Your contact for new licenses
This week is dominated by the US elections and the Commissioner hearings. But the EU finance ministers are also meeting in Brussels today and tomorrow. They want to agree on a joint declaration on the competitiveness of the European economy.
The declaration will again contain demands for a deepening and simplification of the internal market. The finance ministers will probably be able to take a concrete step in this direction on Tuesday. According to EU diplomats, the member states have finally agreed on a joint text on VAT reform.
Until now, Estonia has blocked the reform proposal, which is intended to simplify cross-border electronic invoicing and VAT settlements. The small Baltic state objected to a provision that would make online platforms responsible for collecting VAT on their platform. The Hungarian Council Presidency resolved the blockade by delaying the introduction of the reform, which will not be fully implemented until January 2030.
This small success therefore also highlights the limits of European competitiveness. More than seven years will have passed between the Commission’s proposal (in December 2022) and the implementation of the reform.
Have a patient start to the week,
The German government helped to shape the new EU debt rules, and now the coalition with the traffic light system is fighting fiercely with the EU Commission over how they should be applied to Germany for the first time. The Commission accuses Berlin of using outdated figures in order to avoid ending up on the same bench as highly indebted countries such as Italy or France. The traffic light coalition strongly denies this and in return accuses the Commission of wanting to restrict the budgetary leeway more than necessary under the new rules.
The reform of the Stability and Growth Pact came into force at the end of April. The individual member states must now negotiate medium-term fiscal and structural plans with the Commission, which contain targets for the national budget, but also for structural reforms and investments. The starting point for this is a debt sustainability analysis by the Commission, which takes into account numerous factors such as growth potential. Based on this, the Brussels authority then agrees on fiscal plans with the governments, which set binding upper limits for the countries’ net primary expenditure for four to seven years – the so-called spending categories.
The new regulations are currently undergoing their first practical test. 19 member states have already submitted their national fiscal plans; Germany, like France, has yet to do so. Although Germany sees itself as a model debtor in the EU, the weak growth of the German economy is causing difficulties for Berlin.
The traffic light coalition has been negotiating the German fiscal plan with the Commission since the summer. In a rare show of unity, ministries led by the SPD, Greens and FDP are resisting austerity targets that they regard as excessively strict. According to government circles, the Commission’s interpretation of the rules means that there is too little leeway for the investments always demanded by Brussels.
In the Commission, on the other hand, the German government’s arguments are seen as an attempt to water down the new debt rules. They will not go along with this, they say. The Commission sees the failure to implement a consistent deficit procedure against Germany under Finance Minister Hans Eichel 20 years ago as a fall from grace that ruined the credibility of the then-new Stability Pact. This must not happen again.
According to reports, the dispute is currently focusing on two points:
The timeliness of the data: The Commission is pushing for the latest growth forecasts and new debt figures to be used as the basis for calculating the spending path. In the case of Germany, however, these are much more grim than the forecasts from the spring. At a meeting with officials from the Directorate-General Ecfin just over a week ago, however, the responsible state secretaries from the Ministry of Finance and the Ministry of Economic Affairs as well as the head of department from the Chancellery argued with verve that there was no legal basis for this in the new regulation. At the same time, government circles asserted that they were perfectly willing to use the current data as a basis. However, the methodological framework should not be made unnecessarily restrictive for the first application, which could lead to tying down future governments.
The reform policy of the traffic light coalition: The fiscal plan also takes into account the governments’ reform commitments. In its talks with the Commission, the traffic light party refers in particular to its growth package of 49 individual measures, from which it hopes to achieve additional growth of 0.5 percentage points in 2025. The package is too fragmented for the Commission – it is calling for major structural reforms, in line with German economic researchers.
How well-founded the respective arguments are is difficult to understand from an outside perspective. This is because the Commission only discloses the data and assumptions of the fiscal plan at the end of the negotiation process. “One weakness of the new system is the lack of transparency in the negotiation process between the Commission and individual member states,” criticizes Nils Redeker, Vice Director of the Jacques Delors Centre at the Hertie School in Berlin.
