Bloomberg Audio Studios, podcasts, radio news. The European Union is facing a unique combination of challenges a war on its borders, trade and security pressure from the US, competition from China, and declining competitiveness as highlighted in the Dragi report two years ago. So is this a moment of crisis or something even more serious for the EU?
Joining us to discuss.
Margareta Vesteire, who is former Executive Vice President of the European Commission until twenty twenty four, in our chair of the board at the Technical University of Denmark, among other roles, great to talk to you. You worked in the European Commission through some of its biggest recent crises, including the COVID nineteen pandemic, the start of the Russian invasion of Ukraine. How would you compare the combination of challenges the EU is facing now to those moments.
Does it feel more serious?
I think it's a bit different because the risk is that, since for instance, competitiveness is a bit of an asymmetrical crime, is not felt as a European crisis. And having seen how fast, how coordinated, how strong member states have acted together as one European unity, when it came to COVID, the energy crisis, the war in Ukraine. The very slow approach to increasing competitiveness, of course, is an issue of concern because we know everything about this USLAF underline ask
Graghi to write this comprehensive report. Letter has done more than a market on the Single Market, Ninisto has done the report on safety and security, so everybody knows what needs to be done. The progress on getting things done is there, but it's really slow.
And could this be a moment though that may actually activate more progress, more cooperation, because if we think of some of the examples of what's in those reports, things like the Capital Markets Union, there's you know, it feels like a very long journey on that particular set of reforms, and there are still divisions among members states about what exactly they want of that union, despite all of the conversation about how it could help Europe protect itself economically
and also from a security point of view.
So two observations.
One is that something new is happening the European Scale Up Fund, because it's a generalely different way of thinking about how to enable scale up. So instead of having a commission program with all that comes with it. The Commission is one of many anchor investors and the other investors they're private investors, and now they're in the process of finding that third party investment manager that can do that with arm slength and professionally in the most critical sectors.
I think that's a general good sign because when people start thinking and new about all problems, then they might actually start to solve them. Second observation, I think everybody has had it with that two decade long conversation about the capital market. We need a smaller number of countries to take the lead on this to say we will establish that capital market. The rest of you more than welcome on the terms that we core countries actually set
for this. My guess is that if we did that, we would have a capital market with some debt within the next four to five years.
Do you think we're far away from that happening.
I think that the conversations they are moving in that direction because I think a lot of people they have lost their patients because it's so obvious that if you want businesses to scale, you need to provide a market four hundred and fifty million customers. Get that single market toward and part of that is a single capital market, and if you cannot have it in one go then you need to have it in several goals.
Has in some ways President Trump done the EU a favor by upending so many of the norm that the EU has relied on over the past number of decades, and perhaps helped to encourage some of those who may be reluctant to take bigger changes to make them Well.
I wouldn't express it that way, because you know, I'm really sad about some of the very very negative effects of the Trump presidency, take the closure of USAID, the risk of offsetting a new AIDES epidemic. So I think one cannot see it like that. That being said, I think it was about time for Europe to realize we need to do better ourselves. The European social contract is at stake here because many people feel that that social
contract is not being upheld. Europe is the best place to live ever in history, and as I usould say, especially if you're a woman, but that is not good enough because a lot of people feel that their future is not secured, their children cannot get their own place to live, and so on and so forth.
So I think it's really important.
For Europe to realize this is not a race to be more Chinese or more American. This is a race for Europe to be a much better version of herself and being that also being more competitive, more focused.
Can we sell that to Europeans though as well, that the difficult decisions that will need to be made, and you know, with their demographic challenges in Europe like there are in other parts of the world as well, when it comes to the social model, do politicians need to be more honest with their voters that there are going to be difficult choices to be made and some of those are going to mean a change in perhaps some parts of that social system that Europe has constructed.
