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Spain and Germany – Complementary Drivers of European Competitiveness and Resilience
Global economic shifts, increasing geopolitical tensions, and persistent trade challenges are placing unprecedented pressure on the European Union’s economic outlook. The EU Institutions and Member States need to take decisive steps to strengthen European resilience and to restore global competitiveness. By investing in innovation, strengthening strategic industries, and diversifying export markets, we can lay the groundwork for sustainable growth together. Coordinated European action is our chance to turn recent challenges into opportunities for renewal and long-term prosperity.
We believe Spain and Germany are uniquely positioned to lead the EU forward. By leveraging our complementary strengths, we can address the structural challenges that the EU is facing and set a course for renewed prosperity to preserve the European social market economy.
Our common understanding: Reforms are urgently necessary to secure the competitiveness of Europe as a business location. Mario Draghi correctly identified three central areas for reform in his 2024 report. First, innovation: Europe is falling behind the United States and China in developing and commercialising advanced technologies. Second, energy: European energy prices remain two to three times higher than those in competing large economies. Third, strategic dependencies: Europe relies too heavily on narrow supply chains and lacks capacity in key sectors.
We can reverse these trends by harnessing our internal strengths – starting with the Single Market. Removing barriers within the EU would boost competition, efficiency, and trade, preserving and creating jobs. We would see more growth without increasing our dependency on external actors. To get there soon, we call for a swift implementation of the Single Market Strategy and the success of the 2028 Single Market Roadmap, including the consecution of a savings and investment union.
A major obstacle to growth is bureaucracy. The mounting regulatory burden, both at EU and national levels, stifles innovation and competitiveness. What we need is a comprehensive, rolling program to reduce existing red tape – with clear targets and timelines, both at EU and national levels. New legislation should only be introduced when it delivers genuine European added value and strengthens the Single Market and its industrial base. Member States need to transpose and implement it without creating further burdens and avoid gold-plating as well as delays.
Europe must also regain its position as a global leader in research and development. To reinforce R&I, we strongly support the proposed Competitiveness Fund and a substantial increase in funding for Horizon Europe in the next Multiannual Financial Framework. The EU must also ensure to better leverage private investment across the full innovation cycle. Prioritising innovation-friendly regulation to support the successful commercialisation of innovative products, services and working methods is the way to further facilitate European productivity and long-term competitiveness. Research, education and innovation should come together as a knowledge triangle that firmly includes businesses.
Spain and Germany should lead in innovation by example. Both countries have strong manufacturing sectors in which digitalization and robotics are becoming increasingly important. Integrating artificial intelligence and making use of data to boost productivity are issues that businesses face in both countries. Joint initiatives in these areas could unlock transformative potential.
Energy is another area where our countries fit together like pieces of a puzzle. Spain has made impressive strides in scaling up renewable energy and hydrogen production – resources that German industry urgently needs to succeed in its green transition. To realize this potential, Europe must fully integrate its energy markets. By supporting the establishment of more energy interconnections, clean energy can flow efficiently across borders.
Beyond internal reform, Europe must deepen its global partnerships. Trade agreements with Mercosur, Mexico and Indonesia should be ratified swiftly. Beyond that, the EU needs additional free trade agreements to expand market access and reinforce regional partnerships, such as CELAC and the Pact for the Mediterranean. As competition intensifies, securing favourable conditions in third markets is essential for resilience.
Resilience comes at a cost – and that cost must be balanced with competitiveness. Without the right balance of both, long-term prosperity is under threat. Currently, Europe procures most defence equipment from third markets. A common European security and defence strategy must strengthen cooperation and develop a competitive defence market. Both Germany and Spain have a strong potential to cooperate in promoting flagship projects that fulfil current capability gaps, and foster cooperation and interoperability among their respective industrial bases in the sectors of defense, security and space. Europe must also protect its critical infrastructure and maintain tech sovereignty to ensure resilience.
Together, Spain and Germany, have the businesses, the talent, and the shared vision to lead the EU through today’s challenges. Let us set the right framework, together with our European partners, to fully unlock this potential – for a competitive and resilient Europe.