The economist understands the German government’s argument. The Commission must apply the new rules consistently. “However, there is room for interpretation and the question of how to make sensible use of this is, in my view, still open.” For Germany, it is particularly important what financial leeway for investment the EU rules allow in the medium term. Even if the German plan could be renegotiated after the parliamentary elections, “important stakes are already being set” in the current negotiations.
It is still unclear whether Germany will apply for four or seven years to bring its finances into line with the new EU rules. For the four-year path, the government would have to reduce public spending by several billion euros. In his thesis paper on Friday, Federal Finance Minister Christian Lindner writes of “significant additional consolidation pressure” in this case.
The seven-year path, on the other hand, would roughly correspond to the requirements of the German debt brake, according to government circles. However, Germany would have to commit to further reforms in return – which would not be easy for the traffic light coalition given the open dispute over the correct direction of economic policy.
There is no fixed deadline for the presentation of the German fiscal plan. In Berlin, it is said that Chancellor Olaf Scholz, Economics Minister Robert Habeck and Lindner will ultimately have to decide which of the two paths to take. The seven-year path could be seen as a stigma by the stability hawks, as they find themselves in the company of heavily indebted countries such as France and Italy. However, traditionally frugal Finland has also requested seven years, particularly in order to have room for the sharp rise in defense spending.
Europe functions according to processes that are geared towards peacetime. Although understandable, it means that the EU can only respond to crises in an improvised and inadequate manner, argue former French Minister for European Affairs Laurence Boone and former Moldovan Deputy Prime Minister Nicu Popescu in a joint policy paper for the foreign policy think tank ECFR.
“We are not at war,” Popescu told Table.Briefings “but we are not at peace either.” The Russian invasion of Ukraine in particular had shown that the EU’s military, energy and transport infrastructure was not up to the challenges of crises. It was therefore necessary to introduce processes that would accelerate adaptation to new crises.
Popescu experienced the EU’s inertia first-hand as Deputy Prime Minister and Foreign Minister of Moldova. When Russia started bombing Ukraine’s energy infrastructure, Moldova had to reduce its dependence on the Ukrainian energy grid. To do this, it needed more direct connections to the Romanian electricity grid. However, the planning and financing via EU, EIB and EBRD funds had taken far too long, explained Popescu.
Together with Laurence Boone, he is calling for the creation of a “European Defense Production Act” (EDPA) along the lines of the USA, which has had a Defence Production Act since the 1950s. In the USA, this set of rules enables the executive to intervene quickly and flexibly, and not just in military emergencies. For example, the US government also used the US DPA 2022 to tackle an acute shortage of powdered baby milk.
Boone and Popescu argue in favor of an EDPA that is adapted to the circumstances in the EU, meaning that the power to act in emergencies could probably not be as centralized as in the USA given the importance of the member states. Nevertheless, the EDPA must give “Brussels a coordinating role in the rapid and comprehensive mobilization of resources in response to wars and other crises.”
Boone and Popescu compare the EDPA to the blue light that allows an ambulance to break the traffic rules in an emergency. Similarly, the EU should be able to reallocate funds more easily in an emergency, expand cross-border infrastructure, reduce reporting obligations and order the production of important goods. In addition, the EU should have a higher budget available for crisis response.
An important part of an EDPA would be the possibility for the EU to award contracts with priority status to ramp up the production of strategically important products, such as artillery ammunition. The EDPA is thus reminiscent of the European Commission’s proposal on the Single Market Emergency Instrument (SMEI) from September 2022. In that regulatory proposal, the Commission also wanted to give itself the right to award contracts with priority status in crisis situations.
However, these powers were restricted in the Council. The regulation, now called the “Internal Market Emergency and Resilience Act” (IMERA) and was passed in September of this year, gives the Commission a coordinating role, but with few powers to intervene in the market. In addition, IMERA is explicitly not intended to affect areas that fall within national jurisdiction, such as national security.
On the part of the member states, the appetite for regulation as proposed by Popescu and Boone therefore appears to be small. Moreover, the Commission already has a proposal on how to ramp up arms production in the form of the European Defense Industrial Program (EDIP).
Nevertheless, Popescu is convinced that an EDPA “must come.” The member states are actually aware of the problem. After all, the larger member states are already in the process of establishing their own emergency regulations, such as the German LNG Acceleration Act of 2022.
