The citizens of Europe have cast their votes, leading to the formation of a newly elected Parliament. Contenders for the European Commission president and fresh consortium of commissioners now vie for authority. However, this is no regular scenario for Brussels.
Regardless of who occupies the influential seats, the responsibility they are about to assume is crucially significant. Europe, three decades back, characterized approximately 25% of the global GDP, but it has now fallen behind. The ratio of GDP per resident between the EU and the US stands at a startling one to two at approximately $40,000 (€37,400) per European and $80,000 per American. All top-ranking global companies are non-European, and so are the top 12 start-ups valued at a minimum of $1 billion. Also, none of the top-ranked 50 companies in Europe were established in the last three decades.
In comparison to their counterparts, European companies portray slower growth, report decreased returns, and are falling behind in research and development initiatives. This scenario is visible even in sectors such as car manufacturing, an area that Europe traditionally dominated. Just one among the top 10 electric car brands in the US in the prior year was of European origin. The number of planned semiconductor production units in China is four times larger than in Europe.
Sadly, the EU no longer appears to be a breeding ground for innovation and globally competitive companies. This sentiment echoes in the words of Emmanuel Macron and Olaf Scholz as they remarked, “Our Europe is mortal”. They describe Europe as being at a critical “Zeitenwende” or historically defining moment.
However, the advent of generative AI could alter this narrative. This technology holds the promise of providing the needed boost. Goldman Sachs anticipates that generative AI might escalate global GDP by 7% in the forthcoming decade.
Europe has pioneered technology regulations, evident through GDPR, the DMA, DSA, and the AI Act, but it still lags in pioneering and deploying the technology at scale. The regulatory complexity and the varying set of laws across different member states often induce hesitation in companies for introducing new products. Companies such as Meta, Google, and even European brands like Volkswagen have deferred their AI rollout in Europe, and are progressively choosing the US to build and launch their AI offerings. Given the rapid embracing of AI by the US and China, the divide between these influential nations and the EU is growing.
So, what can Europe do to alter its trajectory?
The resource-heavy nature of primary AI models, both financially and energetically, is addressed by deploying adaptable AI models, specifically those that are open source. These models provide European enterprises, emerging start-ups and researchers with the ability to utilise tools they would not typically be able to construct independently. As a result, Europe’s eminent university system and vast potential for research and development place it in a strong position to become a frontrunner in the applied field of AI. This would allow for the creation of applications and services through which the influence of this impactful new technology would be felt.
Despite its significant single consumer market of 450 million customers being one of its principal assets, Europe has yet to utilise this to its full potential. The aim of the European pioneers is to match strides with the technological giants of the US and China. They eagerly anticipate the next global tech hub being established within European borders. As a European, I am excited to witness the rise of companies that could join the ranks of Meta, Alibaba, or Google. The key components for this to transpire are already available to us: an expansive consumer market, distinguished universities, exceptional talent, and a successful track record of innovation and experimental ethos.
The inability to sufficiently enact the digital single market, however, stymies this potential development despite the introduction of an overwhelming 77 new pieces of digital legislation since 2019. For instance, it is noteworthy that a digital startup in Amsterdam would have 27 unique intellectual property laws and a multitude of content licensing rules, data protection protocols, and other hurdles to overcome before they can successfully launch their business across the continent.
Reflecting on my tenure in Brussels in the 90s, the single market was considered a beacon of hope. During my study at the College of Europe, which crossed paths with my now wife, Miriam, I worked within the Commission during a historic period of globalisation and integration within Europe. Yet the consequences of the 2008 financial crisis took a toll on this wave of globalisation. Populism and the weight of vast deficits caused governments to focus on national sovereignty, overshadowing the ideal of collective efforts. This shift led to a phase of introspection within Europe.
There is no nation that has withdrawn from the European scheme more decisively than the UK, my homeland. The European Union is becoming increasingly argumentative and divided, with regulators and policymakers heading in varying paths. It’s hardly surprising, therefore, that a significant number of voters, particularly the youth, are backing revolutionary populists advocating for a disruption of the prevailing order.
Our newly elected legislators and commissioners are faced with an enormous challenge to halt Europe’s economic downturn. Achieving this won’t be a simple task, but it is within reach. All we need to do is capitalise on our attributes. The single economy is Europe’s premier advantage, yet it remains unfinished. We need to complete the task, evade disunited regulation, and adopt a welcoming stance toward artificial intelligence progression. We then just need to let the creativity, innovation, and entrepreneurial spirit of Europe rekindle the sense of optimism we are all longing for.
Nick Clegg holds the position of President for Global Affairs at Meta.