EU, Draghi’s roadmap: “It has lost momentum, the USA and China are racing”

The former prime minister frames the current scenarios and indicates the prospects for European competitiveness

The former president of the ECB Mario Draghi participated today in the beginning of the year seminar of the European commissioners which was held, behind closed doors, in Jodoigne, a municipality of 12 thousand souls about fifty kilometers south-east of Brussels, in Brabant Walloon, Belgium. The president of the Commission Ursula von der Leyen wanted the meeting, and last autumn she decided to entrust the former Prime Minister with the task of drawing up a report on the competitiveness of the EU, which outlines a “vision for the ‘economy of the future’.

Draghi was invited to Jodoigne precisely to discuss that relationship, von der Leyen explained to the commissioners at the college meeting on 21 November, as reported in the minutes of the meeting published yesterday. The president today publicly thanked the former prime minister: “Thank you dear Mario – she said via social media – for the excellent exchange today with the college of commissioners on competitiveness. We discussed many challenges and policy areas. I can’t wait to have the report, which will help advance the debate on how to strengthen the EU economy.”

From AI to green transition: the scenarios of change

In the meeting with the European commissioners, his collaborators inform, Draghi briefly outlined the dynamics that determined the current scenarios and prospects for European competitiveness. Starting from 2016, he observed, we have witnessed a series of new and relevant facts for Europe in the most diverse fields, from the election of Donald Trump in the USA to the forceful emergence of the green transition on the agenda of governments and organizations, up to to the much faster-than-expected advent of artificial intelligence. In this context, you underlined again, the European economy has recorded a progressive weakening, losing momentum and ceding centrality in supply chains, to the benefit of other countries such as the United States and China.

The war in Ukraine, continued the former prime minister, only confirmed the fragility of the Old Continent, not only from an economic point of view, but also in terms of a geopolitical model. It follows, this is essentially the reasoning made by Draghi, the need to define a broad and detailed roadmap, which clearly identifies priorities, lines of action and policies to be implemented in the various sectors. The identification of these paths, Draghi further explained, proposing an approach dear to him, can only be based on an accurate analysis of the data.

The challenges to face

Therefore the report on European competitiveness, which the former prime minister is preparing on behalf of the President of the Commission Ursula von der Leyen, will be an exercise as open as possible to listening to all relevant stakeholders, open to contributions from all those who are interested to give, open to the search for incisive and ambitious solutions. The former governor of Bank of Italy made it clear what his ideas are last September when, in a speech published by the Economist, he recalled that Europe faces a series of supranational challenges, which will require huge investments in a limited period of time: in defense, for the green transition and for the digital transition. Draghi underlined that, unlike the US which launched the IRA using fiscal leverage, the EU has no federal strategy to finance those investments.

The risks for Europe

If it does not act, he warned, Europe runs the “serious risk” of missing the climate objectives it has set itself, of failing to provide “security” to its citizens and of “losing” its industrial base, in favor of areas of the world who self-impose “fewer constraints”. Rather than giving state aid a free hand, the former ECB president argued, it would be better to “redefine” the framework of the rules on budgets and the Union’s decision-making process, to make them ” adequate” to the common challenges. This dilemma, he continued, can only be resolved by “transferring greater spending powers to the center”, which in turn would make it possible to have more “automatic” rules for the member states.

From the economy to energy challenges: how to move

If the EU managed to “federalise” some of the investments necessary to achieve the common objectives that the Union has set itself, it could be able to achieve a “balance” similar to that enjoyed by the USA. Spending at the federal level, by borrowing jointly, would bring, Draghi noted, “greater efficiency” and provide “greater fiscal space”, given that the costs of servicing the debt would be lower. In this way, national policies could focus more on “debt reduction”, to obtain “buffers” in budgets for lean periods. In view of the enlargement to the east, it will be necessary to “avoid”, Draghi again warned, the mistakes of the past, expanding the periphery without strengthening the centre. More centralized decision-making, he continued, will involve “citizen consensus”, in the form of a “revision of the treaties”.

And therefore: the strategies that ensured the “prosperity and security” of Europe in the past (“relying on America for security, China for exports and Russia for energy”) have become “insufficient, uncertain or unacceptable”. In this “new world”, he warned, the “paralysis” is clearly “unsustainable”, while the option of leaving the EU, pursued decisively by the United Kingdom, has given “decidedly mixed” results. Therefore, he concluded, “forging a closer Union will ultimately prove to be the only way to ensure the security and prosperity that European citizens aspire to”. It will soon be discovered to what extent the Draghi report will echo these concepts, which the former Prime Minister had already partially expressed when he was in Palazzo Chigi.