However, the former Moldovan deputy prime minister warns that unilateral action by individual member states could lead to distortions in the internal market and make cross-border projects more difficult. According to Popescu, cross-border projects in the defense, energy and transport sectors would be essential, especially in war situations.
“The EU cannot wait another three to five years until it finally gains tempo,” Popescu told Table.Briefings, referring to the slow implementation of reconstruction projects under the Next Generation EU program. “This slow pace is damaging our economy, creating dissatisfaction in society and ultimately jeopardizing our political system,” warned Popescu.
Today marks the start of a marathon week that is akin to the Super Bowl for those inside the Brussels Bubble. The European Union’s Commissioner-designates for cabinet positions will take turns being “grilled”, four nominees per day, in a marathon seven days of testimony to the European Parliament.
For some of us, one position, which many observers have overlooked, is especially noteworthy: veteran Bulgarian politician Ekaterina Zaherieva is nominated as Commissioner for Startups, Research, and Innovation.
We have long had Commissioners for Research and Innovation; the Commissioner for Research, Science, and Innovation began in 1967 and was held by three Germans in a row through 1981. This mandate was changed in 2019; Science was dropped and replaced by three more titles: Culture, Education and Youth. The post was given to a young, hard-working Bulgarian named Mariya Gabriel.
However, it was a mammoth slate of five responsibilities, and even though Commissioner Gabriel was generally applauded for her term, it’s clear that the role spread her too thin. Her early resignation – to take a leadership position in her national government – left her successor Iliana Ivanova with only one year to make a mark.
Leading up to this Fall’s nominating process, multiple agendas were in play. Universities called for Education, Research and Innovation to be kept together in one Commissioner. Likewise, organizations such as mine were hopeful that Startups – the innovative, fast-growing companies that drive economic growth and build new industries – would finally be given a seat at the table. And advocates hoping for more focus on sovereign European technology pinned their hopes on an experienced member of Parliament, Finland’s Henna Virkkunen, to help make Europe technologically relevant again; would she get Innovation in a super ministry?
President von der Leyen surprised us all with her decisions.
Why is this important? There’s an old saying: “Invention is turning money into ideas, while Innovation is turning ideas into money.” By that definition, Europe is a world champion at invention. We have an incredible landscape of universities and research institutions producing world-class talent, patents, and breakthrough ideas.
But compared to the US, we are terrible at turning those ideas into money. Research projects often fail to become businesses. Professors or researchers are not equipped or incentivized to become entrepreneurs, and universities are often hostile to such notions, or make their intellectual property impossible to license. Our top talent or startups often decamp for Silicon Valley, where capital is easier to raise.
Anyone familiar with the reports from Enrico Letta or Mario Draghi knows that our structural deficits in both innovation and competitiveness have significantly weakened Europe’s geopolitical and economic might. So it was predictable to read last week when the European Council’s eight-page document called on the new Commission to increase the “economic valorization” of Europe’s research. Amazingly, however, that document left out one word: “startups.” The hoped-for “valorization” will seemingly materialize as if by magic.
That’s why it is all the more important that President von der Leyen went out of her way to add Startups to the title of the new Commissioner. She has signaled yet again that she knows what can help cure Europe’s ills. Simply put, if Europe is ever going to become relevant again on the global stage, it will have to rediscover its ability to launch global champions in new technology sectors. That can only come from Europe’s startups.
Luckily, in one of the most underreported stories of the last decade, Europe has built a thriving and dynamic network of startup ecosystems, powered by thousands of startups in sectors such as AI, climate & energy tech, Fintech, deep tech, and many more. They’re backed by nearly 1,000 EU-based venture capital funds and a generation of successful founders who are reinvesting and nurturing the next wave. My association now boasts more than three dozen member startup organizations.
And Germany can take heart: in the third quarter of 2024, German startups received 2.7 Billion US-Dollars in venture capital investment according to Dealroom, 2nd place in Europe, and ahead of France. Germany is a startup nation wider willen // in spite of itself. In the last two months the federal government has hosted both a (first!) Startup Summit and a (17th) Digital/IT Summit, and both events – with programs suddenly packed with startups – showed that more of Germany’s leaders recognize that startups are the missing link between Ideas and Innovation.
So, from the Bundesregierung all the way to the EU Commission, the message has arrived. But there is still much to do. Atop the agenda, the European startup ecosystem could perform way better if two key problems were fixed:
Both of these topics have been on the EU agenda forever, but fixing them is still the fastest route to making Europe competitive. Ironically, the two Commissioners who will most likely be tackling these most important problems are NOT the Startup Commissioner.
Luckily, Commissioner-designate Zaharieva has already pledged to work closely with these two other Commissioners.
So is her role just that of a cheerleader? No. Having a Startup Commissioner means that someone in the cabinet is finally going to stand up for this crucial piece of the economy, and also be measured on how well Europe’s startup ecosystem develops. Many countries, including Germany, have officials in charge of startups (like State Secretary Anna Christmann). But imagine a world in which each national government had someone responsible for this at the cabinet level; here President von der Leyen has set a great example.
Putting Startups alongside Innovation and Research sends another strong signal too: our educational institutions have to go beyond just teaching and research. Lab innovations have to succeed in the marketplace. Otherwise we’re all just funding a giant charity program to train America’s future talent pool.
We don’t know what we’ll get when Commissioner Zaharieva unveils a European Innovation Act or delivers her planned Startup & Scaleup Strategy.
Pessimists will say her focus will skew to the budget for research at universities and institutions, leaving startups to be forgotten. Ms. Zaharieva has little to no track record of expertise in any of her three mandated topics. Even the European Parliament seems uninterested in quizzing Ms. Zaharieva about startups; almost none of the vetting questions submitted to her in advance even mentioned them.
Optimists like me will say it’s great to have a highly capable politician who can mobilize her colleagues in the cabinet and advocate for startups across a wide spectrum of sectors. Here’s hoping she can help convince Europe that startups are so crucial for our future that someday even Germany would want the Innovation Commissioner post again. Now that would send a signal.
Clark Parsons is CEO of the European Startup Network, a network of European startup associations, and Managing Director of the Innovate Europe Foundation. The foundation acts as a think tank, forum, and dialogue partner for the concerns of the German and European digital and innovation ecosystem.
This week is dominated by the US elections and the Commissioner hearings. But the EU finance ministers are also meeting in Brussels today and tomorrow. They want to agree on a joint declaration on the competitiveness of the European economy.
The declaration will again contain demands for a deepening and simplification of the internal market. The finance ministers will probably be able to take a concrete step in this direction on Tuesday. According to EU diplomats, the member states have finally agreed on a joint text on VAT reform.
Until now, Estonia has blocked the reform proposal, which is intended to simplify cross-border electronic invoicing and VAT settlements. The small Baltic state objected to a provision that would make online platforms responsible for collecting VAT on their platform. The Hungarian Council Presidency resolved the blockade by delaying the introduction of the reform, which will not be fully implemented until January 2030.
This small success therefore also highlights the limits of European competitiveness. More than seven years will have passed between the Commission’s proposal (in December 2022) and the implementation of the reform.
Have a patient start to the week,
The German government helped to shape the new EU debt rules, and now the coalition with the traffic light system is fighting fiercely with the EU Commission over how they should be applied to Germany for the first time. The Commission accuses Berlin of using outdated figures in order to avoid ending up on the same bench as highly indebted countries such as Italy or France. The traffic light coalition strongly denies this and in return accuses the Commission of wanting to restrict the budgetary leeway more than necessary under the new rules.
The reform of the Stability and Growth Pact came into force at the end of April. The individual member states must now negotiate medium-term fiscal and structural plans with the Commission, which contain targets for the national budget, but also for structural reforms and investments. The starting point for this is a debt sustainability analysis by the Commission, which takes into account numerous factors such as growth potential. Based on this, the Brussels authority then agrees on fiscal plans with the governments, which set binding upper limits for the countries’ net primary expenditure for four to seven years – the so-called spending categories.
The new regulations are currently undergoing their first practical test. 19 member states have already submitted their national fiscal plans; Germany, like France, has yet to do so. Although Germany sees itself as a model debtor in the EU, the weak growth of the German economy is causing difficulties for Berlin.
