Sustaining the Competitiveness of Europe's Business Environment

This paper argues that five factors will influence the resilience of Europe's business environment in the coming years, representing challenges to the sustainability of European economic competitiveness, and opportunities for Europe and companies doing business there.  The first is the continuing impact of the economic crisis on labor and growth.  Second, changing demographics are presenting burdens on workers and public finances.  In the coming years, there will be fewer workers contributing to countries’ economic growth and tax base, likely resulting in a decline in living standards.  The fiscal, regulatory, and immigration policies that might remedy this situation are unpalatable to different interest groups.  Third, European countries' ability to compete in the region and globally varies due to large differences in the cultures of entrepreneurship and technological innovation.  Fourth, a subdued and pessimistic populace is concerned about increasing inequality and what the future has in store.  Fifth, globalization has brought many new entrants in the world economy, providing opportunities for European exporters and companies looking to do business abroad.  However, there are significant risks now for companies, as their every action abroad will be scrutinized by the media, NGOs, and foreign governments, requiring firms to be cognizant that their strategy or operations could provoke a backlash, and that their economic interests may diverge from the political interests of European governments and the EU.  The paper also provides brief overviews of the challenges that other major economies are facing.  In such a light, Europe’s challenges may appear less grave and more manageable.