Mario Draghi wants to strengthen European integration
Outpaced by the United States and too dependent on China, the former president of the ECB claims that Europe is at stake and must continue to resort to common borrowing to finance a true Marshall Plan.
Former Italian Prime Minister and economist Mario Draghi speaks at a press conference on the future of European competitiveness at the EU headquarters in Brussels on September 9, 2024.
Nicolas Tucat/AFP
Europe is experiencing an economic lag compared to the United States and is increasing its dependence on China, warned Mario Draghi on Monday, particularly recommending the issuance of new common debts to better finance innovation, the green transition, and defense. “Investment needs are enormous,” emphasized the former president of the European Central Bank (ECB) during a press conference in Brussels, mentioning a figure of 750 to 800 billion euros per year, more than the Marshall Plan from the United States that supported Europe after World War II.
During the delivery of a long-awaited report to the President of the European Commission, Ursula von der Leyen, the former Italian Prime Minister advocated for a “radical change” towards more European integration but also less bureaucratic complexity. “For the first time since the Cold War, (the European Union) must genuinely fear for its survival and the need for a unified response has never been more pressing,” he declared. Following the success of the historic post-Covid recovery plan of 800 billion euros, the EU should “continue to issue common debt instruments to finance common investment projects aimed at increasing the EU’s competitiveness and security,” hoped Mario Draghi, emphasizing the “gap” that has widened with the United States and the need to partially free itself from China to develop renewable energies.
Europe will need to “accelerate innovation,” particularly in digital technology, launch a “joint plan for decarbonization and competitiveness,” but also reduce its dependencies on certain raw materials and key technologies dominated by the Chinese.
Red line for Berlin
The idea of new common borrowing, supported by France, remains a red line for many Northern European countries such as Germany or the Netherlands, which fear being more heavily taxed to compensate for the delays of Southern countries. Mario Draghi acknowledges that such a project will only be possible “if political and institutional conditions are met.” He emphasizes primarily the need to mobilize private capital to finance innovation through the creation of a genuine “Capital Markets Union.” The common borrowing “is just one instrument among others, it is not an objective in itself,” he explained.
He also criticized the increased reliance on national public aid which has favored large country businesses in recent years to the detriment of smaller ones. “This has only increased the fragmentation of the single market,” he lamented. “Real disposable income per capita has risen nearly twice as fast in the United States as in Europe since 2000,” warns the former president of the European Central Bank (ECB) in this 400-page document commissioned by Ursula von der Leyen. She stated that Mr. Draghi’s proposals “will be found” in the guidelines of the new Commission for the next five years as she is set to present her new team this week. However, she did not revisit the idea of common borrowing, instead referencing “national contributions” or new “own resources” to feed the EU budget.
Economic stagnation
The European Union has been mired in economic stagnation for a year and a half. It has fared less well in overcoming the crisis caused by the pandemic in 2020 than the United States, just as was the case during the financial crisis of 2008. This lag is explained “mainly by the sharper slowdown in productivity in Europe” and poses a threat to its social model, emphasizes Mario Draghi. “If Europe fails to become more productive, we will be forced to make choices. We cannot become both a leader in new technologies, a model of climate responsibility, and an independent actor on the global stage. We will not be able to finance our social model. We will have to lower some, if not all, of our ambitions. This is an existential challenge,” he points out.
Among many measures, Mario Draghi recommends developing a “common research strategy,” enhancing European stock markets to facilitate IPOs of innovative companies, creating a “Union of Energy,” targeted support for the manufacturing of certain clean technologies, an action plan for the automotive industry, and increased cooperation in armaments innovation.
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AFP
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