EU seeks to take on China, US to reverse economic decline

BRUSSELS - The European Union's economy is falling further behind China and the United States, a major headache that will dominate leaders' talks on Thursday as they discuss how to stem the bloc's economic decline and bounce back.

From supply chain disruptions following the coronavirus pandemic to an energy crisis after Russia's invasion of Ukraine, Europe's economy has faced multiple challenges in recent years.

But it may yet face its biggest: the clean energy and digital transitions that Brussels has made its priority in the coming years will require additional annual investment of nearly 620 billion euros ($660-billion).

From artificial intelligence to solar panels, from computer chips to batteries, the EU is fast losing ground fast on innovation to other global powers.

The EU has been put further on the back foot as China and the United States have ploughed billions of dollars of state aid to prop up their critical industries.

What is needed is "radical change", former European Central Bank chief Mario Draghi said during a speech in Belgium on Tuesday, pointing to "other regions (that) are no longer playing by the rules".

"Our major competitors are taking advantage of the fact that they are continental-sized economies. We have the same natural size advantage in Europe, but fragmentation is holding us back," Draghi added.

The Italian ex-premier, increasingly touted as a potential successor to Ursula von der Leyen as European Commission chief, will present a report on the issue in the summer.

Official EU data shows the bloc's economic stagnation has lasted more than 18 months. While the United States grew by 2.5 percent and China by 5.2 percent in 2023, Eurostat data last month showed the EU economy grew by only 0.4 percent.

The EU's 27 member states want to define the strategic priorities for the European Commission's next five-year mandate following elections taking place across the bloc in June.