The findings by Mario Draghi, former Italian premier, in his report to the European Union concerning its competitiveness, paint a stark picture. Draghi concludes that the EU has significantly slipped behind the US and is contending with emerging threats from China. According to him, the necessary answer isn’t a small adjustment, but a comprehensive modification to promote innovation, facilitate decarbonisation and ramp up competitiveness, while maintaining economic safety.
These conclusions are particularly valuable coming from Draghi – an individual who, while not currently part of the EU system, has in-depth knowledge and familiarity with its workings. Unlike a typical administrative report recommending minor modifications, Draghi’s analysis highlights the grand scale of investment and policy shift needed for the EU to enhance productivity and counter what he terms the “vital issue” of supporting living standards.
Several of the issues identified are ones that have been conspicuous yet ignored for a long duration, due to the EU enjoying a period replete with globalisation, inexpensive energy and free commerce. Now, however, with the EU’s economic expansion slowing, its weak points – particularly in crucial technological areas – are being exposed, along with the urgent need for environmental action. Without such action, Draghi warns of a gradual, agonizing economic downturn for the EU.
Although the analysis is convincing, certain proposed policy measures might spur debates. For instance, Draghi recommends an extensive investment scheme, requiring additional expenditure approximating €800 billion annually. He also advocates for the reduction of EU regulations and a concerted effort to finalise the single market, echoing suggestions from a recent EU report by Enrico Letta, another former Italian PM.
Draghi urges for a strategy of shared funding through a novel debt instrument from the EU to bolster investment, an approach likely to be contentious in some European nations. He further implores the EU to be more dynamic, which would entail not only substantial reductions in regulations but also the termination of national legislative vetoes in broader policy sectors. Such shifts may stir controversy in nations like Ireland, known for its staunch defence of tax policy independence. Despite this, the report doesn’t wholly advocate for integration but rather promotes centralisation where necessary within EU jurisdiction, granting national autonomy otherwise.
Highlighting the evolving global economic landscape, Draghi notes the shift from free trade towards safeguarding crucial resources and vital products such as computer chips. He presents a case for a more assertive yet sophisticated re-emergence of industrial policies. His suggestion that the EU should continue to supervise and regulate Foreign Direct Investments (FDI) may face opposition in Dublin.
This report brings to the forefront significant questions, outlining an expansive policy framework. While these suggestions might appeal to the European Commission, its reception amongst member countries could be mixed. Nonetheless, the report presents a holistic approach to coping with Europe’s standing in a rapidly shifting economic setting. Crucially, it starkly warns of the severe consequences of maintaining the status quo.