The traffic light coalition has been negotiating the German fiscal plan with the Commission since the summer. In a rare show of unity, ministries led by the SPD, Greens and FDP are resisting austerity targets that they regard as excessively strict. According to government circles, the Commission’s interpretation of the rules means that there is too little leeway for the investments always demanded by Brussels.
In the Commission, on the other hand, the German government’s arguments are seen as an attempt to water down the new debt rules. They will not go along with this, they say. The Commission sees the failure to implement a consistent deficit procedure against Germany under Finance Minister Hans Eichel 20 years ago as a fall from grace that ruined the credibility of the then-new Stability Pact. This must not happen again.
According to reports, the dispute is currently focusing on two points:
The timeliness of the data: The Commission is pushing for the latest growth forecasts and new debt figures to be used as the basis for calculating the spending path. In the case of Germany, however, these are much more grim than the forecasts from the spring. At a meeting with officials from the Directorate-General Ecfin just over a week ago, however, the responsible state secretaries from the Ministry of Finance and the Ministry of Economic Affairs as well as the head of department from the Chancellery argued with verve that there was no legal basis for this in the new regulation. At the same time, government circles asserted that they were perfectly willing to use the current data as a basis. However, the methodological framework should not be made unnecessarily restrictive for the first application, which could lead to tying down future governments.
The reform policy of the traffic light coalition: The fiscal plan also takes into account the governments’ reform commitments. In its talks with the Commission, the traffic light party refers in particular to its growth package of 49 individual measures, from which it hopes to achieve additional growth of 0.5 percentage points in 2025. The package is too fragmented for the Commission – it is calling for major structural reforms, in line with German economic researchers.
How well-founded the respective arguments are is difficult to understand from an outside perspective. This is because the Commission only discloses the data and assumptions of the fiscal plan at the end of the negotiation process. “One weakness of the new system is the lack of transparency in the negotiation process between the Commission and individual member states,” criticizes Nils Redeker, Vice Director of the Jacques Delors Centre at the Hertie School in Berlin.
The economist understands the German government’s argument. The Commission must apply the new rules consistently. “However, there is room for interpretation and the question of how to make sensible use of this is, in my view, still open.” For Germany, it is particularly important what financial leeway for investment the EU rules allow in the medium term. Even if the German plan could be renegotiated after the parliamentary elections, “important stakes are already being set” in the current negotiations.
It is still unclear whether Germany will apply for four or seven years to bring its finances into line with the new EU rules. For the four-year path, the government would have to reduce public spending by several billion euros. In his thesis paper on Friday, Federal Finance Minister Christian Lindner writes of “significant additional consolidation pressure” in this case.
The seven-year path, on the other hand, would roughly correspond to the requirements of the German debt brake, according to government circles. However, Germany would have to commit to further reforms in return – which would not be easy for the traffic light coalition given the open dispute over the correct direction of economic policy.
There is no fixed deadline for the presentation of the German fiscal plan. In Berlin, it is said that Chancellor Olaf Scholz, Economics Minister Robert Habeck and Lindner will ultimately have to decide which of the two paths to take. The seven-year path could be seen as a stigma by the stability hawks, as they find themselves in the company of heavily indebted countries such as France and Italy. However, traditionally frugal Finland has also requested seven years, particularly in order to have room for the sharp rise in defense spending.
Europe functions according to processes that are geared towards peacetime. Although understandable, it means that the EU can only respond to crises in an improvised and inadequate manner, argue former French Minister for European Affairs Laurence Boone and former Moldovan Deputy Prime Minister Nicu Popescu in a joint policy paper for the foreign policy think tank ECFR.
“We are not at war,” Popescu told Table.Briefings “but we are not at peace either.” The Russian invasion of Ukraine in particular had shown that the EU’s military, energy and transport infrastructure was not up to the challenges of crises. It was therefore necessary to introduce processes that would accelerate adaptation to new crises.
Popescu experienced the EU’s inertia first-hand as Deputy Prime Minister and Foreign Minister of Moldova. When Russia started bombing Ukraine’s energy infrastructure, Moldova had to reduce its dependence on the Ukrainian energy grid. To do this, it needed more direct connections to the Romanian electricity grid. However, the planning and financing via EU, EIB and EBRD funds had taken far too long, explained Popescu.
