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The writer is prime minister of Hungary
Hungary has assumed the rotating presidency of the Council of the European Union for a second time, 13 years after our first. During my time as prime minister, a role I held between our two presidencies, I have had a unique vantage point from which to witness the erosion of Europe’s competitiveness.
I have been fortunate enough to know the great architects of the European integration of the 1990s. Among them was Helmut Kohl, who often observed that Europe’s political survival hinges on maintaining economic competitiveness. As he once remarked: “We all need Europe in order to remain competitive on the world markets.” His words have never been as relevant as they are today.
The loss of the EU’s competitiveness has been a growing tendency in recent decades. This decline can be attributed primarily to misguided Brussels decisions that go against the realities of the world economy.
The green transition is the chief example, in which the EU has been imposing its own ideologically motivated goals without adequately consulting industry. With energy prices now three to five times higher than those in the US, European companies are losing their competitive edge and are being compelled to allocate funds to utility bills rather than innovation.
It is obvious that Europe must aim for leadership in the green industry, with particular emphasis on electric vehicle development and manufacturing. However, imposing regulations that hinder industrial stakeholders and burden citizens is no longer sustainable. Farmers are also facing significant challenges: their production costs have risen significantly, and they are having to navigate increasingly complex green obligations.
Businesses are also facing increasingly heavy tax burdens. The introduction of the OECD’s global minimum corporate tax in January, intended as the EU’s largest tax reform, has been a catastrophic failure. In spite of the fact that around 140 countries, including all EU member states, have joined the agreement, key competitors such as the US, China and India have yet to adopt it.
Europe has become a far less attractive investment destination, even prompting European companies to consider relocating to other markets. While economic growth in major EU countries will barely reach 1 per cent this year, the US is set to grow by nearly 3 per cent, China by close to 5 per cent, and India by almost 7 per cent. Over time we will only fall further behind. An immediate course correction is necessary.
Our experience in Hungary shows that economic success requires competition and a business-friendly environment. We implemented a flat personal income tax, abolished the inheritance tax for close relatives and maintain the lowest corporate tax rate among EU countries. We have also diversified our trade and investment relationships, focusing on co-operation with industrial partners in the Asia-Pacific region in key sectors of technology and innovation. Consequently, last year resulted in a record high FDI influx into Hungary.
We aim to convince our fellow Europeans that healthy competition, as well as co-operation with the best technologies, will lead to more growth. In particular, we propose a new green industrial strategy in collaboration with major industrial stakeholders. We know that the main players in the European economy don’t want to be sheltered from competition through a trade war. If they don’t want it, then we don’t need it. Our objective is to establish a business-friendly environment, ensuring companies have access to affordable, secure energy and can engage in competition with minimal administrative burdens.
We aim to negotiate a new competitiveness deal to relaunch European economic expansion, while promoting an open economy and international co-operation. We want to curb illegal migration by working closely with the primary countries of origin and transit, emphasising the importance of protecting external borders and the necessity of EU funding for this purpose. Additionally, we seek to shape the future of cohesion policy to achieve greater convergence among regions. Lastly, we aim to establish the foundations of a farmer-oriented EU agricultural policy.
It is no secret that Hungary’s competitiveness strategy has drawn inspiration from the German-French growth and competitiveness agenda. Consequently, it is unsurprising that Berlin and Paris, along with Rome, have endorsed the Hungarian presidency’s initiatives. We firmly believe that a competitive Europe serves the interests of all member states. Hungary is gearing up for an exceptionally active EU presidency. It’s time to set aside ideological disputes and kick-start Europe’s engine. Let’s make Europe competitive again.