The Crumbling Economic Foundation

The EU's economic woes are far from localised. Germany, the economic powerhouse of Europe, is experiencing significant challenges. The recent announcements of massive layoffs at major corporations like Bosch, ThyssenKrupp, and others, are not isolated incidents.

These layoffs, representing tens of thousands of jobs, signal a deeper malaise in the German manufacturing sector – the very backbone of the EU's economic strength. These aren't just cuts in response to minor fluctuations; they're strategic decisions driven by sustained declines in profitability. Labour costs are often the first to be targeted in such situations, making layoffs and factory closures almost inevitable. Volkswagen’s earlier restructuring, which I discussed extensively in a previous session, further underscores this trend.

The scale of these job losses – 7,000 at Bosch, 11,000 (40% of a division) at ThyssenKrupp – is simply staggering and highlights the severity of the situation. The job freeze and reduced working hours announced by Daimler paint a similarly grim picture.

France, too, is far from immune. The concurrent announcements of plant closures by Michelin and strikes over threatened factory closures in northern France demonstrate that these problems are widespread throughout the EU, not confined to Germany. This isn't simply a "slowdown"; it's a systemic crisis of confidence impacting numerous key industrial sectors.

The situation is exacerbated by the EU's significant dependence on external factors. As former ECB President Mario Draghi eloquently stated in his address to the EU Parliament, the EU's high trade-to-GDP ratio, coupled with its heavy reliance on a small number of suppliers for critical raw materials and its dependence on imported digital technology, makes it acutely vulnerable to global shocks.

This over-reliance, coupled with soaring energy prices – two to three times higher than in the US or China – has placed immense pressure on EU businesses, crippling competitiveness and hindering economic growth.

Draghi's assessment is particularly stark because he explicitly highlights the EU's lagging position in new technologies. Only four of the world's top 50 tech companies are European, underscoring a critical deficiency in innovation and technological leadership.

This further diminishes the EU's ability to adapt to the rapidly evolving global economic landscape. The alarmingly low defense spending among EU member states, as Draghi points out, also points to a larger picture of systemic weakness.