Goal-Oriented Strategies: Navigating Europe's Economic Challenges in the 2024 Permacrisis Status
Goal-Oriented Strategies: Navigating Europe's Economic Challenges in the 2024 Permacrisis Status
Insights from a Seasoned Management Consultant
This article was featured in RIIM ChuSanRen Inc., an established Japanese association operating in the development of management consulting guild.
In this thought-provoking article, Sorin Caian, a seasoned Romanian management consultant and Senior Partner at BDO in Romania offers a pragmatic analysis of Europe's current economic landscape. As Europe faces a myriad of challenges – ranging from climate change and geopolitical tensions to energy crises and the aftermath of the pandemic—this piece explores how the old continent can navigate these hurdles and emerge victorious.
Highlighting key initiatives like the European Green Deal, the revival of industrial sectors, and Romania's remarkable economic growth, the article provides valuable insights and actionable strategies for business leaders aiming to score big in a complex and rapidly evolving economic environment.
The European Green Deal: Ambitious Goals and Necessary Reforms
The last decade brought a lot of changes and challenges for the world itself and for the people living wherever in it. I remember, after the financial crisis started in 2008/ 2009 in the US, that we have been affected significantly and it took couple of years to re-balance. However, being a young member of the European Union starting with January 1st 2007, the opportunities brought by direct foreign investments, EU cohesion funds (grants shared from the EU budget) as well as restructuring of the Romanian Industry, determined a very good evolution, reducing significantly the impact of external influences.
Pandemic Aftermath: Transforming Work and Life: the geopolitical crises and the energy crisis
The pandemic period bought a strong bias to the economic and social (and not only) activities. However, it introduced a new approach to work and life, giving more freedom in doing your job, accelerating the use of technology but paying a big price in reducing the direct human communication. I am not among those saying that the AI (I like to call it Augmented Intelligence, not Artificial Intelligence, since it is a set of tools, not a decision maker, yet!) will destroy the humanity (even if the sci-fi movies seem to be just a pale reflection of future) but for sure it impacts over the human community, on its empathic component.
On the flip side, these last years brought new challenges for whole world and especially for Europe. I would like to recall two of the most important, provoking effects that will last for the coming years.
1. Geopolitical Tensions: War in Ukraine and Middle East Conflicts are
The war in Ukraine, started more than 2 years ago was a real shock. We have believed that the humanity have reached the wisdom to use its capacities in development, resolving main problems of earth in increasing the standard of life for everyone and looking for a joint brighter future, but the last two years have shown a face of human kind that we thought is just rarely and limited shown up!
2. Energy Crisis: Inflation and Adaptation Strategies
The climate change has determined a very strong attitude at the level of European Union, being reflected in the adopted Green Deal which sets targets for de-carbonizing of Europe looking at the 2050 horizon. The very ambitious objectives involve major reforms, huge level of investments as well as enormous efforts to innovate and adapt.
Brexit: Economic Implications for the European Union
Europe has been obliged to find solutions in each individual case, and the solutions to be acceptable to all its member states, which is really difficult to achieve.
Industrial Shifts: Reducing Dependence on Asian Production
The more recent events in the Middle East determined not only people’s reaction in many countries but it had a strong impact on the economy by cutting or making more difficult the commercial routes from Asia to Europe and return (Red Sea being a main transport corridor) generating extra costs, longer supply chains and lots of uncertainties.
The energy crisis started by the Ukrainian War, together with the other factors such the conflict in Middle East, have determined an inflationary push in all Europe, unprecedently recorded since many years in the Euro Zone. The former eastern countries, due to their reforms after moving towards market economy, have faced in the early 90 an aggressive inflation, but in the last +20 years the situation have been calm and the economic growth being good and, in some cases, very good.
The exit of UK from the European Union (the famous Brexit) had an impact over the strength of the Union economy, but not so important as initially foreseen by the pessimists, and the real impact is diluted by other factors which are really more important.
Romania's Resilience pillars: Economic Growth and Foreign Investments
However, we, European Union and Romania, are I a moment when we have to adjust the long term strategic thinking. The good think of the energy crisis (which have generated a high price to be paid by the population and economic entities) was the acceleration of production and use of renewable energies. Solar, wind and hydro have substantially increased their share while the nuclear was re-considered as part of the future production mix. Some states have restarted their coal production capacities, as a temporary measure, to balance the reduction or elimination of russian gas as source (Germany and Poland the most relevant).
Another direction is to establish new production facilities in Europe to reduce the dependence on Asian sources. If we talk about pharma, microelectronics, batteries, construction materials, etc., a lot of new facilities are under construction or planned (some of them being already functional) in Europe. I can observe a joint approach of states, involving state aid component to encourage and facilitate such investments.
As part of re-designing the industry, we have to observe that the military industry, which was dormant or even closed in most of the countries, now have a new pulse, unfortunately in parallel with the defence expenditures of all countries.
The Future of Management Consulting: Adding Value in a Changing World landscape
Even if the Green Deal (including its attached instruments, such as Modernization Fund, to be used in transforming the Green House Gases generating industries) is top on the agenda, we may learn in the future a relatively reduction of its speed or lowering of very ambitious objectives.
