BusinessEurope: Why Europe’s economy is on a make-or-break knife-edge

“Europe is now at a turning point,” Markus Beyrer, director general of lobby group BusinessEurope, told Euronews’ business editor Angela Barnes.

“We will to a certain extent decide ourselves whether we … repair the flaws we have in our system,” Beyrer said.

“If we fail to deliver on time, to really move competitiveness up the agenda…investment will continue to leave Europe at light speed,” he added.

The message from the European business chief comes as EU leaders convene for a summit on Thursday, where defence spending dominates discussions.

Boosting competitiveness is nonetheless high up the EU’s wider agenda, as the bloc seeks to improve its economy through supporting businesses.

To this end, the European Commission presented its “Competitiveness Compass” plan in January, building on the work of top politician Mario Draghi.

The framework seeks to boost innovation by supporting the adoption of new technologies like AI, as well as presenting a strategy for decarbonisation.

The action plan also aims to bolster EU supply chains and reduce dependencies, an ever-pressing priority as geopolitical divides widen.

“We have to position ourselves as the solid continent in the world,” Beyrer told Euronews.

He added that reducing energy costs, boosting skilled labour, and cutting regulatory red tape are key priorities for BusinessEurope.

“Europe can only be as strong as its economy and this urgently needs to be taken care of,” he said.

Challenges to Europe's economy

The eurozone economy expanded by 0.9% in 2024, nearly double the 0.4% recorded in 2023, and higher than a previous estimate of 0.7%. Even so, growth cooled in the final months of 2024 and at the start of this year.

While businesses are feeling the benefits of easing inflation and interest rates, forecasts are clouded by unpredictable trade policies from US President Donald Trump.

The White House has already imposed a 25% tariff on all steel and aluminium imports into the US, as well as threatening a 200% tariff on EU-made alcohol. More tariffs on goods coming to the US are set to be imposed at the start of April, and the EU is set to announce their own levies shortly afterwards.

“EU retaliatory measures and a weaker euro—resulting from lower US demand for European products—could lift inflation by around half a percentage point,” ECB President Christine Lagarde said on Thursday.

It's likely such price pressures could disrupt the ECB's rate-cutting path, presenting a setback for European companies and consumers.