Mario Draghi, the former head of the European Central Bank and Italy’s ex-prime minister, has presented his long-awaited report on the European economy. It outlines goals as well as ominous warnings regarding the future of the bloc if action is not taken to address the EU’s economic obstacles.
Talking to reporters in Brussels, Draghi remarked that “for the first time since the Cold War we must genuinely fear for our self-preservation.”
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Draghi is largely credited with handling the Eurozone debt crisis between 2009-2010. European Commission President Ursula von der Leyen commissioned the report from Draghi around a year ago.
Main takeaways
The report calls for a major reorientation of economic policy and huge investments into the European economy. Draghi says these steps are necessary to prevent the EU from falling further behind the US and China.
Some of these recommendations include loosening competition rules to allow for market consolidation in various sectors, integrating capital markets by centralising market supervision, joint procurement in the defence sector and a new trade agenda to increase the bloc’s economic independence. A coordinated push towards decarbonisation will also be necessary.
According to Draghi, strengthening the EU’s competitiveness will require €750-800b ($828-883bn) in additional annual investments, equivalent to 4.4-4.7% of EU GDP. It would be the highest investment-to-GDP ratio in Europe since the 1970s.
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By GlobalDataHe acknowledged that it would be hard for the private sector alone to foot the bill for this stimulus, therefore some form of common funding would be needed.
The common funding would also be used to back public goods such as common energy infrastructure and defence spending.
Early reactions
Draghi resisted saying his recommendations were the only path forward, but said that “it’s: ‘Do this, or it’s a slow agony.’” He added, “We have reached the point where, without action, we will have to either compromise our welfare, our environment or our freedom.”
Europe is already facing economic stagnation, a war on its border and the rise of far-right parties across the continent.
However, the prospect of common EU debt given the existing issues is an “absolute non-starter,” according to one EU diplomat.
Germany’s Finance Minister Christian Lindner has been quick to reject this proposal as well, saying that the pooling of “risks and liability creates democratic and fiscal problems.” He emphasised, “Germany will not agree to this.”
