The EU is losing competitiveness, but Mario Draghi has a plan. The former President of the European Central Bank (ECB) published last semester a series of measures aimed at reviving and maintaining the bloc’s economic power amid competition from global superpowers like the US and China. According to the economist, the EU will require both intensive public and private investment to achieve this goal.
The plan was released as the European Commission grapples with a war on its borders, the loss of its main supplier of affordable energy—Russia—and the rise of far-right parties across the region. In the report, published in September, the former ECB president adopted a tone reminiscent of a concerned yet affectionate professor.
“If Europe cannot become more productive, we will be forced to choose. We will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility, and an independent player on the world stage,” wrote Draghi. “We will not be able to finance our social model. We will have to scale back some, if not all, of our ambitions.”
According to Draghi, the bloc should consistently invest around €750bn-€800bn annually, the equivalent of almost 5% of GDP, reaching investment levels last seen in the 1960s and 70s. In the report, the economist acknowledges that this ambition surpasses even the Marshall Plan, which invested around 1-2% of GDP post-war.
Among his key recommendations, Draghi emphasized the urgent need to create a truly unified Single Market and advocated for the integration of capital markets under a single supervisory authority, the ESMA (European Securities and Markets Authority). The goal is to retain Europe’s vast private savings within the EU and attract additional foreign investment. Currently, an estimated €300 billion in European household savings is diverted annually to markets outside the EU, primarily the United States.
For the stock market, the idea is to maintain the various stock exchanges across EU countries while unifying regulations, establishing centralized supervision, and removing barriers to capital movement. Strengthening ESMA and creating a Savings and Investment Union are crucial elements of this vision, which seeks to leverage European savings to enhance competitiveness and economic growth across the region.
The report also calls for more flexible regulation in certain sectors, such as telecommunications, to facilitate consolidation, as well as a new trade agenda for the bloc. Another recommendation is to cut costs and improve efficiency by developing a unified energy infrastructure and a common military defense strategy.
Draghi was categorical about the urgency of restoring the EU’s economic independence and pushing innovation. Once a prime destination for business, the bloc has fallen behind both the US and China in technology development. Currently, only four of the world’s top 50 tech companies are European.
“Europe largely missed out on the digital revolution led by the internet and the productivity gains it brought: in fact, the productivity gap between the EU and the US is largely explained by the tech sector,” the report states.
While politicians and markets continue to digest Draghi’s recommendations—published alongside another report by Enrico Letta, another leading voice on the subject—little to no concrete action has been taken. Much now depends on decisions from the European Commission, the policies of new governments, and upcoming elections in several EU countries. Buckle up!