Well, I think you need to make changes in order to develop the social system that Europe has constructed. I think that is the point. And I think people are more than ready to hear this because they feel it already. They see the problems, They see increasing inequality, they see that businesses do not throw as they ought to do, and some people they feel that they are not included
in society anymore. And I think we see some of the conclusions from that in how people are voting saying yeah, but then we want some strong person actually to cut through all of this haze of democracy that we're hearing. So thing is really really important that democracy says we are going to deliver, and we are going to deliver on that social contract. So, you know, a lot of
things need to do better. But it also for businesses to lean in, for investors to be more willing to take a risk on some of the amazing innovators and entrepreneurs that we have in Europe, because we still have the traffic across the Atlantic where businesses they get US capital on board. Of course they want the businesses to move to the US. I think there are no surprises the surprises that is still happening after we made that diagnosis ages ago.
When you were at the Commission, you oversaw some of the most contentious parts of the relationship with.
The US, particularly over tech regulation.
Given the current context of pressure, and I'm thinking this about in the context of what you're just talking about, can the EU afford to keep pushing on regulatory issues on regulation of technology or does this risk becoming another flashpoint in the relationship.
But you cannot afford to give up what has been you know, with one hundred percent democratic legitimacy, saying listen, we have promised Europeans that social platforms would be safe to use. We have promised Europeans that the market would be open and contestable, so more innovation would happen. This is not about the outer world. This is about Europe who we want to be. And I think this is absolutely crucial because a lot of people gets more and
more reluctant with technology, artificial intelligence in particular. If Europe cannot show that you can trust this technology to work for you, well, then you know, the risk is a much bigger backlash than what we see slowly coming already.
Do you worry that some of the efforts being called simplification by the Commission to I suppose you could argue pull back or simplify parts of the regulation for technology is perhaps giving up on some of those tenets.
Well, I think if I look at what has been done in order to implement the AI Act, I think that is a very pragmative, constructive approach that has been put forward, and I think that is really important, you know, to show in businesses that there are ears and there are you know, minds that take on board the difficulties that was put out in front of businesses. I think that's very well done, so of course one need to
take care. But it's no surprise that when you have been legislating from some time that there will be overlaps, that there will be overlaps where the wording is kind of different. I would think that it would be the same any lawyer would say no, no, no, no, no, I'll cut you another ten thousand euros in lawyer fees.
So of course there is potential not all legislation is made ready for digitization, because there is a relationship between the laws on digital issues and other parts of laws like consumer protection, copyrights and so on and so forth. So I think it's one hundred percent legitimate to look
for simplification where it becomes slow and more contested. Is, of course, if that is a disguise for deregulation, for not keeping the promises that we're giving to Europeans about tech actually being trustworthy.
Is there an issue with enforcement though when we look at the fines on the Digital Markets Act, they are very small amounts of money compared to what we had seen in the past in competition cases. Is there a risk that there is a chilling effect on enforcement because of the political pressure coming from the US.
If you look at the enforcement of competition law, that is something that has been done since the early days of the European Union, when it was even the European Union. So you have a tested instrument, you know, you have calibrated it, you know what level of fines actually work. Here with the Digital Markets Act, you have a completely new instrument. You need to figure out how should you make this work. When you have a first you don't go full scale. You need to say, well, we need
to listen to you. We need to figure out how we do this. We need to get our procedures in place so that you have due process within the framework of the law.
I think this is only natural.
What I think is important is, of course, that we had the green Landing moments. I think everybody realized that Europe has readlines. Europe is not seeking conflict. This is not about picking a fight. This is about, when there is a fight, being firm on what we believe in and the promises that has been made to Europeans.
Do you think that's being done effectively?
I think we're getting there more and more. I think that is absolutely crucial. But I think there has been sort of a long period of learning trying to figure out, well, how do we do with our how do we work with our partners when they're truly different from what we were used to. But I think that learning materializes more and more. I think European leaders they say, well, listen, it's our job to develop the national economy, the European economy,
how the social contract actually is being fulfilled. This we will do on our own terms, and we'll do that in a relationship with external partners, but we'll do it in our own terms.
