For years, Europe prided itself on being a global leader in trade, technology, and diplomacy. But as the European Union drowns in regulations and internal debates, the United States and China have surged ahead in innovation, economic power, and geopolitics. Europe's influence is shrinking, and the longer it hesitates, the harder it will be to recover. The time for delay is over-this is a critical moment that will define Europe's future. If the EU continues to drift without decisive leadership and a bold vision, it risks becoming irrelevant, both politically and economically.
For a small country like Malta, this decline is particularly troubling. As the EU's smallest member state, Malta relies on a strong European economy for investment, trade, and diplomatic backing. If Europe continues to lag, Malta risks being trapped in a system that is losing global relevance. But while Europe struggles, Malta stands as proof that size is no barrier to impact. Despite its limited resources, Malta has consistently shown that it can stand up and be counted at the global level. It has done so before, and it can do so again.
Tech, economy, diplomacy
Europe is struggling to keep pace in the tech race. While the US and China have built giants like Apple, Tesla, Alibaba, and Huawei, Europe has failed to nurture start-ups that can compete at that level. Overregulation and risk aversion have stifled investment in AI, biotechnology, and emerging industries. As the US and China advance in artificial intelligence, quantum computing, and space exploration, Europe remains bogged down in discussions rather than driving progress. If this continues, it won't just fall behind-it will remove itself from global technological leadership.
Economically, Europe is also losing ground. While the US strengthens its trade partnerships and China expands its global infrastructure projects, the EU struggles with sluggish trade negotiations and market restrictions. Bureaucratic inertia makes it slow to react to the fast-changing global economy. Dependence on foreign energy, further exposed by the Russia-Ukraine conflict, weakens Europe's resilience even more. For small economies like Malta, this creates deep uncertainty. As a trade- and service-based economy, Malta needs a competitive Europe to attract investment and sustain stability. If Europe weakens, Malta's growth opportunities will shrink dramatically.
Europe's diplomatic influence is also fading. The US and China shape global affairs, while Europe often reacts rather than leads. A fragmented foreign policy weakens the EU's ability to take decisive action, particularly in critical regions like the Middle East. Malta, which depends on EU partnerships for diplomatic leverage, faces diminishing influence when Europe appears weak. If the EU loses power, Malta's ability to participate in key international discussions will also diminish.
While Europe remains strong in luxury goods, pharmaceuticals, aerospace, and financial services, it is struggling in high-growth sectors. China now dominates global electric vehicle production and battery manufacturing, while European carmakers like Volkswagen and Renault face high costs and slower adoption of next-generation technologies. China also leads the solar panel industry and controls most of the world's rare earth minerals-critical for electronics, electric vehicles, wind energy, and defence-leaving Europe at a serious disadvantage. In infrastructure, China has built the world's largest high-speed rail network, surpassing 40,000 km, while Europe, once a pioneer in the field, has stalled due to high costs and bureaucratic delays.
The US, meanwhile, dominates AI research, cloud computing, and semiconductor technology. Europe's lack of major tech corporations and fragmented investment culture make it difficult for start-ups to grow and compete. The US is also expanding its dominance in space exploration and commercial space travel while accelerating high-tech startup growth through a venture capital ecosystem that far outpaces Europe's. The semiconductor industry further reflects Europe's shortcomings-while American firms like Intel, AMD, and NVIDIA lead in design and production, Europe remains heavily dependent on foreign technology providers for critical components.
Malta as a catalyst for EU transformation
At the heart of Europe's crisis is a lack of leadership and vision. The EU no longer acts with the decisiveness and ambition that once made it a global powerhouse. It is time for a new European project-one that reinvigorates innovation, competitiveness, and global relevance. And Malta can serve as a catalyst for this transformation.
Despite its small size, Malta has demonstrated that strategic thinking, adaptability, and resilience can achieve meaningful results on the world stage. It has shown that with the right policies and determination, a country can punch above its weight. In many ways, Malta can and should be a model for the future of Europe-proving that agility, boldness, and forward-thinking leadership matter more than size.
Europe can reverse its decline, but only if it acts decisively. Innovation must become a priority, with the creation of a European equivalent to Silicon Valley to foster a stronger startup culture. Cutting bureaucracy and regulatory barriers is essential to making Europe a more attractive environment for business growth. Trade agreements must be pursued aggressively to prevent economic isolation. Security cooperation must also be strengthened, as geopolitical relevance requires more than just diplomacy. Most importantly, Europe must embrace digital transformation-not just by regulating AI and green energy, but by leading in their development.
Malta, despite its size, must also take strategic steps to secure its economic and political future. By positioning itself as a hub for technology and innovation, it can attract entrepreneurs frustrated by Europe's slow-moving economies. Expanding trade beyond the EU and strengthening ties with emerging markets will reduce dependence on an increasingly fragile European system. Malta's strategic location between Europe, Africa, and the Middle East presents an opportunity to play a larger role in global trade-an opportunity that must be actively pursued. Beyond economics, Malta must also strengthen its diplomatic relationships outside the EU, maintaining strong ties with the US, UK, and Gulf states to ensure a diverse network of strategic partners.
Europe's decline is not inevitable, but the window for action is closing. If the EU fails to take bold steps to regain its competitiveness, it will continue to lose influence to the US and China, leaving its member states-especially smaller ones like Malta-at a severe disadvantage. The time for complacency has passed. Europe must decide whether it wants to lead on the global stage or remain a spectator. And if Europe needs a new model to follow, it need look no further than Malta. The smallest member of the union might just hold the key to the EU's revival.
Alex Muscat is a Member of the House of Representatives of Malta on behalf of the Labour Party.