Together with Laurence Boone, he is calling for the creation of a “European Defense Production Act” (EDPA) along the lines of the USA, which has had a Defence Production Act since the 1950s. In the USA, this set of rules enables the executive to intervene quickly and flexibly, and not just in military emergencies. For example, the US government also used the US DPA 2022 to tackle an acute shortage of powdered baby milk.
Boone and Popescu argue in favor of an EDPA that is adapted to the circumstances in the EU, meaning that the power to act in emergencies could probably not be as centralized as in the USA given the importance of the member states. Nevertheless, the EDPA must give “Brussels a coordinating role in the rapid and comprehensive mobilization of resources in response to wars and other crises.”
Boone and Popescu compare the EDPA to the blue light that allows an ambulance to break the traffic rules in an emergency. Similarly, the EU should be able to reallocate funds more easily in an emergency, expand cross-border infrastructure, reduce reporting obligations and order the production of important goods. In addition, the EU should have a higher budget available for crisis response.
An important part of an EDPA would be the possibility for the EU to award contracts with priority status to ramp up the production of strategically important products, such as artillery ammunition. The EDPA is thus reminiscent of the European Commission’s proposal on the Single Market Emergency Instrument (SMEI) from September 2022. In that regulatory proposal, the Commission also wanted to give itself the right to award contracts with priority status in crisis situations.
However, these powers were restricted in the Council. The regulation, now called the “Internal Market Emergency and Resilience Act” (IMERA) and was passed in September of this year, gives the Commission a coordinating role, but with few powers to intervene in the market. In addition, IMERA is explicitly not intended to affect areas that fall within national jurisdiction, such as national security.
On the part of the member states, the appetite for regulation as proposed by Popescu and Boone therefore appears to be small. Moreover, the Commission already has a proposal on how to ramp up arms production in the form of the European Defense Industrial Program (EDIP).
Nevertheless, Popescu is convinced that an EDPA “must come.” The member states are actually aware of the problem. After all, the larger member states are already in the process of establishing their own emergency regulations, such as the German LNG Acceleration Act of 2022.
However, the former Moldovan deputy prime minister warns that unilateral action by individual member states could lead to distortions in the internal market and make cross-border projects more difficult. According to Popescu, cross-border projects in the defense, energy and transport sectors would be essential, especially in war situations.
“The EU cannot wait another three to five years until it finally gains tempo,” Popescu told Table.Briefings, referring to the slow implementation of reconstruction projects under the Next Generation EU program. “This slow pace is damaging our economy, creating dissatisfaction in society and ultimately jeopardizing our political system,” warned Popescu.
Today marks the start of a marathon week that is akin to the Super Bowl for those inside the Brussels Bubble. The European Union’s Commissioner-designates for cabinet positions will take turns being “grilled”, four nominees per day, in a marathon seven days of testimony to the European Parliament.
For some of us, one position, which many observers have overlooked, is especially noteworthy: veteran Bulgarian politician Ekaterina Zaherieva is nominated as Commissioner for Startups, Research, and Innovation.
We have long had Commissioners for Research and Innovation; the Commissioner for Research, Science, and Innovation began in 1967 and was held by three Germans in a row through 1981. This mandate was changed in 2019; Science was dropped and replaced by three more titles: Culture, Education and Youth. The post was given to a young, hard-working Bulgarian named Mariya Gabriel.
However, it was a mammoth slate of five responsibilities, and even though Commissioner Gabriel was generally applauded for her term, it’s clear that the role spread her too thin. Her early resignation – to take a leadership position in her national government – left her successor Iliana Ivanova with only one year to make a mark.
Leading up to this Fall’s nominating process, multiple agendas were in play. Universities called for Education, Research and Innovation to be kept together in one Commissioner. Likewise, organizations such as mine were hopeful that Startups – the innovative, fast-growing companies that drive economic growth and build new industries – would finally be given a seat at the table. And advocates hoping for more focus on sovereign European technology pinned their hopes on an experienced member of Parliament, Finland’s Henna Virkkunen, to help make Europe technologically relevant again; would she get Innovation in a super ministry?
President von der Leyen surprised us all with her decisions.