Is technological sovereignty something that your need or is it even possible?
Is that something that you worry about?
It depends a lot about how you define it. I think it's really important to define technological sovereignty as a question of control. Can you control what is essential to you? And of course not all data is equal, but some data is more important than other data. And I think it's really important that data that you really want only to be for European jurisdiction, that you make sure that you have only European jurisdiction. So first things first, you
need to enforce European laws. No matters of, for instance, what social platform people are using or what cloud businesses are using. You need to know that it's good, it's safety use. Second, to provide alternatives, we need many more European alternatives, and when I look at European.
Social platforms, you have almost too many.
You know, you need some consolidation in that sector to have European scale. When you look at cloud you see real European Also to the price points, relevant alternatives.
Feel very small at this stage compared to the prevalence of the American companies.
But that leads me to my third point, which is to be much more cautious about market creation. We're not at all using the demand site. You know, the data is government or the Danish Party is then negotiating government platforms right now. It would be great if they say, listen, we'll work with three European AI developers as long as they're European in order to deliver best and public services to our citizens, so that you activate that demand side.
Because if you have a big public customer, well then investors will see that you have great potential. So you know, when things are small, it's because they don't have customers. So to activate the demand side of all these markets that are not fully matured in Europe. That is something that we have still failed to do. So there's a lot of potential here.
And cannot be driven from Brussels from the EU.
Well, it can be coordinated.
I oversaw some of the defense material procurements in the last part of my tenure, and what I saw was that if you put up just a bit of incentive, you know, a small pile of money that maybe will cover the costs of coordinating and getting things in place, then you see member states saying, okay, if that's the name of the game, we will actually buy.
A lot of stuff together.
That gives you better prices, that gives you better material, that eases coordination if you ever have a military operation. So I think definitely there is a role for Europe here and also for having the discussion with heads of state and government to say, listen, organizing that demand side is absolutely crucial if we want a European market.
For this, we keep coming back to the idea of more cooperation being what will advance progress for Europe. I wonder do you worry about individual government's, individual member states? You know, big elections that are coming up. We've got France next year, for example, that you may get leaders who are not so pro European integration and that could actually slow down the entire project or any of these plans which could help the EU overall.
But no election is done until it's done. If you look at den Macron, I think a year before the election he was not considered a contester for the presidency. So you know, I'm holding my bets for what is going to happen in France. What I think is important is that those who have ambitions to work fast, that they actually come together. For instance, the Nordic country Scandinavia,
you have a coherence here, you have ambition here. I think it's really important that they come together and show what is actually doable because it is really attractive for growth, for being able for every member stay to deliver to their citizens, that they come together and make this happen. You cannot have that capital market on your own. That is part of the problem. We see that very clearly. So no match in the color of the government. Everybody needs scale in order to deliver.
If you're thinking about the challenges facing the EU, and there are many, many of them, what are you most concerned about in the coming months.
I think we have some cultural challenges. I think sometimes we need to overcome ourselves to take that leap of faith in our European colleagues, compatriots, coast citizens, to say, listen, we are so much more alike than what we actually think. We have so much more in common than what we actually think, and we are much stronger than we think. If you look at the for example, the US efforts
of having Open and win the Hungarian election. The Vice President came over Tromp called and promised all the economic might of the US if only the Hungarian voters would keep Open in place. Because he was the one who was always triggering in veto preventing Europe having a common foreign policy. That shows the kind of strength that Europe
is holding that we're not aware of. And I think this is a cultural thing that we do not realize the power that we hold, and because of that, we don't use it for the benefit of your herself.
Do we need to pay less attention to the United States?
But it's not a question of paying less attention to others. It's a question of focusing on who we are and what we want to achieve for this beautiful, amazing continent. Yes, it's challenged, but oh my god, what we have achieved so far, we can achieve great things in the future too,