A guest editorial by Nicolai Chamizo, founder and chief executive officer of Incore Invest
As we move deeper into 2025, Europe is facing a pivotal moment. It has long been a hub for scientific discovery, entrepreneurship and high-quality talent, but structural headwinds from shifting demographics to slow productivity growth are beginning to constrain its potential and it is no longer deemed the innovation powerhouse it once was. Across the Atlantic, the United States is doubling down on biotech, Artificial Intelligence (AI) and semiconductors. In Asia, China is scaling with surgical precision fuelled by aggressive R&D spending and clear industrial strategies. Yet, while the challenges are real, they are not impossible. Europe still possesses the assets it needs to lead, i.e. deep expertise, rich academic institutions and a strong foundation in values-driven innovation. The task ahead is not simply to keep pace, but to reignite momentum with focused investment, policy reform and bold ambition. Whilst Europe is still in the game, with the right strategic intent and swift adaptation, it’s well positioned to lead once again.
The urgency behind the shift
Europe’s innovation model is still rooted in excellence, but it faces a serious rise in growing pressure. Regulatory complexity, fragmented capital markets and legacy industrial systems are slowing its ability to respond to the pace and agility of global changes. It is safe to say Europe isn’t failing, but it is falling behind.
To put it into context, the EU’s productivity has grown just 0.7% per year since 2015, which is less than half the U.S. rate and a fraction of China’s. And Europe’s working-age population is forecasted to shrink by two million per year by 2040. These aren’t hopeless and impossible challenges, but they do demand bold and coordinated action.
There is also increasing competition from fast-rising economies in Asia. Countries like India, South Korea and Singapore are demonstrating how targeted investment, streamlined regulatory environments and public-private collaboration can create powerful innovation engines. These models offer valuable lessons for Europe.
How Europe can reclaim momentum through focused investment
Europe has no shortage of potential. What it often lacks is the scale and speed to transform strong ideas into global leaders. While the US and China pursue moonshots with full government and private sector backing, Europe’s R&D investment remains cautious and fragmented.
Underinvestment in this area has left Europe with an innovation gap that is widening each year. In 2022, the U.S. invested $886bn in R&D (3.4% of GDP), more than double the EU’s $382bn (2.3% of GDP). China, meanwhile, has overtaken both in public R&D spending and is rapidly accelerating private investment.
Europe’s firms, facing higher energy costs and unpredictable regulation, are increasingly forced to downscale or offshore core operations. This not only hampers productivity but also erodes long-term industrial resilience. To overcome this, Europe needs to reimagine its playbook, shifting focus from optimisation to transformation. That means investing not just in startups, but in the scaleups that will anchor the next generation of economic growth.
Additionally, the funding gap is also a real concern. Europe needs deeper capital pools and more risk-tolerant investors. The availability of venture and growth capital remains uneven across the continent. If we want to turn our brightest ideas into unicorns and category leaders, we must build a stronger bridge between innovation and investment.
Turning policy into a growth engine
Europe can be a leader in innovation-friendly regulation, but to do that it must move faster. Let’s create policy frameworks that encourage experimentation, support labour mobility and unlock growth across borders.
Energy resilience, digital infrastructure and regulatory harmonisation should be treated not as secondary goals but as core drivers of a competitive economy and with the right structures in place, Europe’s innovators will have the right platform to thrive.
We also need to create regulatory sandboxes that foster responsible innovation. These are important as test environments give startups and scaleups a space to iterate and evolve, reducing time-to-market and increasing competitiveness. We’ve seen their success in fintech so now is a good time to expand that model across other verticals too.
Unlocking Europe’s human capital advantage
The demographics are moving and shifting across Europe, but this makes it all the more essential to optimise how we attract, retain and ultimately empower talent. Europe should focus on competing globally for the best minds, offering clearer and faster routes for high-skilled workers and founders to relocate, contribute and build within the continent.
Lifelong learning and meaningful reskilling programs are no longer optional. They’re foundational to maintaining a competitive workforce. Public and private sectors must work together to close the skills gap and ensure workers are equipped for roles in fintech, AI, green tech, digital services and more.
To complement this, more needs to be done to foster entrepreneurial mindsets across the education system. Young people should see building companies as a viable, and even aspirational path. Entrepreneurial education, innovation hubs tied to universities and better pathways from academia to industry are essential to fuelling the next generation of leaders.
Europe produces world-class talent, but too often we see it leaving for more ambitious opportunities elsewhere. We must create the conditions for that talent to thrive at home and not just through salaries or benefits, but by cultivating a culture of innovation, offering career growth and spotlighting success stories.
A united vision for a competitive future
Europe has made progress but ambition must now meet action. The European Commission’s steps to streamline investment and enhance tech independence are promising and to go further, we must accelerate coordination across capital, infrastructure and regulatory alignment. Fragmentation is not destiny and with shared purpose and pan-European collaboration, we can transform our innovation ecosystem into a global benchmark.
We should also amplify the visibility of European successes. Role models matter. When entrepreneurs see companies from their region breaking through on the world stage, it fuels ambition. A narrative shift that celebrates innovation, risk-taking and global reach can have a compounding effect.
The European path forward
Europe is not on the sidelines in this game, but to remain at the front of global innovation, we must embrace urgency, foster agility and back our talent and technology with conviction.
This isn’t about playing catch-up. It’s about reclaiming leadership on our terms with the creativity, values and vision that have always defined Europe at its best. Let’s rise to the challenge and shape a future we can lead with confidence.
Image: Incore Invest
Guest Editorial
This article was produced specially for Fintech Intel by an expert guest contributor.
