Something is ailing Europe; experts and leaders at Davos offered up remedies

Europe's economy has flagged at a time when it must find new ways to compete. Image: World Economic Forum
- European leaders and experts at the World Economic Forum Annual Meeting in Davos did not shy away from addressing the region's difficult situation.
- As the geopolitical order shifts Europe must act now to spur its economy and retain its relevance as a global power, they said.
- Some of the suggested solutions: unify EU capital markets, and have ‘more confidence!’
For a long time, according to Politico editor Jamil Anderlini, Europe made “three big bets.”
“Russia for cheap energy, China for big, open markets, and America for security,” Anderlini said during a panel discussion at Davos 2025. “Those bets paid off for a while, and are now big losing bets.”
The acknowledgment of an uncomfortable new reality was threaded throughout the many Europe-focused portions of this year’s meeting.
Between 2019 and 2024, the EU economy grew at roughly half the pace of the US. Only about a quarter of the chief economists surveyed recently by the Forum think Europe will see "moderate or stronger" growth this year, compared with more than half of the economists when it comes to China – and three-quarters when it comes to the Middle East and North Africa.
Leaders and experts convening in Davos had no shortage of prescriptions for the region to regain its competitive edge in a changing world.
Those changes include a new administration in the US, which seems inclined to make a traditionally warm relationship less so. “The EU treats us very, very, unfairly,” freshly inaugurated US President Donald Trump said during a remote Davos address. New US tariffs on European imports now seem likely. It’s unclear whether the task force assembled to prep the EU for the new American leadership accounted for such a quick change in tenor.
The more nuanced relationship with the US comes at the same time Europe is faced with a lingering energy crisis as it weans itself from Russian supplies, a chronic dependence on Chinese imports, and what experts say is a financial system that’s far less integrated than many outsiders might assume.
“Europe is a myth,” said a playfully provocative BlackRock Chairman and CEO Larry Fink during a Davos panel. “It’s a beautiful myth.”
From capital markets to having ‘more confidence’
In fact, there are plenty of readily addressable issues in Europe, Fink said. One is to stop being so pessimistic.
More concrete ideas advocated by Fink and others include forming an EU capital markets union, which could better allocate money to young companies that need it to grow into the future Metas and Microsofts of the world.
European Central Bank President Christine Lagarde said the region’s decision-makers are painfully aware of what must be done; it’s just a matter of doing it. A capital markets union, she agreed, would help retain promising homegrown entrepreneurs and startups, and probably attract others from abroad.
It just might be “time to import a few of the talents that would be disenchanted, for one reason or another, from the other side of the sea,” she said.
IMF Managing Director Kristalina Georgieva drew a sharp cultural distinction between Europe and the US. “The United States has a culture of confidence,” she said. “Europe has a culture of modesty.”
Georgieva added: “My advice to my fellow Europeans is: more confidence! Believe in yourself!”
Another suggestion for Europe made during a Davos panel by Tharman Shanmugaratnam, the president of Singapore: tap into what’s distinguished you in the eyes of the world for centuries. Europe is, after all, the land of Beethoven and Kant, and a model for liberal democracies everywhere.
“It’s a font of the values that we admire in today’s world,” President Shanmugaratnam said.
The Forum has published a series of relatively practical suggestions for addressing Europe’s issues in a batch of recent reports. They cover things like leaning into its green energy potential, improving its investment environment, and pursuing strategic interdependence.
New opportunities may also crop up in light of decisions made elsewhere.
Lagarde said she thinks the incentives for clean-energy production made available via the US Inflation Reduction Act, which have proven tempting for European companies, will soon no longer be available.
If the US doesn’t want that kind of economic growth anymore, she seemed to suggest, Europe would be more than happy to take it.
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February 10, 2025