BRUSSELS, Sept 25: Industry in the European Union is in a “worrying” state with crucial ground being lost on productivity and employment, the European Commission warned on Wednesday.

In two separate reports on competitiveness, the commission painted a bleak picture of industry in Europe, battered by a sharp drop in investment and anaemic internal demand.

Confounding the problem, the reports said, were the huge gaps between the bloc’s most dynamic countries, especially Germany, and the laggards to the south and east.

“Moreover, the cost of energy is increasing in almost all member states, contributing to the de-industrialisation of Europe,” the commission said.

The matter is an urgent one for European countries faced with recurrent news of closing factories and entire employment sectors disappearing or being sent overseas.

Reclaiming lost industry is seen as the best hope of bringing solid growth back to the EU, which has yet to recover from the doldrums of the debt crisis.

Accordingly, the EU had set itself an ambitious target to lift industry back to 20 per cent of overall economic output but in the summer of 2013, the share stood at 15pc and was on a falling trend.

“We’re a long way away from pre-crisis levels,” Industry Commissioner Antonio Tajani told a news conference.

“Europe is losing ground.” he said.

In a statement presenting the reports, the commission noted “worrying developments in two essential areas for any economy: productivity and employment.” Productivity, once a strongpoint in many European countries, was now lagging the United States and Japan, Tajani said.

“We are going to have to turn things around,” he said.

Italy was especially problematic, Tajani said, having undergone a de-industrialisation so acute that it is now at the level of Greece and Portugal instead of the top tier.

“Spain has overtaken Italy in terms of productivity thanks to reforms undertaken,” Tajani said.

Many EU countries are plagued with a raft of problems, he said, including too much red tape, inadequate infrastructure and lacklustre innovation where the United States was “way ahead of us”.

But the Commissioner said his assessment was hardly a mystery and that there was a broad consensus to revive industry across the EU.

“We have done a lot of things for steel, cars and shipyards,” he said.

“We have to do even more.”

On the positive side, industry on a nominal level remained stable between 2012 and 2013 even if its share in the whole economy shrank.

And exports were expanding compared to the United States and Japan, giving the bloc a 365 billion euro trade surplus ($495 billion) for 2012.

The reports were to be the basis of a discussion for EU industry ministers meeting in Brussels on Thursday.

Restarting industry will also headline a summit of EU leaders in February.

In the second quarter this year, the EU economy expanded a modest 0.4pc from the previous quarter while eurozone nations ended a record 18-months of recession.—AFP