Speech by EVP Margrethe Vestager at the Forum Europa

Embracing paradoxes

Dear friends,

We live in a complex world. A world of paradoxes. And it is sometimes hard to think in paradoxes.

I am sure most of you know about Schrödinger's cat experiment. A cat, a flask of poison, and a radioactive source are placed in a sealed box. At any moment, the flask can be shattered, the poison released, and the cat dies. As long as no one opens the box, both hypothesis coexist: the cat is dead, AND the cat is alive. But the minute someone opens the box, one of those hypothesis ceases to exist. The cat is dead, OR it is alive.

This experiment originally serves to illustrate “quantum superposition”, a founding principle of quantum physics. But I believe it can also illustrate another important idea: it is easier to think in oppositions, rather than in paradoxes. “Right versus wrong”. “Partner versus rival”. “Regulation versus innovation”. “Trade openness versus economic security”.

In those polarised times, a few days after an election that brought populists at record high levels in a number of European countries, opposition sounds good. It makes catchy headlines. But it's incomplete. Inevitably partial. That's why, since the first days of this mandate, we put our efforts to drop the oppositions, and embrace the paradoxes. Because it may not be as catchy, but I believe it is the basis for sound and solid policymaking.

Let me show this to you by explaining how we manage paradoxes in three areas : our economic security; our approach to research & innovation; and our digitisation.

In June 2023, we adopted our European economic security strategy. Few concepts embrace as many paradoxes as this one. Putting our strategy into practice is a constant balancing act. Between the ‘defensive' and the ‘assertive'; between our trading openness and the defence of our economic interests; between what we give to, and what we gain from others around us.

Initially, the strategy came from an observation. A financial crisis from the US, a pandemic from China, and an energy shock from Russia have laid bare how dependent we are on others, for things we need the most. There is a realisation that we cannot rely on exclusive suppliers, because it creates chokepoints.

This complex situation calls for a complex response. A management of paradoxes that is well captured in the three “Ps” that the strategy builds on – protect, promote, partner. One - we protect ourselves to avoid single points of failure, and prevent our dependencies from being weaponized against us. Two - we promote our own competitiveness and secure our supply chains, including - Three - by partnering with others, that share common economic interests.

Let's take clean technologies. There is no fighting climate change, no carbon neutrality by 2055, without clean technologies. But we now face an unprecedented supply shock that stems from Chinese overcapacities. China is exporting their excess products across the world at low prices. Prices that we cannot compete with. This is a serious risk for our industry. We've seen it with solar panels.

So we use the tools that we have to protect ourselves. Starting with our Foreign Subsidies Regulation. Every time we suspect that a foreign company has been unduly advantaged in a public tender, we dig further. We have investigated suspicious bids in public tenders for trains, in Bulgaria, or for solar panels in Romania. As a result, Chinese state-backed companies withdrew their bids. We are surveying the market on wind turbines, where we suspect unfair use of foreign subsidies. And that's not all. You will have seen our recent announcement on planned tariffs on electric vehicles under trade defence rules, or our investigation on medical devices under the international procurement instrument.

Simultaneously, we take steps to secure, and promote, our own supply of clean tech. The Net Zero Industry Act, for instance, identifies a set of technologies that are eligible for public support via targeted strategic projects. Things like solar photovoltaic, wind, fuel cells and grid technologies. The Strategic Technologies for Europe Platform will steer funding across 11 EU programmes, including clean tech.

Going forward, I believe we will need to develop a more systematic approach to address distortions in critical supply chains. Only days ago, with our partners in the G7 Summit, we agreed to launch coordination on new qualitative criteria that take into account factors like trustworthiness, security and sustainability. Those criteria could be deployed in different ways. For instance, as non-price criteria in public procurement auctions. If like-minded partners can develop common objective criteria for our critical supply chains, we would be creating a premium market where all producers that meet such criteria can gain scale. Eventually, we reach critical mass, and we align our competitiveness with the values that we believe in. And that we share. In today's geopolitical world, this is no small thing.

