Mario Draghi Proposes Bold Solutions for EU's Economic Challenges

Mario Draghi has solutions for Europe's sluggish economy. Will EU governments listen?

BRUSSELS (AP) -- A long-awaited report on how to rescue Europe's economy from weak growth and red tape is in. The question is, how many of its recommendations will actually be enacted by the drawn-out decision-making process of the European Union? The report stands out from other recipes for improvement because the project was headed by Mario Draghi, the former head of the European Central Bank who also served as Italy's prime minister in 2021-22. Draghi is regarded as having saved the euro currency union with his 2012 promise that the ECB would do "whatever it takes" to save the shared currency from the debt and financial crisis then engulfing it. Now the EU and its 440 million people are facing a persistent and growing growth gap with the US, the report says. Last year the EU economy grew 0.4% compared with 2.5% in the U.S. Europe is also struggling with three areas where it has become dependent on outsiders: Russia for energy, China for growth and trade, and the U.S. for defense. All three are now disrupted or in question. Draghi says the EU and its 27 member governments have to work better together to develop their own capacities. The report, requested by the European Union's executive commission, says Europe needs to massively ramp up infrastructure and green energy investments while slashing burdensome regulation in order to return to consistent, strong growth. Whether any of it will actually take effect over the upcoming 5-year term of the re-elected commission President Ursula von der Leyen depends on backing from the EU's member governments and its parliament. Here are some key takeaways from the report's nearly 400 pages: To pay for the transition to clean energy and boost defense capacity, the EU would need to increase public investments by a massive 5% of annual economic output, levels not seen since the 1960s and 1970s, and dwarfing the post-World War II Marshall Plan. To find the money, the EU needs to integrate its financial markets so that companies can raise more capital through stock and bond sales rather than bank loans as they tend to do now. That has been one of the EU's long-standing projects, but it has moved slowly amid resistance to some aspects, such as shared deposit insurance. Draghi also said that issuing shared debt would be one way to both fund investment in specific projects such as defense or cross-border energy grids. That's what the EU did to fund its pandemic recovery program. But the idea faces political resistance, and von der Leyen, the commission president, said at a news conference introducing the report that Europe's national governments would have to "look at the political will to have these common European projects." Europe needs to "close the innovation gap with the United States," Draghi said, pointing out that regulatory barriers and lack of startup financing meant that fast growing European companies - so-called "unicorns" valued at $1 billion or more - often moved to the U.S. in search of venture capital backing. That, and too much regulation, leaves Europe stuck with an economy based on older, "middle technologies" such as autos instead of digital tech. The report pointed out that no EU company worth more than $100 billion has been set up from scratch in the last fifty years, while all six U.S. companies worth more than $1 trillion - such as Apple and artificial intelligence chip maker Nvidia - were started in that period. Only four of the world's top 50 tech companies are European. "We have many talented researchers and entrepreneurs filing patents," the report says. "But innovation is blocked at the next stage... innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations." While Europe's regulations on artificial intelligence and data privacy are "commendable, their complexity and risk of overlaps and inconsistence" can undermine the EU's own tech companies as use of AI becomes more widespread. The loss of cheap Russian natural gas over the invasion of Ukraine means Europe - which unlike the U.S. must import the bulk of its energy - must hustle to build out renewables. Energy prices have fallen but companies still face electricity prices 2-3 times higher than in the U.S. and gas prices are 4-5 times higher. Fossil fuels will "continue to play a central role in energy pricing for the remainder of this decade," the report says. European Union countries are buying too much of their defense equipment abroad, almost two thirds of it in the United States, and failing to invest enough in joint military projects, the report says. NATO allies -- almost all of whose members are part of the EU -- have been ramping up defense spending since Russia annexed Ukraine's Crimean Peninsula in 2014. Their aim is for each country to spend at least 2% of gross domestic product on national defense. NATO forecasts that 23 of its 32 members will meet or exceed the 2% target by the end of this year, up from just three countries in 2014. The report highlighted the shortcomings of countries investing in their national defense industry rather than joint procurement. When Ukraine appealed for artillery, for example, EU countries supplied 10 types of howitzers. Some use different 155 mm shells, causing logistical headaches. In contrast, the A-330 Multi-Role Tanker Transport plane was developed jointly, and this allowed participating countries to pool resources and share operating and maintenance costs.

