberger has been observing the European economy for Deutsche Bank Research since 2020. As part of Deutsche Bank’s Europe campaign, she talks about how politics in Brussels influences competitiveness, what homework the EU needs to do – and where Europe's strengths lie.

Marion, the European elections still feel like they’re some way off and, in a similar way, many people might feel that the decisions made by the European Parliament have little impact on their everyday lives. Why are the European elections from June 6 to 9 important?

I assume we’ll see a lot more attention once we enter the “hot phase”, the final days before the elections get under way. The European Union sets the course in many policy areas: from energy to trade to competition policy – areas that affect the lives of all its citizens and are therefore important. The European Parliament also has a say in setting Europe's priorities. As a result of the Green party winning more seats and hence more influence in the last election in 2019, for example, the “Green Deal” became one of the EU’s most important strategic projects.

What do you expect looking ahead?

The balance of power is likely to shift to the centre-right. It is becoming apparent that defence and national security will be at the top of the agenda in the next legislative period – as well as how Europe can remain competitive in the long term.

How competitive is the EU at present – not least in competition with the United States and China?

Europe has many strengths. It has a well-educated workforce, top research institutions, legal certainty and social stability. This should not be underestimated. However, Europe also faces some challenges: our societies are aging, energy is comparatively expensive and there are too many rules and regulations. Added to this, while other countries have intensified industrial policy in the recent past – in other words they have been promoting their key industries by directing subsidies and other benefits their way – Europe's competitiveness, in comparison, has tended to decline during the same period.

How much can the EU influence competitiveness?

Considerably! In many policy areas, the EU has exclusive power or shares power with the individual nation states. The single market is at the heart of Europe. It allows companies to sell their products in all member states and achieve cost advantages. The single market already covers many areas, but it is not yet complete.

Where is there a need for action?

The markets for telecommunications services, defence and energy are not yet fully integrated, to name just three examples. There is potential there. In order to leverage this, the governments in the member states would have to reach an agreement, for example on linking national electricity grids more closely with each other. And of course, the Capital Markets Union would be an important lever for mobilising private capital and being able to make the necessary investments in our future. In short, the EU still has some homework to do.

Can Europe close the gap with the US and China if policymakers act decisively?

With the right steps, it can increase its own long-term potential growth, which is currently far too low – and make Europe more competitive internationally again. Ultimately, the aim is to accelerate technological progress, for example through interdisciplinary technologies such as artificial intelligence, to attract enough qualified workers, to better leverage the potential of the domestic workforce and to increase the productive capital stock.

In which areas does Europe have the best prospects?

The individual regions and countries in the EU all have very different strengths. For example, Germany is really strong in green technology and an export champion. Here in Germany, we are benefiting from the global transformation to a more sustainable way of life. In Scandinavia, digitization is well advanced; and in Italy and Spain, tourism is one of the most important economic drivers.

Finally, back to the elections: in addition to us Europeans, US citizens are also being called to the booths this year. How relevant is the result of the presidential election in November for the European economy?

The United States is enormously important to us – as a pacesetter for the global economy, a trading partner and a guarantor of security. If Donald Trump is elected for a second term, US trade policy could become more protectionist, which would not be ideal for our export-oriented economy. Ultimately, though, we’ll have to wait and see what happens – and see how much of that is down to promises made in the election campaign.