Europe's economy faces urgent competitiveness challenges

European business officials are warning that the continent's economy is at a critical juncture. Markus Beyrer, the head of BusinessEurope, emphasized the need to boost competitiveness amid low growth and looming tariff threats. He stated that Europe must address its economic weaknesses or risk losing investment rapidly. This warning comes as EU leaders prepare for a summit where defense spending is a key topic. However, improving competitiveness remains a priority for the EU. The European Commission has introduced its "Competitiveness Compass" plan, aiming to enhance innovation and support new technologies, including artificial intelligence. The plan also focuses on decarbonization and strengthening supply chains, important in a politically divided world. Beyrer highlighted the need to lower energy costs, increase skilled labor, and reduce regulatory burdens. He warned that Europe's strength relies on a robust economy, which must be urgently addressed. The eurozone saw a growth of 0.9% in 2024, a significant increase from 0.4% in 2023. Despite this, growth slowed toward the end of 2024 and into early 2025. Businesses are benefiting from lower inflation and interest rates, but the outlook is uncertain due to unpredictable trade policies from the US. The US has already imposed a 25% tariff on steel and aluminum imports and is considering a 200% tariff on European alcohol. More tariffs affecting EU goods are expected soon, which could lead to retaliatory measures from the EU. ECB President Christine Lagarde warned that these developments might increase inflation and disrupt efforts to lower interest rates, affecting both businesses and consumers in Europe.