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- Europe's economy has a competitiveness and innovation problem.
- The new Trump administration and Chinese pressure will only squeeze the economic bloc harder.
- These five things could help Europe drive innovation, according to EY's Europe boss, Julie Teigland.
Most EY employees spend their days analyzing individual businesses or conducting audits for clients. But at the upper ends of the EY machine, its leaders are part of the global conversation — consultants to governments and industry groups.
Julie Teigland, the firm's managing partner for Europe, the Middle East, India, and Africa, told Business Insider that in Europe, the big business challenge is a lack of competitiveness and innovation.
This picture only looks set to become more complex as Europe is squeezed between the new Trump administration's expected tariff policy and Chinese retaliation.
In 2025, US GDP growth is expected to be significantly higher than that of Europe. The IMF forecasts 1% growth in the euro area in 2025, compared to 2.7% in the US.
"You don't want the US going twice as fast as Europe. That creates a downward spiral," Teigland told BI.
Teigland said she is trying to drive conversation around what Europe can do to change this.
"We have a million examples of go-getters, but if we don't give them the ecosystem they need, they won't be successful," Teigland told Business Insider.
She believes there are five things Europe can do in the short term to drive innovation and be more competitive.
1. Clearer implementation of regulation
"Over last years the number of regulations and the length of the regulations has more than doubled," Teigland said.
Every member country's market is different, but any time new legislation comes in, it can be implemented in 27 different ways, she said. To stop duplication and inefficiencies, the EU needs to create more alignment on implementation before signing laws, she said.
2. Create a capital markets union
A capital markets union (CMU) would create a single market for capital in the European Union, breaking down barriers that block cross-border investments and allowing nations to share risk.
"We need Europeans to invest in European companies," Teigland told BI. Creating a CMU would "unlock billions" to create more of an innovation ecosystem. She wants to see the EU unbundle fees and allow pension funds to invest in equities with its biggest markets, like Germany.
"Why would you not make that transparent and lower the cost? Why do European mutual funds have to be significantly more expensive than American ones."
EY
3. Support European champions by changing the laws on anti-competition
"We haven't been able to create any European champions in any industry, especially not in tech. Why? Because we don't allow them to combine across borders," said Teigland.
Teigland said the way to foster "champions" — companies that help Europe compete with other economic powers — is to find more balance between regulation that drives protectionism and ones that drive innovation.
The laws on anti-competition need to be changed, particularly for larger companies in late-stage financing, she said.
"Think of all the things that have been knocked out, all the deals that have been brought to the table that Europe has said no way, we're protecting the individual consumers in the individual countries."
4. Stick together against Trump and China
"Both the Chinese and America's strategy has been to pick the Europeans off one by one," Teigland said. But they have to work together to prevent this, she added.
"I think they just have to say, Donald, you're dealing with all of us. We're not going to take a deal for Germany and a deal for Spain."
The EU can use Big Tech litigation as a bargaining chip and offer to scale back its review of companies like Meta, Apple, and Google. They can also use the promise of more defense spending and purchasing US energy.
5. Create a clear investment strategy — especially for defense and industrial spending
Lastly, Teigland thinks Europe needs a clearer investment strategy — "aligning on what we want at the beginning, instead of at the end."
She highlighted the defense and industrial spending plans, noting that even though Trump is expected to increase pressure on the defense industry, there had not been a mapping for industrial policy.
Citing a recent conversation with a NATO General, Teigland highlighted issues with communications technology in tanks. The person shooting the mortars has "to open the lid, use their Apple phone to dial, to call the guy to give him the coordinates because nothing links with each other across Europe," she said.
Teigland told BI that the EU needs a map of who is producing what and how it combines so that it can determine where to invest.
Europe's outlook
It's going to take money to create the ecosystem for success, and combining forces is no small thing for the bureaucracy-heavy EU bloc. But Teigland said she's positive about the direction of change.
Industry groups are aligned about the need to boost competitiveness and trim down regulatory burdens, and senior EU politicians Teigland speaks to are "really listening," she said.
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Recent moves by Ursula Von der Leyen, the president of the European Commission, are one of the biggest signs things that Europe is getting serious about boosting economic growth.
After winning a new mandate in 2024 to lead the European Commission for another five years, Von der Leyen has said she wants to launch a "simplification revolution" and cut regulatory "red tape" by 25% in the first half of 2025.
Teigland said the aligned structure of Von der Leyen's team also signals a changing wind. "In one way, she's concentrated her power, but it's also huge that each minister has an overlapping area."
It's a microcosm of how Teigland thinks the entire bloc should be acting: "She recognizes the interconnectedness of the topics and the need to consolidate and do a few things well together. That gives me hope."
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