The report prepared at the request of the European Union (EU) by former ECB President Mario Draghi on economic competitiveness in the region states that the EU needs a much more coordinated industrial policy, faster decisions and massive investments if it is to keep up with the economic pace of its rivals the US and China.
Moreover, Draghi told the conference at which he presented the report, Europe is the most open economy in the world, so when our partners do not play by the rules, we are more vulnerable than others.
The report says the EU needs additional investment of between €750 billion and €800 billion a year, up to 5% of GDP. In addition, it notes that growth has been slowing for a long time in Europe, but has been ignored. In that sense, Draghi said that now we cannot ignore it any longer. Now conditions have changed: world trade is slowing down, China is actually slowing down a lot and becoming much less open to us… we have lost our main supplier of cheap energy, Russia.
As reflected in Draghi’s report, EU countries had already responded to the new realities, but their effectiveness was limited by a lack of coordination. Different levels of subsidies between countries were disrupting the single market, fragmentation limited the scale required to compete globally, and the EU’s decision-making process was complex and slow. In this regard, it is noted that it will be necessary to refocus the EU’s work on the most pressing issues, ensure efficient policy coordination behind common objectives, and use existing governance procedures in a new way that allows Member States that want to move faster to do so.
The report further suggests that so-called qualified majority voting – where an absolute majority of member states need not be in favor – should be extended to more areas and, as a last resort, that like-minded nations be allowed to act alone on some projects. While existing national or EU funding sources will cover some of the huge sums of investment needed, Draghi said that new sources of common funding may be necessary, which countries led by Germany in the past have been reluctant to accept. Thus, he pointed out that, if the political and institutional conditions are met, these projects would also require common funding, citing defense investments and energy networks as examples.