Romania is facing the same problems and follows the same trends as the European Union member states.
I would like to underline some specific situations which makes me have confident the scenario of positive developments for the near future:
The Romanian economy has become agile and resilient, able to adapt to the changes in the economic environment. Even if we are a part in the global economy of the EU, we have proven a very strong capacity to adapt.
The energy production mix (less than 20% of the energy production is based on fossil fuels), the very large investments in renewable energy (wind and solar) determined a more than 50% of production to be from hydro, wind and solar. These investments made Romania a net exporter of energy and it is expected that the production capacities will continue to grow.
Romania continues to attract very large direct foreign investments, backed up by a strong state policy to support them. It is not a surprise that the Romanian GDP was of 169 billion Euros in 2014 and nearly doubled to 321 billion in 2023 in nominal terms.
But the complexity of the situation in the world as especially in our region may reduce our optimism about the future.
What’s next for Management Consultants evolving role?
It is obvious that we are scrutinizing the role of the profession in the future and we see a lot of challenges. It is obvious that in order to succeed we have to provide added value to the economy and to the society, clearly to our clients.
So, we should be able to embed the most advanced technological tools, being on the edge of innovation, but always balancing the two sides of our job which are the professionalism and the ethics, without considering that we will not be able to achieve our goals and keep our role for the economy and society that we are part of!
Brexit: Economic Implications for the European Union
Europe has been obliged to find solutions in each individual case, and the solutions to be acceptable to all its member states, which is really difficult to achieve.
Industrial Shifts: Reducing Dependence on Asian Production
The more recent events in the Middle East determined not only people’s reaction in many countries but it had a strong impact on the economy by cutting or making more difficult the commercial routes from Asia to Europe and return (Red Sea being a main transport corridor) generating extra costs, longer supply chains and lots of uncertainties.
The energy crisis started by the Ukrainian War, together with the other factors such the conflict in Middle East, have determined an inflationary push in all Europe, unprecedently recorded since many years in the Euro Zone. The former eastern countries, due to their reforms after moving towards market economy, have faced in the early 90 an aggressive inflation, but in the last +20 years the situation have been calm and the economic growth being good and, in some cases, very good.
The exit of UK from the European Union (the famous Brexit) had an impact over the strength of the Union economy, but not so important as initially foreseen by the pessimists, and the real impact is diluted by other factors which are really more important.
Romania's Resilience pillars: Economic Growth and Foreign Investments
However, we, European Union and Romania, are I a moment when we have to adjust the long term strategic thinking. The good think of the energy crisis (which have generated a high price to be paid by the population and economic entities) was the acceleration of production and use of renewable energies. Solar, wind and hydro have substantially increased their share while the nuclear was re-considered as part of the future production mix. Some states have restarted their coal production capacities, as a temporary measure, to balance the reduction or elimination of russian gas as source (Germany and Poland the most relevant).
Another direction is to establish new production facilities in Europe to reduce the dependence on Asian sources. If we talk about pharma, microelectronics, batteries, construction materials, etc., a lot of new facilities are under construction or planned (some of them being already functional) in Europe. I can observe a joint approach of states, involving state aid component to encourage and facilitate such investments.
As part of re-designing the industry, we have to observe that the military industry, which was dormant or even closed in most of the countries, now have a new pulse, unfortunately in parallel with the defence expenditures of all countries.
The Future of Management Consulting: Adding Value in a Changing World landscape
Even if the Green Deal (including its attached instruments, such as Modernization Fund, to be used in transforming the Green House Gases generating industries) is top on the agenda, we may learn in the future a relatively reduction of its speed or lowering of very ambitious objectives.
Romania is facing the same problems and follows the same trends as the European Union member states.
I would like to underline some specific situations which makes me have confident the scenario of positive developments for the near future:
The Romanian economy has become agile and resilient, able to adapt to the changes in the economic environment. Even if we are a part in the global economy of the EU, we have proven a very strong capacity to adapt.
The energy production mix (less than 20% of the energy production is based on fossil fuels), the very large investments in renewable energy (wind and solar) determined a more than 50% of production to be from hydro, wind and solar. These investments made Romania a net exporter of energy and it is expected that the production capacities will continue to grow.
Romania continues to attract very large direct foreign investments, backed up by a strong state policy to support them. It is not a surprise that the Romanian GDP was of 169 billion Euros in 2014 and nearly doubled to 321 billion in 2023 in nominal terms.
But the complexity of the situation in the world as especially in our region may reduce our optimism about the future.
What’s next for Management Consultants evolving role?
It is obvious that we are scrutinizing the role of the profession in the future and we see a lot of challenges. It is obvious that in order to succeed we have to provide added value to the economy and to the society, clearly to our clients.
So, we should be able to embed the most advanced technological tools, being on the edge of innovation, but always balancing the two sides of our job which are the professionalism and the ethics, without considering that we will not be able to achieve our goals and keep our role for the economy and society that we are part of!