In the Draghi report on the future of the EU, dogmas on austerity, competition and green follies are scrapped
More investments, more coordination and more decision-making efficiency: what is in Mario Draghi's report on European competitiveness presented today in Brussels
The European Union needs a more coordinated industrial policy, to be able to make decisions quickly and to invest more in order to keep pace with other economic powers, namely the United States and China: this is the ultimate summary of the long-awaited report on European competitiveness that Mario Draghi – former Italian Prime Minister and former President of the European Central Bank – presented today publicly in Brussels: it was commissioned to him a year ago by the European Commission.
EUROPE NEEDS MASSIVE INVESTMENTS, SAYS DRAGHI
In the report , over three hundred pages long, Draghi writes that the European Union needs additional investments of 750-800 billion euros per year – up to 5 percent of its gross domestic product – to transform its economy and make it competitive . As Reuters points out, this is a percentage much higher than that (1-2 percent) of the Marshall Plan for European reconstruction after the Second World War.
Furthermore, over the last twenty years, economic growth in the European Union has always been slower than that of the United States due to lower productivity.
AN EXISTENTIAL CHALLENGE
Draghi describes a European Union grappling with an "existential challenge" which consists in developing advanced technologies, defining a plan to achieve emissions targets, strengthening defense capabilities and securing material supply chains. first criticisms (to date, in fact, it is dependent on foreign countries, especially China).
THE RISKS OF LOW COMPETITIVITY
“If Europe fails to become more productive, we will be forced to choose,” the report reads. “We will not be able to simultaneously become a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage. We will have to scale back some, if not all, of our ambitions."
Beyond the dependence on foreign countries for energy and raw minerals, among the problems of the European Union is the inability of its defense and telecommunications companies to exploit economies of scale: hence the need, according to Draghi, of greater consolidation.
REVIEW COMPETITION POLICY
Draghi also proposed a review of competition policy so that it "does not become an obstacle" to industrial objectives. This review should first of all concern, on the one hand, the evaluation criteria of technology agreements, in order to examine whether they can stimulate innovation in the bloc, and on the other the constraints on state aid in sectors of strategic importance. Among the latter is, for example, the sector of technologies for the ecological transition, which Brussels has failed to adequately stimulate to respond both to the US program of public incentives (the Inflation Reduction Act) and to Chinese industrial plans.
The report states that "despite the EU's ambition to maintain and develop production capacity for clean technologies, there are many signs of an evolution in the opposite direction. In some segments, EU companies are announcing production cuts in the EU, closures or partial or full relocation to other regions of the world.”
The document also suggests the creation of a common fund for defense research and development, in particular on drones, hypersonic missiles, directed energy weapons, space and more.
– Read also: Will Draghi's report shock American companies?
A TWO-SPEED EUROPEAN UNION?
The report also states that “it will be necessary to refocus the work of the European Union on the most pressing issues, ensure efficient coordination of policies to achieve common objectives and use existing governance procedures in a new way to enable member states that they want to act more quickly."
Draghi therefore seems to suggest – as he had already done in a speech to La Hulpe last April – that, where unanimity was not achievable, a small group of member countries could decide to move on their own.
THE PROBLEM OF ENERGY AND THE GREEN TRANSITION, ACCORDING TO DRAGHI
Draghi's competitiveness report focuses heavily on high European energy prices and their negative repercussions on investment. Furthermore, the emission reduction objectives are weighing heavily on energy-intensive sectors: the same thing does not happen in China and the United States due to the substantial state funding for the transition.
As summarized effectively by Bloomberg , “to make the energy transition an opportunity, Europe must synchronize all its policies with climate objectives and develop a joint plan for decarbonisation and competitiveness that embraces energy producers, clean and automotive technologies, as well as energy-intensive companies where emissions are difficult to reduce”.
According to the estimate reported by Draghi, the main European energy-intensive sectors, such as the chemical and metal sectors, will need an investment of 500 billion euros over fifteen years to decarbonise. Investments in the transport sector will have to amount to 100 billion per year from 2031 to 2050. Draghi defined the automotive industry as a "key example of the EU's lack of planning", given the difficulties in the transition to electric vehicles and the strong competitive disadvantage compared to China .
DAVID CARRETTA'S ANALYSIS (EXTRACT FROM THE NEWSLETTER IL MATTINAL EUROPEO )
Draghi himself said that some ideas were included in the programmatic guidelines presented by the President of the Commission in July before the European Parliament. Other ideas should be included in the mission letters of the new commissioners. The timing chosen by von der Leyen – presentation of the Draghi report before the presentation of the new college – suggests his good intentions. But will Ursula von der Leyen have the courage to cross the red lines set by Germany? In his first term, he rarely did so. Between 2019 and 2024, von der Leyen managed the various crises that followed one another, without showing an innovative vision of the EU. On the most controversial issues, such as the common debt to cover financing needs, it has always shown itself to be conservative.
Von der Leyen's caution is understandable. In the EU, the Commission proposes, the Member States decide. The heads of state and government are the real obstacles to the implementation of Draghi's recommendations.
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All actors – from the Commission to national governments – will have to share a vision and implement reforms. But despite Draghi's optimism, just take a look at the EU political map to understand how difficult it will be. Emmanuel Macron and Olaf Scholz are weaker than ever. The Franco-German engine no longer works. Populist and anti-European parties are in government in Italy, the Netherlands, Finland, Hungary and Slovakia. And ambition has become a rare commodity in Brussels too.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/rapporto-mario-draghi/ on Mon, 09 Sep 2024 13:52:02 +0000.