LUXEMBOURG, March 4 (Reuters) – Europe’s decades-old economic model, which has relied heavily on an expanding workforce, is coming to an end, the chairman of euro zone finance ministers said on Wednesday, pointing to the need to mobilise savings to finance investment and innovation.
Kyriakos Pierrakakis told a conference organised by the European Investment Bank that Europe’s economy was facing strong demographic headwinds and by 2040 its workforce, currently around 200 million people, could be shrinking by close to two million people per year.
“That matters because it changes the equation. Growth can no longer rely on expanding labour supply. It must come from higher productivity. And higher productivity comes from innovation, investment and efficient capital allocation,” he said.
“The growth model that supported European prosperity for decades is reaching its limits,” he said.
Pierrakakis told the conference that the strategic task for the European Union was to mobilise capital more effectively to finance innovation and scale.
“That is the only lever that can raise productivity, increase incomes, strengthen strategic autonomy and build resilience,” he said.
The 27-nation bloc seeks to integrate its different capital markets into a single market where capital would flow more freely so that some 10-11 trillion euros ($12.8 trillion) of Europeans’ savings in bank deposits could be used more productively to finance the growth of innovative companies.
The integration has been slow because of vested national interests and political differences, but geopolitical changes over the last 12 months have given the work a new sense of urgency.
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(Reporting by Jan Strupczewski. Editing by Mark Potter)
