2024-09-09 09:54:36
Economic growth in the European Union continues to lag behind China and the United States, threatening the bloc’s goals of enhancing its geopolitical importance, social equality and decarbonisation, according to its long-awaited report. Mario Draghi which was presented today Monday.
The hundreds-of-page report led by Draghi – who previously served as prime minister of Italy and president of the European Central Bank during the eurozone debt crisis – found that those EU ambitions are now being called into question amid a weakening productivity growth that slows overall economic expansion in the region.
The wide exposure shows the big ones challenges which the EU needs to address through a new industrial strategy, which will include reducing energy prices, increasing competitiveness and boosting investment in defense.
The EU must also adapt to a world where “dependencies turn into vulnerabilities and she can no longer rely on others for her safety,” the report finds, citing the EU’s reliance on China for critical minerals and China’s reliance on the EU to absorb its industrial overcapacity.
Supply chain autonomy
The EU’s high level of trade openness will leave it exposed if supply chain autonomy trends accelerate, the report continues. About the 40% of Europe’s imports comes from a small number of suppliers that are difficult to replace, and about half of that volume comes from countries with which the bloc is not “strategically aligned”, the report said.
“The EU should develop a real ‘foreign economic policy’ that coordinates preferential trade agreements and direct investment with resource-rich countries, stockpiling in selected critical sectors and industrial partnerships to secure the supply chain of essential technologies,” the report says.
The EU should ensure that dependencies do not increase and seek to “harness the potential of domestic resources through mining, recycling and innovation in alternative materials”.
Don’t let competition become a barrier
Other goals include the full implementation of the single market, which includes 440 million consumers and 23 million companies, by reducing trade frictions. The bloc also seeks to ensure that its competition policy does not become an “obstacle to Europe’s goals”, particularly in the technology sector. The European coalition must also facilitate “huge investment needs unseen for half a century in Europe”, through a mix of private financing and public support.
The EU meanwhile faces an “innovation deficit” which needs to be addressed through reforms, the report says.
Draghi: All funds for Defense – What he says in the report he will submit to the Commission
The total percentage investment to EU GDP it would need to grow by around 5 percentage points of EU GDP per year to levels last seen in the 1960s and 1970s to meet defence, digitalisation and decarbonisation targets, the study found.
About the steps for its mobilization private financingthe report recommends the transition of the European Securities and Markets Authority (ESMA) from a coordinator of national regulators to a single regulator for all EU securities markets, able to focus on primary objectives, similar to U.S. securities. P.A. Exchange Commission (SEC).
Von der Leyen: To conquer the clean and digital transition
For her part, Ursula von der Leyen noted that “to be competitive, we must master the clean and digital transition. We laid the groundwork for it in my first term. Now is the time to put it into action. We need to support our industry to transition from decarbonisation through innovation and turn it into a competitive advantage. This is why we must act with all the main levers at our disposal: reducing energy prices, mobilizing public and private investment; improving the business environment and reducing unnecessary bureaucracy.”
According to the president of the Commission, the EU must step up investment in skills “and we must bring more people into the labor market, equipped with the skills needed for the clean and digital transition”.
“We are working to create stronger industrial value chains, especially in terms of security of supply. Key concepts here are access to critical raw materials and key components, robust energy and digital networks, to name just a few. But it’s certainly not the end of the road,” emphasized Ursula von der Leyen.
The report was commissioned to Draghi last year by the President of the European Commission Ursula von der Leyenwhich was elected to a second five-year term in July and is set to appoint new Commissioners this week.