Former Italian prime minister and economist Mario Draghi delivers a speech during a plenary session of the European Parliament, in Strasbourg, eastern France, on Sept. 17.FREDERICK FLORIN/AFP/Getty Images
In Europe, Airbus is a cherished corporate star, as it should be.
When its predecessor company was launched in the 1970s, Europeans thought the passenger-jet venture was borderline insane, doomed to prove that Europe could never compete with the Americans in the aerospace market. At the time, Boeing BA-N had been in the game for more than half a century and Lockheed and McDonnell-Douglas were pumping out planes, too. A fourth player? Forget it.
It was a long burn for Airbus but perseverance paid off, big time – today, it is the global leader in commercial aviation. Since 2019, it has outpaced Boeing (Lockheed and McDonnell-Douglas are long gone) in aircraft orders and deliveries. Its market value, at €106-billion ($160-billion), is a quarter greater than Boeing’s. Airbus is expanding and has assembly plants in Quebec and Alabama. Boeing, meanwhile, stumbles from crisis to crisis.
The flip-side of the story is that Airbus is the global success story that proves to be the exception. The European Union doesn’t do global success stories nearly as well or as often as the Americans. The EU competitiveness report launched earlier this month by Mario Draghi, former president of the European Central Bank, says as much. In essence, he concludes that the EU, and its fulsome social-services model, could fail unless it smartens up and faces what he calls its “existential challenge.”
Take this sobering paragraph: “Europe is stuck in a static industrial structure with few new companies rising up to disrupt existing industries or develop new growth engines. In fact, there is no EU company with a market capitalization of over €100-billion that has been set up from scratch in the last 50 years, while all six U.S. companies with a valuation above €1-trillion have been created in this period.”
Not one of the top-10 tech companies, measured by market value, is European. Semi-conductor giant ASML ASMLF of the Netherlands, in 12th position, is the closest contender, yet its value is one-tenth of Apple’s AAPL-Q. To be sure, the EU produced some global success stories decades ago that spend fortunes on research and development, but they tend to be concentrated in the auto sector (Volkswagen VWAGY, Mercedes MBGAF, BMW BMWYY) and those companies are not creating jobs any more. Their market values are relatively small, they are far more likely to close factories in the next decade than open them, and China has taken the lead in the electric-vehicle revolution. The German automakers risk becoming relics of the past.
So what did Airbus do to soar to the top? The business marked a rare collaboration between European governments, mostly from Germany, France and Spain, to combine their aerospace interests into one company, make sure it was well financed and run by pushy executives with a clearly defined goal, that is, create a rival to Boeing. It worked. Airbus is an example of sustained and ambitious pan-European teamwork that overcame parochial national interests.
That experiment is unlikely to be repeated in spite of Mr. Draghi’s urgings. His 400-page report called for common bonds to help finance investments worth €800-billion a year, the integration of capital markets, common energy infrastructure and the dilution of competition rules to allow certain strategic sectors, such as telecoms and defence, to consolidate and create transnational powerhouses.
The chances of all this happening, or at least happening fast enough not to get buried by the Americans and the Chinese, is remote.
The EU is not a single entity like America or China. Its 27 countries are rarely unified on any domestic, foreign, industrial or environmental issue. Hungary, which is pro-Russia and continues to import Russian gas, comes to mind; it is the big hole in the EU’s pro-Ukraine, anti-Russia stance. The common market is not as common as advertised – the regulations and bureaucratic hassles that companies must endure to expand their businesses across borders can be numbing.
The debt-fearing Germans and Dutch oppose the sale of common bonds to finance grandiose projects, or any projects, beyond the €200-billion devoted to the pandemic recovery funds. If common bonds never materialize, EU-wide investment funding would have to come from the EU budget, which is wholly inadequate to help build the bloc as a competitive force in any field. The budget is worth only about 1 per cent of the EU’s economic output.
What else? How about energy prices. The United States is an oil and natural gas powerhouse and energy-intensive industries thrive on cheap prices. The EU has mostly stopped importing cheap Russian oil and gas and has little domestic hydrocarbon production. Germany, incredibly, recently closed all its nuclear power stations.
Add this all up and poor Mr. Draghi is dreaming if he thinks his competitive action plan will be taken seriously and actually implemented. It should be, of course, but the EU remains a collection of countries without a common vision. Another Airbus seems like an impossibility.