2024-07-24 03:13:04
If at the beginning all attention was focused on the prices of energy resources, then later it shifted to the growth of service prices and wage growth. And now the problem of labor productivity in the EU is being raised more and more loudly, and it is already worth considering whether the slowdown in its growth is not cyclical, but structural, that is, the relationship between production factors is changing. Finally, industrial and export indicators are again deteriorating.
At the beginning of the year, the “Economist Intelligence Unit” predicted that the EU economy will gradually recover in the second half of this year, and the conditions for this will be created by the recovering Chinese economy, that is, trade with China. However, the intensifying protectionism, which has already become, I would say, an open trade war in the automotive industry, spreads like a contagion to other sectors as well.
Once upon a time, it was a catchphrase for politicians decoupling (unlinking), later tried to change de-risking (risk reduction), today business and consumers are already implemented and turned into reality. Supply chains are underway decoupling-deChiningthat is, longer, less centralized, more expensive supply chains are created, the final product of which would not be Made in China (Made in China).
And we in Europe are still sighing because of the achievements of the US and Chinese economies. We are angry about US labor productivity growth rates, which we lag well behind, and we criticize China for its failure to manage excess capacity, significant support for business, and failure to grow domestic demand. The EU also has the problem of internal demand, which we like to point our fingers at when talking about China.
Only if the problem of China’s internal demand is more related to the feeling of insecurity experienced by the population at the moment (due to real estate depreciation, wage cuts), then the EU relates it to the general aging of the population and the decrease in their number.
In the science of business management, the principle of Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis, which is well-known to everyone and already well-worn, dictates that you need to prepare for external factors and find ways to adapt to them (opportunities and threats), and management and decisions should be directed to internal factors (strengths and weaknesses). As unpleasant as it is, it suggests that we sometimes pay too much attention to what we can’t control and not enough to what we have to take care of ourselves. And we have a lot to manage.
I notice that there are cases of neglected business hygiene, that is, when the main factors determining the production result are neglected. Although there are not very many of them: the problems of capital, technology and innovation, labor supply (quantitative and qualitative), energy and raw materials need to be solved. Compared to the USA and China, we are still lagging behind in a lot of things.
We have to admit that the EU’s focus on renewable energy has so far not included the issue of its price competitiveness. Last week, during an interview, Donald Trump emphasized one very important factor for the success of the US economy – the need to ensure competitive prices for energy resources. It is predicted that in 2030 electricity prices in the EU will be higher than in the US and China. Of course, it can’t be better in other resource sectors as we are net importers of gas and oil.
The issue of labor force (even if everyone understands and acknowledges that the entire EU is facing an aging population and declining consumption), a transparent immigration strategy and policy are taboo not only in Lithuania. Some countries are already trying to address this by creating incentives to work longer (establishing a longer work week, creating incentives for part-time workers to work longer, retraining, increasing the retirement age, etc.). If this question still bothers anyone, it might be worth getting your eyesight checked.
When it comes to progress and technology, it is not enough to insert the word “innovation” into the name of the supervising institution. They will be found where there will be a risk-tolerant environment (innovation is always associated with greater risk), where innovation abilities and skills will be concentrated. In addition, innovation requires capital and the courage to accept failure.
For the second year now, no one needs to explain that capital costs (interest rates) throughout the EU, but especially in Lithuania, are very high. Currently (in the first half of this year), the demand for loans to companies has significantly decreased (especially long-term loans; this means that long-term investments are also decreasing). Borrowing in the EU is expensive (depending on the country), but even the applicable borrowing instruments cannot ensure the necessary financing if a large project is planned. The EU capital market is simply unable to do this today. Therefore, a single capital market in the EU is necessary.
Finally, we are still largely at the mercy of China for renewable energy and green transformation. In the EU, a large part of the added value created is made up of goods purchased from China. Whether we like it or not, with our own hands or those of others, we are burying the EU solar module manufacturing sector. The EU buys more than half of all rare natural resources needed for the green transition from China. Currently, not only China, but also other countries that export rare resources are introducing greater control over them.
The beginning of the second half of the year will not be easier, regardless of whether the ECB lowers interest rates or not. There is more and more talk about the possible Trumponomics application of the principles: retaliatory US trade measures are aimed at China and the EU (after becoming US president, D.Trump promises to apply 10% import duties to all imported goods, and the EU treats China the same way).
Let’s sigh less about the achievements of others, but rather solve our own internal problems. Let’s focus and focus on strengthening the foundations of our economic competitiveness with Trump and Xi Jinping looming in the background.
2024-07-24 03:13:04