It is high time for a drastic overhaul of European economic policy. The survival of the European Union is at stake, facing an “existential challenge.” These strong words come from a report on the future of European competitiveness presented this morning by former European Central Bank head Mario Draghi. According to him, hundreds of billions of euros are needed annually.
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Last year, Draghi was asked for advice by Ursula von der Leyen, President of the European Commission. The European economy lags behind the US and China. Disposable income growth in the US has been nearly double that of Europe since the early 2000s, Draghi writes.
The struggles of European industry were highlighted again last week when Volkswagen considered closing factories in Germany due to increasing pressure from Chinese competitors.
At a press conference this morning, Von der Leyen stressed that improving the economic position is “top of the agenda,” with Draghi’s report serving as guidance for the new European Commission.
Investing in innovation
Draghi points out that all three factors driving European economic growth—thriving international trade, cheap Russian energy, and America’s defense of Europe—have become uncertain or have disappeared. Significant changes are needed in the EU, according to Draghi.
Investing more in knowledge and innovation is crucial for the EU to compete with economic giants like China and the US. Currently, the EU is “punching below its weight,” writes Draghi. He calls for removing strict regulations and barriers hindering innovative entrepreneurs in Europe.
Expensive energy
Energy policy is another challenge. Since Russia stopped supplying cheap energy following the invasion of Ukraine, gas prices for European industry have risen to over three times those in the US. The EU needs to accelerate its clean energy plans, Draghi urges.
The report includes over 170 concrete proposals to bring about the “radical change” needed, according to Draghi.
The EU must also become more self-reliant in security matters, investing and collaborating more in defense. Additionally, the EU should ensure the supply of crucial raw materials, forming partnerships with resource-rich countries and increasing domestic production, such as opening new lithium mines.
Various EU processes must also change. For example, the report suggests better coordination of competitiveness and quicker decision-making in the European Council by reducing veto powers.
Download the report here -> https://www.roelthijssen.nl/wp-content/uploads/2024/09/The-Future-of-European-Competitiveness-2024.pdf