Landing on Ursula von der Leyen’s desk just as she’s putting together the new College of Commissioners, the long-awaited report by Mario Draghi on ‘the future of European competitiveness’ totals almost 400 pages collaboratively drafted by two (invisible) teams in Brussels and Rome.
Draghi‘s opus magnum doesn’t disappoint when it comes to length and ambition, and is full of interesting proposals, especially in its ‘Part B’. Yet given the vision it puts forward, it will have no doubt also raise some eyebrows given its emphasis on growth and competitiveness over social and environmental stances. It’s also a loud wake-up call that too much might end up being proposed – perhaps too late – and without any form of ‘Plan B’.
The first part of the report, which outlines a competitiveness strategy for Europe, could be seen as merely restating the many challenges the EU has faced over the past two decades. These include sluggish productivity growth; encumbered and impaired decision-making; increased dependency on other world powers; the piling up of massive regulatory burdens on businesses, impairing innovation; Europe’s outrageously high energy prices; and the EU’s fragmentation and related inability to deepen integration in key areas of the economy.
Thus, nothing new at the end of the day – if anything, this part of the report reads like many dozens of analyses produced by international consultancy firms or the International Monetary Fund. Yet Draghi adds a more dramatic tone as he explains that the EU faces an ‘existential challenge‘ and that failure to act will lead to its eventual collapse.
That said, the report is centred around a rather narrow notion of competitiveness – and in a rather uncompromising way. Other objectives, such as decarbonisation and social cohesion, appear ancillary at best. In fact, 400 pages down, the reader still lacks a precise definition of competitiveness.
Reading between the lines
The report proposes that the Green Deal as we know it should be replaced by a joint decarbonisation and competitiveness plan, which subordinates Europe’s sustainability goals to the imperative of revamping economic growth. Previously used terms, such as ‘competitive sustainability‘ or ‘sustainable competitiveness‘, are absent. In line with the latest rhetoric used by von der Leyen, for example in her 2023 State of the Union speech, Draghi reshuffles EU goals by presenting a Union that is as competitive as needed and as sustainable as possible.
Here, Draghi’s report builds a castle that sits on rather shaky foundations. The proposed vision crucially rests on the assumption that the EU will continue the experience of NextGenerationEU (NGEU) and will manage to leverage an additional EUR 750-800 billion annually, to be used for productive investment. Such a scenario has already been rejected by Christian Lindner, the German finance minister. And yet there is no ‘Plan B‘ in the Draghi report that could be implemented without a massive inflow of public money, or what could be termed as a ‘Marshall Plan on steroids‘ – it’s rather a ‘take it or leave it‘ proposal.
Moreover, even if these massive financial resources are somehow collected, spending them effectively won’t be easy. It would require a level of central coordination and decision-making that only Treaty changes could possibly achieve. Hence, the reader starts wondering whether such a massive level of common EU borrowing should come after those reforms, rather than before them.
Otherwise, the risk is a revival of NGEU, namely a flurry of national projects deprived of a common EU architecture, in the hands of Member States that are increasingly governed by rather conservative and anti-EU forces; or the emergence of a multi-speed Europe, which would undermine the Union’s territorial cohesion and vocation to ‘leave no one behind’.
The myriad proposals espoused in the Draghi report span several areas. These include consistently proposing the return of proactive industrial policy, strongly favouring innovation over regulation, advocating a steep rise in research and innovation funding (with a doubling of the budget for the next Multiannual Financial Framework, up to EUR 200 billion Euros) and the mobilisation of private savings to ignite startups and scaleups in key economic sectors.
At the same time, the text shows scant attention for the social consequences of the proposed industrial transformation and a limited focus on the territorial dimension and on place-based innovation – a key priority if the EU wants to effectively tackle what is increasingly being labelled as the ‘geography of EU discontent’.
An eye on the past, not on the future
Perhaps most importantly, the report is the expression of a rather traditional economic view of GDP growth as the cornerstone of socio-economic performance. This leads Draghi to evoke solutions that echo the US model, especially when it comes to boosting equity markets, rather permissive regulation, mission-oriented large-scale innovation initiatives and the improvement of framework conditions for doing business.
All in all, the report reads very familiar to economists but fails to propose a new EU approach or a more systemic notion of competitiveness (as recently proposed by the ESIR expert group for the European Commission) that respects planetary boundaries. Here, it lacks a spark of imagination and a willingness to chart a new path forward for the EU project. A good example is the lack of attention for more decentralised institutional architectures, the role of cities and the role of the future Digital Public Infrastructure and an Industry 5.0 approach as catalysts of human-centric, resilient and sustainable innovation and growth.
In short, the otherwise impressive Draghi report ends up solving the challenges of the last 20 years, rather than those we’ll be facing over the next 20.
It points us in a direction but often fails to fully explore how we can plausibly get there, as well as to outline a tangible Plan B in the event we face obstacles along the way. Yet in the age of the poly-(or even perma-) crisis, not even considering alternatives in case things don’t turn out as we hope they would is a major red flag.