Mario Draghi has solutions for Europe's sluggish economy. Will EU governments listen?

BRUSSELS -- A long-awaited report on how to rescue Europe's economy from weak growth and red tape is in. The question is, how many of its recommendations will actually be enacted by the drawn-out decision-making process of the European Union? The report stands out from other recipes for improvement because the project was headed by Mario Draghi, the former head of the European Central Bank who also served as Italy's prime minister in 2021-22. Draghi is regarded as having saved the euro currency union with his 2012 promise that the ECB would do "whatever it takes" to save the shared currency from the debt and financial crisis then engulfing it. Now the EU and its 440 million people are facing a persistent and growing growth gap with the US, the report says. Last year the EU economy grew 0.4% compared with 2.5% in the U.S. Europe is also struggling with three areas where it has become dependent on outsiders: Russia for energy, China for growth and trade, and the U.S. for defense. All three are now disrupted or in question. Draghi says the EU and its 27 member governments have to work better together to develop their own capacities. The report, requested by the European Union's executive commission, says Europe needs to massively ramp up infrastructure and green energy investments while slashing burdensome regulation in order to return to consistent, strong growth. Whether any of it will actually take effect over the upcoming 5-year term of the re-elected commission President Ursula von der Leyen depends on backing from the EU's member governments and its parliament. Here are some key takeaways from the report's nearly 400 pages: To pay for the transition to clean energy and boost defense capacity, the EU would need to increase public investments by a massive 5% of annual economic output, levels not seen since the 1960s and 1970s, and dwarfing the post-World War II Marshall Plan. To find the money, the EU needs to integrate its financial markets so that companies can raise more capital through stock and bond sales rather than bank loans as they tend to do now. That has been one of the EU's long-standing projects, but it has moved slowly amid resistance to some aspects, such as shared deposit insurance. Draghi also said that issuing shared debt would be one way to both fund investment in specific projects such as defense or cross-border energy grids. That's what the EU did to fund its pandemic recovery program. But the idea faces political resistance, and von der Leyen, the commission president, said at a news conference introducing the report that Europe's national governments would have to "look at the political will to have these common European projects." Europe needs to "close the innovation gap with the United States," Draghi said, pointing out that regulatory barriers and lack of startup financing meant that fast growing European companies - so-called "unicorns" valued at $1 billion or more - often moved to the U.S. in search of venture capital backing. That, and too much regulation, leaves Europe stuck with an economy based on older, "middle technologies" such as autos instead of digital tech. The report pointed out that no EU company worth more than $100 billion has been set up from scratch in the last fifty years, while all six U.S. companies worth more than $1 trillion - such as Apple and artificial intelligence chip maker Nvidia - were started in that period. Only four of the world's top 50 tech companies are European. "We have many talented researchers and entrepreneurs filing patents," the report says. "But innovation is blocked at the next stage... innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations." While Europe's regulations on artificial intelligence and data privacy are "commendable, their complexity and risk of overlaps and inconsistence" can undermine the EU's own tech companies as use of AI becomes more widespread. The loss of cheap Russian natural gas over the invasion of Ukraine means Europe - which unlike the U.S. must import the bulk of its energy - must hustle to build out renewables. Energy prices have fallen but companies still face electricity prices 2-3 times higher than in the U.S. and gas prices are 4-5 times higher. Fossil fuels will "continue to play a central role in energy pricing for the remainder of this decade," the report says. European Union countries are buying too much of their defense equipment abroad, almost two thirds of it in the United States, and failing to invest enough in joint military projects, the report says. NATO allies -- almost all of whose members are part of the EU -- have been ramping up defense spending since Russia annexed Ukraine's Crimean Peninsula in 2014. Their aim is for each country to spend at least 2% of gross domestic product on national defense. NATO forecasts that 23 of its 32 members will meet or exceed the 2% target by the end of this year, up from just three countries in 2014. The report highlighted the shortcomings of countries investing in their national defense industry rather than joint procurement. When Ukraine appealed for artillery, for example, EU countries supplied 10 types of howitzers. Some use different 155 mm shells, causing logistical headaches. In contrast, the A-330 Multi-Role Tanker Transport plane was developed jointly, and this allowed participating countries to pool resources and share operating and maintenance costs.

Mario Draghi has solutions for Europe's sluggish economy. Will EU governments listen?

