Europe today finds itself at a moment when it is no longer enough to speak merely about slower economic growth or temporary market challenges. Increasingly, leading figures in global finance are openly warning that the European economic model is losing competitiveness compared with the United States and Asia. The latest warning came from Sergio Ermotti, Chief Executive Officer of UBS Group AG, one of Europe’s most important banking institutions.

Speaking about the condition of the European economy, Ermotti emphasized that the problem is no longer limited exclusively to regulation of the banking sector, but rather to “excessive regulation across all areas of business.” In his opinion, enormous bureaucracy, the slowness of institutional systems, and the lack of innovation are the key reasons why Europe is gradually losing the economic race against other global centers of power.

His remarks come at a time when European economies are recording weak productivity growth, slowing industrial activity, and an increasingly visible outflow of capital toward the American market, which offers investors and technology companies a more flexible regulatory environment and significantly greater room for expansion.

Particularly interesting is Ermotti’s belief that the European political system is still not prepared for serious reforms because the current situation “is not bad enough” to force politicians to make difficult decisions. As an example, he referred to the Greek debt crisis of 2012, arguing that only severe systemic disruptions in the past have led to genuine reform efforts.

According to his assessment, European governments continue trying to solve problems through higher taxation, additional borrowing, and fiscal stimulus measures, even though public debt levels are already extremely high. In the long term, such policies could further slow investment activity and reduce the competitiveness of European companies.

These views are especially symbolic coming from the man leading UBS during the period following the takeover of Credit Suisse, one of the biggest shocks in modern European banking history. After the collapse of Credit Suisse in 2023, Swiss authorities prepared a new package of banking reforms that could require UBS to increase its capital reserves by an additional twenty billion dollars.

Ermotti openly criticizes this approach, arguing that the proposed measures are not proportional, are not aligned with international standards, and fail to address the real causes behind the collapse of Credit Suisse. He particularly warns that European and Swiss banks cannot remain competitive in the long run if regulatory requirements become significantly stricter than those imposed on American competitors.

What further concerns European financial circles is the fact that a growing number of international investors and corporations are considering relocating capital, operations, and even headquarters outside Europe. UBS had previously considered internally the possibility of transferring part of its business operations to the United States if regulatory pressure becomes excessive.

Similar warnings were previously expressed by Jamie Dimon, Chief Executive Officer of JPMorgan Chase & Co., who stated last year that Europe is “losing the economic race” against the United States and China.

For the business community in Bosnia and Herzegovina and the wider region, these messages carry particular significance. The European Union remains the key trade and financial partner of the Western Balkan countries, meaning that any slowdown in the European economy directly affects the banking sector, investments, interest rates, availability of capital, and overall business activity in the region. The banking sector in Bosnia and Herzegovina remains highly conservative, raising the question of how long money will continue to be kept “under lock and key” while clients are increasingly pushed toward borrowing from alternative financial companies, thereby creating the foundations for the expansion of private credit markets.

At the same time, the growth of regulatory requirements and administrative procedures is becoming a serious challenge for domestic companies as well. In practice, it is increasingly evident that complex regulatory systems slow investments, increase operating costs, and reduce the ability of economies to react quickly to market changes.

For that reason, balancing the stability of the financial system with economic development is becoming one of the defining issues for the future of the European economy. If Europe fails to find a way to preserve regulatory security while simultaneously enabling greater flexibility, innovation, and competitiveness, the gap between the European and American markets could become even more pronounced in the years ahead.

That is precisely why the statements made by the head of UBS should not be viewed merely as commentary on the banking sector, but rather as a warning about the broader condition of the European economy and its ability to remain relevant in the new global economic order.