Europe must balance competitiveness and social cohesion, Keravnos says

Cyprus must balance long-term economic stability with responses to rapidly changing global challenges, Finance Minister Makis Keravnos said on Friday, warning that Europe can no longer rely on assumptions that held true 10 to 20 years ago. Addressing the Limassol Economic Forum 2026, Keravnos said the world was undergoing rapid changes that were making it increasingly difficult to predict future developments and interpret current events accurately. He praised the event’s organisers, saying the forum had established itself as an important platform for examining geopolitical developments, economic trends and major global challenges. “We are living in a period in which everything is changing very quickly,” he said, pointing to regional conflicts, climate change and the energy crisis as factors contributing to an increasingly complex international environment. Nothing remained unchanged, he added, particularly in the context of the current economic and political landscape, where assumptions that had been taken for granted until recently were being challenged at an unprecedented pace. Changing geopolitical balances are creating new risks and dangers, while technological advances, particularly in artificial intelligence (AI), are transforming daily life, productivity and employment, as well as giving rise to new economic models. At the same time, inflation and the rising cost of living are placing pressure on governments, businesses and households, while Europe faces the challenge of reconciling social cohesion with economic competitiveness. Keravnos stressed that these pressures were not temporary difficulties but interconnected challenges that required a coordinated response. “No country can face these challenges alone,” he said, arguing that the situation demonstrated the importance of the European Union (EU), which he described as more than a single market, but also a shared community of values and principles. The EU, he added, remained Europe’s most important instrument for addressing the challenges confronting the continent. Geopolitical developments had also highlighted the risks associated with dependence on other countries, making it necessary to develop a new strategy that took account of changing international circumstances while maintaining a balance between competitiveness and openness. Keravnos said economic resilience was essential for attracting strong investment, adding that Cyprus had strengthened its credibility and competitiveness through prudent fiscal policies, debt reduction and structural reforms. He also highlighted the speed of the ongoing technological transition, warning that economies had to adapt to the changes it was bringing. “Artificial intelligence is no longer optional,” he said, describing the technology as essential for improving productivity and competitiveness. For this reason, Europe needed to increase investment in skills, research and technology, while ensuring that its existing strengths were channelled towards productive activities. The bloc had significant advantages, including its universities, accumulated knowledge, traditions and culture, Keravnos said, but these needed to be translated into targeted investment and effective training for workers. He also called for a reduction in bureaucracy, arguing that excessive administrative burdens could undermine Europe’s ability to respond to changing conditions. Economic stability, he said, was non-negotiable for Europe, warning that a lack of flexibility could weaken the continent’s stability and its capacity to address emerging challenges. Turning to Cyprus, Keravnos said the country was actively participating in European efforts despite its relatively small size, contributing to the development of common solutions. He also referred to the work undertaken during Cyprus’ presidency of the Council of the European Union, saying the country had helped advance a range of initiatives and citing numerous examples of progress achieved during its term. Cyprus’ geographical position also provided an opportunity to strengthen links between Europe and the Middle East, he said, highlighting the country’s potential role in bringing the two regions closer together. Energy security remains a key European priority, Keravnos added, alongside the resilience of supply chains, the green transition and the development of cross-border infrastructure projects. Cyprus was actively seeking to contribute to these efforts, he said, underlining the importance of cooperation in strengthening Europe’s energy security and addressing wider economic vulnerabilities. The finance minister argued that current conditions demanded common action and a clear long-term vision, with Europe needing to make better use of its strengths and reinforce its economic competitiveness without increasing inequality. He said the continent had the capacity to overcome its present difficulties and create better prospects for the future, provided it was willing to adapt to the changing international environment. Europe could no longer depend on its understanding of the world as it existed 10 or 20 years ago, he said, stressing the need to recognise new realities and respond accordingly. However, adaptation should not come at the expense of long-term prosperity and economic stability. The central challenge, Keravnos concluded, was to develop policies capable of combining a consistent long-term direction with the flexibility needed to respond effectively to immediate economic and geopolitical pressures.