Why is this important? There’s an old saying: “Invention is turning money into ideas, while Innovation is turning ideas into money.” By that definition, Europe is a world champion at invention. We have an incredible landscape of universities and research institutions producing world-class talent, patents, and breakthrough ideas.
But compared to the US, we are terrible at turning those ideas into money. Research projects often fail to become businesses. Professors or researchers are not equipped or incentivized to become entrepreneurs, and universities are often hostile to such notions, or make their intellectual property impossible to license. Our top talent or startups often decamp for Silicon Valley, where capital is easier to raise.
Anyone familiar with the reports from Enrico Letta or Mario Draghi knows that our structural deficits in both innovation and competitiveness have significantly weakened Europe’s geopolitical and economic might. So it was predictable to read last week when the European Council’s eight-page document called on the new Commission to increase the “economic valorization” of Europe’s research. Amazingly, however, that document left out one word: “startups.” The hoped-for “valorization” will seemingly materialize as if by magic.
That’s why it is all the more important that President von der Leyen went out of her way to add Startups to the title of the new Commissioner. She has signaled yet again that she knows what can help cure Europe’s ills. Simply put, if Europe is ever going to become relevant again on the global stage, it will have to rediscover its ability to launch global champions in new technology sectors. That can only come from Europe’s startups.
Luckily, in one of the most underreported stories of the last decade, Europe has built a thriving and dynamic network of startup ecosystems, powered by thousands of startups in sectors such as AI, climate & energy tech, Fintech, deep tech, and many more. They’re backed by nearly 1,000 EU-based venture capital funds and a generation of successful founders who are reinvesting and nurturing the next wave. My association now boasts more than three dozen member startup organizations.
And Germany can take heart: in the third quarter of 2024, German startups received 2.7 Billion US-Dollars in venture capital investment according to Dealroom, 2nd place in Europe, and ahead of France. Germany is a startup nation wider willen // in spite of itself. In the last two months the federal government has hosted both a (first!) Startup Summit and a (17th) Digital/IT Summit, and both events – with programs suddenly packed with startups – showed that more of Germany’s leaders recognize that startups are the missing link between Ideas and Innovation.
So, from the Bundesregierung all the way to the EU Commission, the message has arrived. But there is still much to do. Atop the agenda, the European startup ecosystem could perform way better if two key problems were fixed:
Both of these topics have been on the EU agenda forever, but fixing them is still the fastest route to making Europe competitive. Ironically, the two Commissioners who will most likely be tackling these most important problems are NOT the Startup Commissioner.
Luckily, Commissioner-designate Zaharieva has already pledged to work closely with these two other Commissioners.
So is her role just that of a cheerleader? No. Having a Startup Commissioner means that someone in the cabinet is finally going to stand up for this crucial piece of the economy, and also be measured on how well Europe’s startup ecosystem develops. Many countries, including Germany, have officials in charge of startups (like State Secretary Anna Christmann). But imagine a world in which each national government had someone responsible for this at the cabinet level; here President von der Leyen has set a great example.
Putting Startups alongside Innovation and Research sends another strong signal too: our educational institutions have to go beyond just teaching and research. Lab innovations have to succeed in the marketplace. Otherwise we’re all just funding a giant charity program to train America’s future talent pool.
We don’t know what we’ll get when Commissioner Zaharieva unveils a European Innovation Act or delivers her planned Startup & Scaleup Strategy.
Pessimists will say her focus will skew to the budget for research at universities and institutions, leaving startups to be forgotten. Ms. Zaharieva has little to no track record of expertise in any of her three mandated topics. Even the European Parliament seems uninterested in quizzing Ms. Zaharieva about startups; almost none of the vetting questions submitted to her in advance even mentioned them.
Optimists like me will say it’s great to have a highly capable politician who can mobilize her colleagues in the cabinet and advocate for startups across a wide spectrum of sectors. Here’s hoping she can help convince Europe that startups are so crucial for our future that someday even Germany would want the Innovation Commissioner post again. Now that would send a signal.
Clark Parsons is CEO of the European Startup Network, a network of European startup associations, and Managing Director of the Innovate Europe Foundation. The foundation acts as a think tank, forum, and dialogue partner for the concerns of the German and European digital and innovation ecosystem.