Urgency and concreteness for the future of the EU

On Monday, 9th of September, Italian former prime minister and ex-president of the European Central Bank (ECB), Mario Draghi formally presented his long-awaited report on competitiveness under the name of “The Future of Competitiveness“.

It was under the request of the Commission President von der Leyen that Draghi was asked to come up with proposals that could help the European Union survive the current crises and keep a competitive position in the world’s economy.

The report in a nutshell

The report calls for “urgency and concreteness”  to face the different challenges that the EU has to overcome. The EU companies are facing both greater competition from abroad and lower access to overseas markets. Europe has abruptly lost its most important supplier of energy, Russia.

All the while, geopolitical stability is waning, and our dependencies have turned out to be vulnerabilities. Moreover, the steady lack of growth in the population is starting to be a cause of worry for the future of the work market. The EU is weak in the emerging technologies that will drive future growth. Only four of the world’s top 50 tech companies are European. European startups born in Europe quickly move elsewhere (especially in the US) because of the lack of investments, and because of inconsistent and restrictive regulations in our continent. Member States play here an important role and need to cooperate more with the EU.

Additionally, the European Union has set very ambitious goals to be the first carbon-neutral continent by 2050; however, the demands made to the different sectors are not aligned with each other and there are not enough investments to digitalise and decarbonise the economy while still maintaining social welfare. To make decarbonisation an asset for Europe, climate targets need to be matched by a coherent plan to achieve them,

The report identifies three main areas for action to reignite sustainable growth:

• First, Europe must profoundly refocus its collective efforts on closing the innovation gap, especially with the US and China. The EU needs to invest more in research and innovation to make the most of the AI revolution and advance in technological developments and avoid remaining stuck in the “middle technologies and industries of the previous century”.
• The second area for action is a joint plan for decarbonisation and competitiveness. If the EU fails to coordinate its policies, there is a risk that decarbonisation could run contrary to competitiveness and growth. Chinese competition is becoming acute in industries like clean tech and electric vehicles, therefore, there is the need for a joint plan spanning industries that produce energy and those that enable decarbonisation.
• The third area for action is increasing security and reducing dependencies. Europe has been too dependent on other countries and their resources. This is clear in situations of geopolitical crisis, which can increase uncertainty and dampen investment. In this setting, there is the need for a genuine EU “foreign economic policy”. The EU will need to coordinate preferential trade agreements and direct investment with resource-rich nations, build up stockpiles in selected critical areas, and create industrial partnerships to secure the supply chain of key technologies. Investments in defense also needs to be a priority, as peace in the continent is being menaced by the current geopolitical situation, making this moment crucial for the future of Europe.

“We have reached the point where, without action, we will have to compromise either our welfare, our environment, or our freedom,” stated Draghi during the press conference. Although some remarks were mistaken for jokes and elicited various reactions, the former president’s words remained solemn: “Death of the Union? No, but without reforms, it will be a slow agony”.