Dear friends, all in all, if we had to capture our economic security strategy into one big paradox, I'd say “as open as possible, as closed as necessary”.

This is also precisely the spirit behind the second area that I'd like to talk about : our approach to research and innovation.

Let me be clear: openness and international cooperation is in the DNA of every researcher. There is no questioning this. But this DNA must now unfold in an increasingly complex and tense landscape, where security is a growing concern. In our economic security strategy, we have included provisions to protect European researchers from foreign interference, so that they can safely pursue their international cooperations.

Because this is a fierce race for global tech leadership. And in this race, Europe's research and innovation is a fantastic asset. European researchers play a huge role in Europe's prosperity, its competitiveness, and its security.

The good news is that Europe is a world-renowned place for its scientific excellence. For its innovation edge. By bringing together excellence across so many disciplines, a programme like Horizon Europe is making Europe a scientific powerhouse. Not just to fight climate change, or cure diseases we thought incurable. But also to do that in a way that makes us competitive.

As we speak, scientists funded by Horizon are working on our next hydrogen-fueled trip. On new carbon farming practices that enhance soil health and allow carbon absorption. On new sustainable, high-performance batteries for our future devices. Horizon, with its 12 billion euros mobilized under the European Innovation Council, is putting money straight into the so-called “paradox of success”: Europe can do well by doing good.

But to achieve this, Europe must first manage another paradox related to success. When it comes to Europe's science, success in a laboratory doesn't always mean success in the market. In an ideal Europe, the best ideas should make for the best products. As in the first part of the Schrödinger cat experiment, it should be the one AND the other. Not one OR the other.

But we are facing a big investment gap at that precise, delicate moment when businesses go from lab to fab. And we know that public investment is not enough.

We cannot accept that the best ideas are born in Europe, but do not have a chance to also grow in Europe. We cannot accept to be less than half of the US market in equity, bonds and venture capital. Instead of letting European businesses follow the money over there, we must make sure money follows through, right here.

And there is a clear way to get there, it is called a “capital markets union”. For ten years, we have been talking about a capital single market. We had two action plans and we made significant progress in recent years. But we are far from reaching our full potential. What we need now is for Member States to actually implement the plans. If we have scale in the market, then we can also have scale in the businesses.

So we still need to work on fragmentation which generates, among others, high transaction costs. We must still work on reducing the regulatory burden, on cross border savings for retail investors, and on supervision at EU level.

Finally, let's touch upon our last but not least paradox for today. This one is about our digital transition.

I could easily open a whole new speech, only on this topic. Instead, I will focus on one paradox. One myth that I wish to debunk. Yes, you can do both regulation and innovation. It is time we bring down the old cliché that regulation goes against innovation. Quite the opposite.

We made the Digital Markets Act to avoid that a few large players sit on the gates of the online market. We did it to open-up the market, so that plenty of small and medium businesses can find the incentive to innovate. And a customer base to sell their innovations.

We made the Digital Services Act so that each of us feels safe online. So we can trust, and embrace technology. And so businesses can develop products and services, that that we will eventually buy.

We made the AI Act for thousands of AI businesses to get a stable, predictable legal basis upon which they can create their newest models.

And we see this is working, when we see the number of other jurisdictions around us that start to take similar journeys – the US, Canada, Japan, and more… What was considered as an unbreakable opposition - regulation versus innovation, versus commercial success - is now fading into this new paradox. This sophisticated balance between power and responsibility. Between freedom and control.

Dear friends, the story of Schrödinger's cat has triggered thousands of pages of quantum physics theories and interpretations. I do not have the slightest pretension to be able to describe, let alone to explain, any of them. But far from physics, and applied to politics, there is one learning that I like about this story. However appealing it may be, we must resist the temptation to open the box.

Because as long as the box is closed, all options equally exist. Everything is still possible. As soon as the box is open, we go down to the opposition, where only one option can exist.

Opposition is more simple. More immediate. But I am deeply convinced that in this complex world, we must be ready and willing to embrace complexity. As citizens, as voters, as policymakers.

It may be less immediately attractive, but all in all, it makes our lives so much more interesting.

Thank you.