Mario Draghi is in favor of a Europe more focused on strengthening defense as dictated by the latest geopolitical developments and therefore more independent in the report on competitiveness that he presented and delivered to Commission President Ursula von der Leyen.
Europe now faces conventional warfare on its eastern borders and hybrid warfare everywhere, including attacks on energy and telecommunications infrastructure, interference with democratic processes and the instrumentalization of immigration, the former ECB chief points out, while calling for increased defense spending in countries under from 2% of GDP as mandated by NATO.
Specifically, it states that if all EU member states that are members of NATO and have not yet reached the 2% target did so in 2024, defense spending would increase by €60 billion. At the same time, it underlines the need for the development of innovation in the defense sector. The report also recommends further steps to develop a medium-term EU defense industrial policy that can support the structural cross-border integration of defense assets and the selective integration and consolidation of the EU’s industrial capacity, with the explicit aim of increasing scale and interoperability.
European common defense is at the center
As Mario Draghi mentioned, this report as a whole is not only a vision but can be implemented quickly, underlining at the same time that the words that characterize it are “urgent and concrete”.
The defense industry is too fragmented, the Draghi report points out, which hinders its ability to produce at scale and weakens Europe’s ability to act as a cohesive force. For example, he explains, twelve different types of tanks are manufactured in Europe, while the US produces only one.
Mario Draghi with Ursula von der Leyen
The President of the Commission, Ursula von der Leyen reiterated that a Commissioner for Defense will be appointed to the new Commission, but other Commissioners will also be involved in this specific matter.
At the same time, to a question about joint funding, he answered that “common funding will be needed for some common European projects. The issue now is to define these European projects, you (M. Draghi) spoke about defense, you spoke about cross-border energy networks. What we need to do is to look at the political will to have these joint European projects and determine how to finance them through new national contributions or new own resources.”
Proposals for energy and decarbonisation
Another area of action is a joint plan for decarbonisation and competitiveness. In his report, Mario Draghi focuses on electricity prices, which remain high despite the reduction he notes while outlining how decarbonisation could benefit.
“If Europe’s ambitious climate targets are matched with a coherent plan to achieve them, decarbonisation will be an opportunity for Europe. However, if we fail to coordinate our policies, there is a risk that decarbonisation will be counterproductive to competitiveness and growth.” explains.
In particular, Draghi emphasizes that although energy prices have fallen significantly from their peaks, EU companies still face electricity prices that are 2-3 times higher than in the US, while gas prices paid it is 4-5 times higher.
This price gap is mainly due to the lack of natural resources in Europe, but also to fundamental issues in relation to the common energy market according to the report. In the medium term, decarbonisation will help shift energy production towards secure, low-cost clean energy sources. But fossil fuels will continue to play a central role in energy pricing for at least the rest of this decade. As noted however, without a plan to pass on the benefits of decarbonisation to end users, energy prices will continue to weigh on growth.
The results and recommendations of the report will be considered by the European Commission, which will proceed with proposals.
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