BRUSSELS (AP) -- A long-awaited report on how to rescue Europe's economy from weak growth and red tape is in. The question is, how many of its recommendations will actually be enacted by the drawn-out decision-making process of the European Union? The report stands out from other recipes for improvement because the project was headed by Mario Draghi, the former head of the European Central Bank who also served as Italy's prime minister in 2021-22. Draghi is regarded as having saved the euro currency union with his 2012 promise that the ECB would do "whatever it takes" to save the shared currency from the debt and financial crisis then engulfing it. Now the EU and its 440 million people are facing a persistent and growing growth gap with the US, the report says. Last year the EU economy grew 0.4% compared with 2.5% in the U.S. Europe is also struggling with three areas where it has become dependent on outsiders: Russia for energy, China for growth and trade, and the U.S. for defense. All three are now disrupted or in question. Draghi says the EU and its 27 member governments have to work better together to develop their own capacities. The report, requested by the European Union's executive commission, says Europe needs to massively ramp up infrastructure and green energy investments while slashing burdensome regulation in order to return to consistent, strong growth. Whether any of it will actually take effect over the upcoming 5-year term of the re-elected commission President Ursula von der Leyen depends on backing from the EU's member governments and its parliament. Here are some key takeaways from the report's nearly 400 pages: Investment, investment, investment To pay for the transition to clean energy and boost defense capacity, the EU would need to increase public investments by a massive 5% of annual economic output, levels not seen since the 1960s and 1970s, and dwarfing the post-World War II Marshall Plan. To find the money, the EU needs to integrate its financial markets so that companies can raise more capital through stock and bond sales rather than bank loans as they tend to do now. That has been one of the EU's long-standing projects, but it has moved slowly amid resistance to some aspects, such as shared deposit insurance. Draghi also said that issuing shared debt would be one way to both fund investment in specific projects such as defense or cross-border energy grids. That's what the EU did to fund its pandemic recovery program. But the idea faces political resistance, and von der Leyen, the commission president, said at a news conference introducing the report that Europe's national governments would have to "look at the political will to have these common European projects." Innovation and new technology Europe needs to "close the innovation gap with the United States," Draghi said, pointing out that regulatory barriers and lack of startup financing meant that fast growing European companies - so-called "unicorns" valued at $1 billion or more - often moved to the U.S. in search of venture capital backing. That, and too much regulation, leaves Europe stuck with an economy based on older, "middle technologies" such as autos instead of digital tech. The report pointed out that no EU company worth more than $100 billion has been set up from scratch in the last fifty years, while all six U.S. companies worth more than $1 trillion - such as Apple and artificial intelligence chip maker Nvidia - were started in that period. Only four of the world's top 50 tech companies are European. "We have many talented researchers and entrepreneurs filing patents," the report says. "But innovation is blocked at the next stage... innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations." While Europe's regulations on artificial intelligence and data privacy are "commendable, their complexity and risk of overlaps and inconsistence" can undermine the EU's own tech companies as use of AI becomes more widespread. A pro-growth transition to renewable energy The loss of cheap Russian natural gas over the invasion of Ukraine means Europe - which unlike the U.S. must import the bulk of its energy - must hustle to build out renewables. Energy prices have fallen but companies still face electricity prices 2-3 times higher than in the U.S. and gas prices are 4-5 times higher. Fossil fuels will "continue to play a central role in energy pricing for the remainder of this decade," the report says. Less reliance on the US for security European Union countries are buying too much of their defense equipment abroad, almost two thirds of it in the United States, and failing to invest enough in joint military projects, the report says. NATO allies -- almost all of whose members are part of the EU -- have been ramping up defense spending since Russia annexed Ukraine's Crimean Peninsula in 2014. Their aim is for each country to spend at least 2% of gross domestic product on national defense. NATO forecasts that 23 of its 32 members will meet or exceed the 2% target by the end of this year, up from just three countries in 2014. The report highlighted the shortcomings of countries investing in their national defense industry rather than joint procurement. When Ukraine appealed for artillery, for example, EU countries supplied 10 types of howitzers. Some use different 155 mm shells, causing logistical headaches. In contrast, the A-330 Multi-Role Tanker Transport plane was developed jointly, and this allowed participating countries to pool resources and share operating and maintenance costs.

