No competitiveness without integration and sustainability. On the Draghi report

“America innovates, China replicates, Europe regulates – the Draghi report in six words.” So tweeted the former Financial Times editor Lionel Barber, using a familiar meme to summarise former European Central Bank president Mario Draghi's report The future of European competitiveness. 

To echo a Wall Street Journal headline that appeared back in June 2024, a cursory scan of Draghi's report does seem to suggest that Europe is "regulating its way to last place": throughout the report we find phrases such as "restrictive regulations", "asymmetries in regulation", "regulation is seen by more than 60% of EU companies as an obstacle to investment", "burden of regulation", "high cost of complying with regulations", "regulatory burden", and "hindrances from the rising weight of regulation".

However, as University College London professor Cristina Caffarra makes clear for the Centre for Economic Policy Research, Draghi is not promoting "a much more laissez-faire approach [...] – music to the ears of US tech giants subject to European Commission scrutiny". This, Caffarra explains, "is a misrepresentation of what Draghi says, weaponised by Big Tech proxies and telecoms incumbents in their campaign to stave off merger vetos and curb regulation. [...] The message to be taken from Draghi is really this (paraphrasing): Whatever competition enforcers are doing, it is not really working to help innovation and growth in Europe. It is not delivering on that goal.  We need more and different. [...] No siloes. Joined-up thinking."

In the New Statesman, director of Eurointelligence Wolfgang Münchau sees regulations in the tech sector specifically as a direct threat to Europe's relevance in the world of the future: "The EU has given itself a data-protection regime so restrictive that it constitutes an obstacle to the development of artificial intelligence. It introduced a Digital Services Act that treats social media platforms as hostile to European culture. [...] The EU is stuck in a technology trap of mid-20th-century mechanical engineering."

While he has obvious respect for Draghi's analysis and vision for Europe, Münchau does not see much hope for the effective implementation of the former Italian Prime Minister's solutions. Taking Brexit as an emblematic "calamity" for the prospects of stronger European integration, Münchau paints a dire picture: "The EU does not have the money to co-finance the investments. For that it would need to become a sovereign country itself, with the power to raise taxes and issue debt. But therein lies the problem: a failing EU with a strong presence of far right anti-European parties will not assume these powers. Deeper European integration is as necessary as ever. But I believe that the moment for that has passed. This is why decline is the most likely scenario. I don’t expect a formal break-up, though. Gridlock is the path of least resistance." 

Addressing MEPs in Strasbourg on 17 September, Draghi declared that "Europe faces a choice between paralysis, exit and integration. [...] Integration is our only hope left.” As Benjamin Fox reports in EUObserver, Draghi was responding to criticisms of his proposals, in particular an 800 billion euro per year increase in European economic investment, which could potentially rely on joint EU debt. As Fox points out, it was the EU response to the Covid-19 pandemic that broke the taboo around common debt: "The idea of common debt, such as eurobonds, was a taboo among EU policymakers for many years, but this was broken in 2021 when governments agreed to allow the EU Commission to raise €800bn to finance the NextGenerationEU programme to help member states recover from the Covid-19 pandemic using the EU budget as collateral. The joint debt instruments proposed by Draghi would be modelled on the Covid recovery fund."

However, as Thomas Moller-Nielsen reports for Euractiv, Draghi insists that common debt is not an "essential ingredient" of his solution, and that it could only be deployed if "the political and institutional conditions are in place". 

Draghi's comments, made during a 30 September event hosted by EU policy think-tank Breugel, were seen as an effort to pacify the more "fiscally hawkish" member states, such as the Netherlands and Germany, who were less than enthused by Draghi's proposals. Nevertheless, Draghi insisted that "in this new geopolitical context, individual countries are just too small to cope".

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More on the same topic

What’s behind Europe’s auto industry crisis and how can more mass job losses be prevented?

Equal Times | 20 September | EN ES FR

"Can competitiveness and sustainability be compatible?" This is the question that must have run through the minds of many Europeans upon hearing of the Draghi report and its implications. It is also a question that Brussels-based Equal Times asks, in the context of the Draghi report and the fate of European auto workers. Against a backdrop of massive layoffs due to deindustrialisation (EU workers have lost almost a million manufacturing jobs in the last four years), the authors wonder if the appointment of Teresa Ribera – a "figurehead of the ecological transition in Spain" – to the European Commission signals a step in the right direction for both workers and the environment. The authors also see much to hope for in Draghi's vision: "Neither European competitiveness nor reindustrialisation are possible without a just ecological transition, because the future lies in sustainable industries. A first reading of Draghi’s plan offers scope for a just transition that would enable the protection of (quality and sustainable) jobs and the design of the policies needed to deal with the climate crisis."

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