The European Union is going through its most profound crisis since its establishment more than 50 years ago. The dramatic economic downturn that most countries have experienced, coupled with a lack of agreement among politicians on how to reverse it, has given way to increasing social discontent, the rise of political extremism, and a general erosion of confidence among businesses and citizens in politicians and the European project as a whole.

Until recently, the debate around how to regain this lost confidence and generate growth and jobs has been dominated by those in favour of fiscal austerity; in the belief that pain today means avoiding greater pain tomorrow. Increasingly, however, countries are putting forward recipes aimed at stimulating growth in the short term to avoid irreversible damage in already hard-hit economies in the long term.

To date, no consensus has been reached. Nevertheless, one belief is shared by all: Europe needs to boost competitiveness if it wants to maintain its high standard of living. Creating a knowledge-based economy across Europe is widely regarded as critical to restoring Europe’s economic fortunes and underpinning social progress.

The recently launched “Europe 2020 Competitiveness Report: Building a More Competitive Europe” analyses and measures European countries’ competitiveness and monitors to what extent the EU is making progress in achieving the competitiveness goals set out in its Europe 2020 Strategy to achieve “smart, sustainable and inclusive” growth.

The report highlights the strong competitiveness divide in Europe that has led to many of the imbalances that we are currently witnessing, creating political frictions among Member States. The report also points out the key reforms and investments that Europe should make at the Member States level and in Brussels to address the existing challenges. This analysis can serve as a basis for defining a widely supported competitiveness agenda that enacts long-term and stable economic and social progress throughout Europe.

Given recent political frictions, defining and implementing a holistic competitiveness agenda in a result-driven way would help countries converge in terms of economic growth. By pursuing such an agenda, the EU would also greatly contribute to the sustainability of the European project, not to mention the unity of the Union, which has appeared all too fragile in recent times.

Beñat Bilbao-Osorio, Associate Director, Margareta Drzeniek, Director and Senior Economist, and Caroline Ko, Junior Economist, are with the World Economic Forum’s Centre for Global Competitiveness and Performance.