With its current role as President of the Council of the European Union, Hungary has an exceptional opportunity to drive an agenda beneficial for itself and the entire region. As underlined by the recently published Draghi Report, authored by Mario Draghi, the respected former head of the European Central Bank, the EU requires a set of substantial competitiveness reforms.
An estimated EUR 800 billion-plus should be invested annually to ensure that the much-anticipated energy transition and the complete digital transformation of the economy occur. If that sounds like a lot, it is, as underscored by the fact that the annual GDP of 22 of the EU’s 27 member states is smaller than that.
“Europe needs change, and the Hungarian presidency wants to be the catalyst for that change,” István Joó, CEO of the HIPA, told the audience, adding that the EU currently lags in cutting-edge technologies compared to her rivals.
He said that complex regulatory frameworks can hinder business operations and limit innovations essential for economic vitality. He also noted that energy costs remain significantly higher than those in competitor markets, adding further challenges.
He announced that a new EU competitiveness pact the Hungarian government has drawn up would seek to ease the administrative burden, provide energy at affordable prices and develop what he called a “realistic” green industrial policy; it will be presented at the next meeting of EU leaders.
Given that the European Union and the United States are each other’s biggest investors, with bilateral trade at an all-time high, the transatlantic alliance is a solid foundation upon which to build in such times.
The continent needs to set its priorities to face interconnected challenges, Fabian Zuleeg, chief executive of the EU Policy Center, said. The problem is that the recent series of crises is likely to continue, and on top of that, polarized risks also need to be taken into account. These are things that can go one way or another, like the U.S. elections, and could fundamentally impact how global trends are shaped. Hence, preparation for worst-case scenarios is essential.
As to how to regain Europe’s competitiveness, Zuleeg recalled that many issues are not determined at the EU level but rather at the business and local level in terms of competition.
“The administrative burden has been around forever, yes. But the only instrument the EU has been given is legislation; far more effective ones like taxation, for example, are not available,” he pointed out.
Proper harmonization would be of enormous significance, “to have instead of 27 +1 regulations just one. But it’s always the choice of the member states that insist on national exceptions,” Zuleeg commented. “Painful choices will need to be made: the golden age is over. Yet, acting can happen only together, and the EU remains the only instrument we have,” he noted.
Will Europe be able to continue to attract investments? That will come down to easing the administrative burden. It is worth looking overseas for comparisons: in the United States, 3,500 regulations were adopted between 2019 and 2024; in the EU, that number was 14,000.
Even legislation meant to bring about positive change can sometimes impose burdens. Take the reporting obligations concerning ESG or the Corporate Sustainability Due Diligence Directive, which requires EU and non-EU organizations to conduct human rights and environmental due diligence. Compliance with this alone will tie up considerable corporate resources.
How to make the most of the EU’s potential, find areas for improvement, and address the current situation was a central theme of the EU competitiveness panel, moderated by Susan Danger, CEO of AmCham EU. Regional business leaders expressed that some companies might explore investment opportunities outside Europe, where the regulatory environment is perceived as more favorable. They agreed a united action plan would be essential for navigating these challenges effectively.
The discussion emphasized action points outlined in the Draghi Report, suggesting that initiatives like a capital markets union could enhance the overall value of Europe’s economy. Achieving these goals will require resilience and significant innovation, drawing on the continent’s vast potential and immense human capital. The panelists underlined that bold action and close collaboration will also be crucial to reaching the desired objectives.
The BMG summit’s breakout sessions each covered one topic, showcasing leading trends. The Business Environment section delved into foreign direct investment trends, government incentives, and investment opportunities in rural areas. The discussions also touched upon the phase-out of windfall taxes and EU-related tax directives.
In the Digital section, experts highlighted how harnessing the power of AI could add the volume of India’s and China’s GDP combined to EU growth. However, as studies show, executives expect regulatory clarity before they can move forward faster. The problem is that AI development is like a train blazing down the tracks, making it questionable how regulations like the EU AI Act can keep pace. The session also reviewed the priorities of the National Tax and Customs Administration’s AI Working Group and the potential impact of these trends on Hungary’s digital landscape.
AmCham presented its Employee Health Benefits Survey and the new Healthcare Data Policy Paper in the Healthcare discussion. The importance of healthcare in strengthening Hungary’s competitiveness was a central theme, emphasizing preventive care, digital health progress, and infrastructure enhancement.
The Workforce breakout offered a comprehensive discussion of how Hungary can strengthen its competitiveness within the EU labor market. Government representatives underlined efforts to boost employment by mobilizing untapped labor reserves, including young and senior populations. The session also addressed the employment of foreign workers from third (non-EU or EFTA) countries and discussed the new immigration law, along with the formation of a new working group formed by the Ministry of National Economy and the National Directorate for Aliens Policing to refine related regulations.
This article was first published in the Budapest Business Journal print issue of November 4, 2024.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