Mario Draghi can't save the EU's failing economy

Brussels is yet again relying on more integration, more subsidies, and more protectionism It will require more integration. Qualified majority voting - rather than unanimity - should be extended to more areas. And there will need to be vast new public subsidies for investments that the private sector can't finance by itself. The former president of the European Central Bank and Italian prime minister Mario Draghi on Monday released his major report on restoring the competitiveness of the European Union. But hold on. In reality, even "Super Mario", as he used to be known in the financial markets, can't rescue a failing system. The EU unveils strategies to re-boot its economy every few years, and none of them make any difference - because it is the institution itself that is to blame. In his 400 page report, Draghi laid out the challenges facing the European economy. It has fallen behind the United States, China and now India as well. Growth is flat, and often negative. Debts are rising all the time, and generous welfare models are becoming increasingly unaffordable. "For the first time since the Cold War, we must genuinely fear for our self-preservation," he argued, launching the report. If the EU doesn't start to grow again, then it may well be doomed. In fairness, no one could dispute Draghi's analysis, or his ability to make the case for radical changes. As president of the European Central Bank, he was rightly credited with rescuing the euro in 2012, preventing the break-up of the single currency, even if it involved quietly bailing out member states with printed money and long-term consequences that have yet to be seen. And as PM of Italy, he helped restore the country's finances, and made some modest reforms to boost growth, even if they have done little to improve its two-decades long stagnation. If anyone can make the case for genuine reform, he can. So what's the plan? The report argues that competition rules should be relaxed in industries such as telecoms to allow genuine European giants to emerge; further integration of capital markets, with powers centralised, to make it easier to raise money for investment; a revamped trade strategy, which sounds suspiciously like protectionism, to secure the continent's independence; and most ambitiously of all, an €800m (£675m) "industrial strategy" financed largely by money borrowed from Brussels, to carve out a slice of some of the major technology sectors where it is falling badly behind its major rivals. To people for whom "more Europe" and "more debt" are the answers to almost every problem, the report will no doubt be hailed as a masterful plan for restoring the bloc's place in the global economy. The trouble is, strategies for boosting the continent's competitiveness come around every few years. The Lisbon Strategy, of which Sir Tony Blair was a key architect, was launched in 2000, with the aim of making Europe the "most dynamic, knowledge-based economy in the world" within a decade. When 2010 rolled around, with little sign of it happening, it launched Europe 2020, with the ambition of creating "sustainable, smart, and inclusive growth across the European Union" by the end of the decade. Given the lack of progress, in 2019 we had Europe's "Green New Deal", which was much the same as all the other plans, except with more wind power added in, followed by the "Coronavirus Recovery Fund", with €750bn of extra spending which, according to France's President Macron, was a "turning point" for the European economy. The list goes on and on. It is almost as if the people writing the reports haven't noticed that the internet makes it easier than ever to look up all the past goals, and think that simply cutting and pasting the same remedies from five, 10 or 20 years ago will impress us. The blunt reality is that the EU's problems are too deep to be fixed from the top. Government spending is already way too high, hitting an alarming 58pc of GDP in France, 55pc in Italy, and almost as much in many other member states. Welfare spending is far too generous, with the continent accounting for around half of the world's social spending even though it accounts for less than 7pc of the world's population, and 15pc of global GDP. Perhaps most of all, the EU has turned the single market, originally designed to boost its competitiveness, into a regulatory monster that crushes growth with bureaucratic regulations that ban innovation before it has even be tried, make it almost impossible for entrepreneurs to launch new products, and increasingly closes the continent off from the rest of the world. We see more and more evidence of that with every week that passes. The once mighty auto industry, in which only a few years ago Europe was a global leader, is now on its knees, with Volkswagen considering German factory closures for the first time in its history, brought down by green rule that took no account of the competition from the rest of the world. And as Apple launched the iPhone 16 on Monday, the built-in artificial intelligence that is one of its key features won't initially be available in Europe because the rules make it too difficult. Draghi's report does not seem to address any of those issues. Instead of proposing a radical decentralisation of power, stripping the Brussels machine of its grip on industry, and working out ways of reducing the tax burden on small businesses and start-ups, it delivers the same old tired formula of more integration, more subsidies, and more protectionism. If that was going to work, it would have worked in 2000, in 2010, and 2019. Instead, the continent just falls further and further behind the rest of the world, retreating into a genteel poverty from which there will be no easy escape. And even Super Mario shows little sign of grasping that. His report may join all the other action plans that have failed dismally.