Draghi warns EU needs investment boost to face 'existential challenge'
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The news: Fromer ECB president Mario Draghi warned the EU needs to increase investments by at least an extra €800 billion ($1.33 billion) annually to prevent falling further behind the US and China.
The context: In a landmark report on how to stem the bloc’s economic decline commissioned by the European Commission, Draghi said a "new industrial strategy" focused on boosting innovation, decarbonising and enhancing defence was needed.
He warned that without improvements in productivity and growth, Europe could face a decline in living standards and be forced to scale back its economic and social ambitions.
The report lays out how Europe’s lagging productivity and ultra-high energy costs, exacerbated by losing access to cheap Russian gas, are dampening growth.
The report proposes relaxing competition rules to allow for market consolidation in the telecoms sector, reforming Europe's innovation lifecycle, supporting clean industries, and enhancing defence capacity through joint procurement in the defence sector and coordinated policies.
Without significant investment, Draghi warned, Europe faces slow economic decline and diminished global influence.
The numbers: In the 400-page report, Draghi calls for a minimum additional €750bn-€800bn in annual investment, equivalent to up to 5% of EU GDP, to boost productivity and growth.
Current energy costs for EU industries are 158% higher for electricity and 345% higher for natural gas than in the US, according to the report.
What they said: “This is an existential challenge,” Draghi, who also served as Italy's prime minister from February 2021 to October 2022, said.
“Europe’s fundamental values are prosperity, equity, freedom, peace and democracy in a sustainable environment. The EU exists to ensure that Europeans can always benefit from these fundamental rights. If Europe can no longer provide them to its people – or has to trade off one against the other – it will have lost its reason for being.”
The sources: EU competitiveness report, The Economist, The Financial Times
