The former prime minister presented the plan that von der Leyen commissioned him a year ago for a new industrial strategy. There are three areas of intervention: innovation, decarbonisation and security
“It’s an existential challenge” and a “radical change” is needed. The former Italian Prime Minister Mario Draghi He has been saying it for some time but he repeated it on Monday morning in Brussels on the occasion of the presentation of his European Competitiveness Report (full text here)alongside European Commission President Ursula von der Leyen, who commissioned the work a year ago.
«Change radically»
The aim of the plan is to outline a new industrial strategy for Europe to overcome the obstacles that are holding it back. But above all, if Europe is forced to trade its fundamental values for each other – prosperity, fairness, freedom, peace and democracy – “it will have lost its reason to exist. The only way to address this challenge is to grow and become more productive, while preserving our values of fairness and social inclusion. And the only way to become more productive is for Europe to change radically».
The Union’s weaknesses and Draghi’s analysis
There was great expectation because the lack of competitiveness is the main weakness of the Union, with significant economic and social repercussions. Draghi is very clear: “If Europe does not manage to become more productive, we will be forced to choose. 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 not be able to finance our social model. We will have to scale back some, if not all, of our ambitions”.
Areas of action
The former president of the ECB identifies three areas of action: innovation, decarbonisation and safety (intended as industrial independence from third countries but also as defense). And three bottlenecks linked to the EU’s inability to pursue its objectives, wasting common resources in numerous instruments that must be implemented at national and community level, the EU does not coordinate its industrial policies.
The investments
To digitize and decarbonize the economy and increase defense capacity, the share of investment in Europe will have to increase by about 5 percentage points of GDP, to the levels seen in the 1960s and 1970s. This is an unprecedented figure: For comparison, Draghi explains, the additional investments provided by the Marshall Plan between 1948-51 amounted to about 1-2% of GDP.. But private savings will not be enough, even if the completion of the Capital Market Union is urgent. “The financing needs required by the EU to achieve its objectives are enormous,” the report explains, “but productive investment is weak despite large private savings. To achieve the objectives set out in this report, an additional annual investment of at least €750-800 billion is needed, according to the latest Commission estimates, corresponding to 4.4-4.7% of EU GDP in 2023.”
“Without action we will compromise our well-being”
According to Draghi, “increasing productivity is key. It also has implications for the issuance of safe commons. To maximize productivity, some joint financing for investment in key European public goods, such as cutting-edge innovation, will be needed.” But there are also other public goods identified in the report, such as defence procurement or cross-border networkswhich will not be delivered without joint action. In each area we are not starting from scratch, Draghi said: the EU still has general strengths – such as strong education and health systems and strong welfare states – and specific strengths to build on. However, “collectively we are failing to convert these strengths into productive and globally competitive industries”. So Europe needs to fundamentally refocus its collective efforts to close the innovation gap with the US and China, especially in advanced technologies. “Europe is stuck in a static industrial structure, with few new companies emerging to disrupt existing industries or develop new engines of growth.” For Draghi, he concludes, we must “abandon the illusion that only procrastination can preserve consensus. In reality, procrastination has only produced slower growth, and certainly not more consensus. We have reached the point where, Without taking action, we will have to compromise our well-being, our environment or our freedom».
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September 9, 2024 (edit September 9, 2024 | 12:12)
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