EU launches vast economic reform plan

The Twenty-Seven, meeting at a summit in Budapest, launched on Friday a vast reform plan inspired by Mario Draghi to revive the European economy under the threat of a trade war with the United States of Donald Trump.

Economic reforms have become “even more urgent” with the election of Donald Trump in the United States, the former Italian prime minister has warned.

The former president of the European Central Bank published a report at the beginning of September to revive growth. He came to present it to European heads of state and government in the Hungarian capital.

Europe must revive its growth through massive investments in digital innovation, the green transition and defense industries, he estimates in the 400-page document commissioned last year by Ursula von der Leyen.

“Since then, the urgency to produce results has increased,” she said, promising to rely on Mario Draghi’s conclusions.

She cited among her priorities reducing bureaucracy for businesses, particularly start-ups, and creating a savings and investment union to help businesses finance their research and development needs.

Ursula von der Leyen promised to propose “in the first 100 days” of her mandate a green industrial pact to support the decarbonization of industry, at the end of a summit which ended without a family photo. French President Emmanuel Macron left the summit without making a statement.

“Mario Draghi has launched a clear call for a European revival. Europe needs fundamental modernization to remain competitive,” said German Chancellor Olaf Scholz.

“This is a moment of strategic awakening for Europeans,” said French Minister for Europe Benjamin Haddad.

But beyond the declarations of principles, the differences of opinion remain deep on many subjects, in particular the public financing to be mobilized.

The picture drawn up by Mario Draghi is gloomy: Europe is experiencing an economic decline compared to the United States and is dangerously increasing its dependence on China for certain raw materials and strategic technologies. Per capita income “has increased almost twice as much in the United States as in Europe since 2000,” he points out.

The Italian official estimates the necessary investments in the Old Continent between 750 and 800 billion euros per year, more than the Marshall Plan of the United States which supported the reconstruction of Europe after the Second World War.

This investment wall is an immense challenge for the 27 EU countries as they try to reduce their debt and budget deficits.

EU leaders recognized on Friday “the urgency of decisive action” in a declaration which takes up the main avenues put forward by Mario Draghi: deepening of the single market, capital markets union, implementation of a trade policy that defends European interests, regulatory simplification, etc.

But they remain vague on budgetary issues. The Twenty-Seven recognize that it will be necessary to mobilize “both public and private financing” and affirm that they want to “explore all instruments and tools”, a controversial statement which sparked lengthy discussions.

Germany and other “frugal” countries in fact exclude any recourse to new joint debt, despite the success of the historic post-Covid recovery plan of 800 billion euros initiated in 2020. They could, however, consider public financing via the European Union budget or increased recourse to the European Investment Bank.

The emphasis will be placed on private financing by mobilizing the savings of Europeans towards the needs of businesses and by breaking down the national barriers which prevent the creation of a true internal financial market.

Beyond the Budapest declaration of principle, member countries risk getting bogged down in endless debates. In addition to the problem of financing, their interests diverge on the union of capital markets, a veritable sea serpent of European summits. The creation of a union of telecommunications, energy or defense industries has also been blocked for years.