Whether it’s in pharmaceuticals, artificial intelligence, or defense, executives attending the World Economic Forum in Davos this week had a stark warning for Europe: Get your house in order or lose out to the US and China.
The WEF in Davos gathered more than 800 executives from all over the world.
Photo Credit: Bloomberg
Citing everything from over-regulation and clunky bureaucracies to the inability of the continent to leverage its market of about 450 million people, the executives said Europe risks being left behind in many of the industries of the future, and called on the region to present a unified front and pool resources to drive its competitiveness.
“It makes no sense to build an Italian corvette ship, a French corvette ship, a Spanish corvette ship, a Swedish corvette ship, a German corvette ship and a UK corvette ship,” Pierroberto Folgiero, chief executive officer of defense firm Fincantieri SpA, said in an interview in Davos. “We need to spend more in defense but we need to spend better. We must share platforms and projects.”
Fincantieri CEO Pierroberto Folgiero
Photo Credit: Bloomberg
Although these issues have hurt European business for a long time, things are coming to a head as US President Donald Trump’s trade war and intensifying competition from China across many of Europe’s key industrial sectors are adding greater urgency, with the CEOs saying a change in the narrative is critical. At stake are economic growth, jobs and social cohesion in Europe.
The WEF in Davos gathered more than 800 executives from all over the world this week, with businesses seeking clarity on pressing issues including high energy costs, the AI race, supply chains amid military conflicts and a shifting new world order.
Leaders in several industries echoed the sentiment that Europe may fall behind, with Novartis AG CEO Vas Narasimhan saying innovative drug launches were being hindered in some European countries as the US puts pressure on drug prices.
“If Europe wants to attract investment like the US and China right now, it has to step up,” Narasimhan said, citing the ease of doing business in the US, where his company is plowing billions of dollars into new plants and research and development. He called on European countries to “value our medicines, value the impact they have on patients.”
Novartis CEO Vas Narasimhan
Photo Credit: Bloomberg
The world is getting “progressively divided into geopolitical blocs and there’s a need to create as much self-sufficiency as possible within these blocs, certainly on the energy and the defense side,” Fincantieri CEO Folgiero said. “In these strategic sectors, the supply chains will have to become shorter.”
In the drugs industry, shorter supply chains will mean Europe needs to shore up the availability of key ingredients as global trade tensions mount, said Michael Sen, the CEO of German health-care company Fresenius SE.
After years of outsourcing production, Europe has developed an “unhealthy” dependence on China for so-called active pharmaceutical ingredients, he said in an interview Monday in Davos. That carries the risk of a “weaponization of active drug ingredients in this new world order,” he said. “You are in deep trouble if you have shortages of key drugs. Drugs can be used as a power play.”
The high cost of doing business in Europe is another major hindrance, the executives said. Steep energy costs in the region are resulting in China and the US winning in some key industries like automotive and AI.
“This is a challenging environment for business leaders to make long-term decisions,” said Conrad Keijzer, CEO of Swiss chemicals maker Clariant AG, highlighting high gas prices in Europe for chemical makers, which are squeezing margins and forcing them to put a hold on future investments in sustainability projects.
In contrast, North American businesses are “all positioned for growth,” said Jan Jenisch, chairman of cement firm Amrize Ltd., citing the build out of data centers in the US. “What’s happening in the US market – they are the leaders with the big tech companies, they are the leaders with all the satellite systems in the sky, they became energy positive, they are the leaders in AI,” he said.
Nicola Mendelsohn, head of Meta Platforms Inc.’s global business group.
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Europe’s seemingly never-ending regulations drew a fair share of criticism. Nicola Mendelsohn, the head of Facebook owner Meta Platforms Inc’s global business group, said that the regulatory regime in Europe has made it harder to roll out and adopt new AI products, and that business leaders are becoming increasingly frustrated.
“It’s very clear the link between complicated regulation and the ability to allow innovation to flourish and grow,” she said in an interview with Francine Lacqua on Bloomberg Television.
Some European leaders have acknowledged the region’s shortcomings. French President Emmanuel Macron said Europe needs to simplify the regulations that put undue burdens on businesses — something they don’t have to contend with in other parts of the world. In his Davos speech, he said policymakers and companies should give preference to “Made in Europe” products, and said a capital markets union is becoming urgent to bankroll the financing needs of businesses.
French President Emmanuel Macron said Europe needs to simplify the regulations that put undue burdens on businesses
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Europe’s efforts to become self-sufficient won’t be easy, according to the head of Swedish telecom equipment maker Ericsson AB.
“This whole sovereignty narrative in Europe is dangerous,” Borje Ekholm said in an interview in Davos. “I don’t think Europe has the capability to be sovereign today.”
