Macron Warns EU ‘Could Die’ Within 3 Years Due to Overregulation, Welfare Burden, Underinvestment

French President Emmanuel Macron speaks at the ‘Berlin Global Dialogue 2024’ event at the European School of Management and Technology (ESMT) in Berlin, Germany, on Oct. 2, 2024. Ludovic Marin/AFP/Getty Images

French President Emmanuel Macron issued a stark warning on Oct. 2, stating that the European Union faces existential risks in the next two to three years unless it drastically reforms its regulatory framework, bolsters investment, and addresses unsustainably high social spending.

Macron made the remarks during a panel discussion at a conference in Berlin on Oct. 2, warning that the EU’s current economic model is unsustainable. Without urgent reform, he cautioned, the bloc risks losing its competitive edge, falling significantly behind global powers like China and the United States, and ultimately sinking into economic irrelevance.

“Our former model is over,“ Macron said. ”We are overregulating and underinvesting. In the two to three years to come, if we follow our classical agenda, we will be out of the market.”

Concerns have been growing across the EU regarding the bloc’s competitiveness, fueled by persistent underinvestment in key sectors, rising regulatory burdens, and escalating social welfare costs. The French leader said that Europe must confront these challenges head-on or risk irrelevance in an increasingly multipolar world order.

“If we want clearly to be more competitive and have our place in this multipolar order, first we need a simplification shock,” Macron said of the need to reform the bloc’s regulatory framework.

Over the past decade, the EU has implemented various regulations aimed at protecting consumers, the environment, and workers. However well-intentioned these policies may be, according to Macron, they have created a complex and overly rigid regulatory framework that stifles innovation and hampers growth—particularly in sectors like artificial intelligence and defense.

The French leader said the EU’s economic model is outdated and needs to be revamped, particularly since it can no longer rely on cheap Russian energy to boost business profit margins or count on the United States to handle the bloc’s defense needs.

“The EU could die,“ Macron said. ”We are on [the] verge of a very important moment.”

Macron also addressed the EU’s extensive social welfare system, which has long been a pillar of European governance but is increasingly seen as an unsustainable financial burden as the bloc faces growing risks to its competitiveness.

According to Eurostat, EU governments spent the equivalent of around $3.4 trillion, or 19.5 percent of gross domestic product, on various social programs in 2022.

The largest portion of this spending is allocated to pensions, unemployment benefits, and other social transfers aimed at mitigating risks like illness and old age. What’s more, there’s an appetite among Europeans for their governments to ramp up social spending, with 78 percent of EU citizens believing that public spending on key social policies should increase, with half supporting higher taxes to pay for it.

“It’s not sustainable with the social model that we have,” Macron said.

By comparison, the United States spent roughly $3.5 trillion on various social programs in 2023, or 14–15 percent of GDP, according to the Center on Budget and Policy Priorities.

While both the EU and the United States allocate similar amounts to social protection in dollar terms, the EU’s percentage of GDP spent on these programs is significantly higher, reflecting the bloc’s more extensive welfare systems.

Macron’s comments at the Berlin conference echo the findings of a recent report by former European Central Bank President Mario Draghi, which described the EU’s current economic strategy as an “existential challenge.”

The report, released in September, said that Europe’s complex regulatory environment is a key factor in its lagging productivity growth compared to the United States. Draghi’s report called for sweeping reforms to simplify regulations, foster innovation, and enhance competitiveness in key industries.

Macron threw his full support behind Draghi’s recommendations, stating that the EU must urgently adopt the report’s conclusions if it hopes to compete globally.