Europe at a Crossroads: Tackling Growing Economic Challenges and Striving for Competitiveness

Europe Faces Mounting Challenges Amid Struggles to Implement Solutions

By Sophie Kiderlin & Holly Ellyatt, CNBC
Published: September 8, 2025

Europe now deals with problems that grow over time. Political leaders note the issues, and business leaders see them pile up. They try to fix the issues, yet their work falls short. Experts at the Ambrosetti Forum spoke up. They gathered in one place, and each voice pointed to a fragile state. Old problems tie together with politics, the economy, and society.

Accumulating Challenges Threaten Europe’s Stability

Arancha González Laya, who once led Spanish foreign affairs and now guides Sciences Po University, compared Europe’s state to a build-up similar to bad cholesterol. Each small issue does not shock on its own. Still, when they join, they sweep in harm over Europe’s long life. "One day you will discover that you have a heart attack," she said.

Markus Kerber, a former German State Secretary and advisor, compared Europe to a rabbit caught in headlights. He said the continent sits still as the world changes fast around it. He pointed out that the old global order has fallen apart and left Europe with few signs of what to do next. He noted the rise of a group led by the United States, China, India, the European Union, and Russia. In this new mix, Europe does not hold the right tools to act quickly.

Economic Competitiveness: A Lingering Concern

One main worry is Europe’s work in the world economy. Analysts and leaders agree that the continent has lagged in the reforms needed to boost its world trade role, especially when compared with parts of the U.S. and Asia.

Reports from 2024 by former Italian Prime Ministers Mario Draghi and Enrico Letta list a set of issues that harm Europe’s money matters:

A heavy load of rules that stops new ideas
A divided single market that cuts work short
Energy prices that push up industrial costs
Slow growth and work that widen the gap with the U.S.

The Draghi report said, “Europe’s households have paid the price in foregone living standards.” Each family feels the drop, as real income per person in the U.S. has grown almost twice as much as in the EU since 2000. Data from the International Monetary Fund shows that the EU’s slice of global GDP (by buying power) fell from 27.5% in 1980 to just 14.1% in 2025. This drop shows how Europe has lost ground.

Efforts and Calls for Reform

Even as these issues grow, European leaders stick to plans for change. Valdis Dombrovskis, the EU Commissioner for Economy and Productivity, explained that projects like the “Competitiveness Compass” come from the work of Draghi and Letta. This plan targets tasks such as:

Narrowing the gap in new ideas
Using the EU single market to its full size
Cutting red tape and simplifying rules

“These aims are set on the EU agenda and are now at work,” Dombrovskis told CNBC.

Yet, many call for bolder moves. Carlos Cuerpo, Spain’s Minister of Economy, Trade and Business, stressed that delays in reforms must end. He urged a shift from waiting to doing, with clear steps based on the competitiveness plan from recent years. “Competitiveness is a medium-term task that must show up in day-to-day choices and quick actions,” Cuerpo said. “This is the hardest, yet most needed part of our work.”

Europe’s Path Forward

Experts and leaders at the Ambrosetti Forum agree: Europe sees its own troubles—from political strains to slow economic pace. Fixing these problems calls for fast and ongoing reform. A strong will on all sides and a clear view of a nimble, modern Europe are at the core of these plans.

As the world changes, how Europe adapts and competes will shape its role on the global stage.

For continuous updates on Europe’s economic and political developments, subscribe to CNBC Pro and join our Investing Club.

Related Topics: