Spending as a percentage of GDP beyond the Marshall Plan that rebuilt Europe after World War II is what the European economy needs to revive itself and compete with the US and China, Mario Draghi in the long-awaited report on the European economy.
In the introductory section of the 400-page report, Italy’s former central banker and prime minister stresses that the bloc needs additional investment of 750-800 billion a year, or up to 5% of GDP, to transform its economy.
In order to cover these costs, Europe should issue regular issues of common bonds.
“The private sector is unlikely to be able to finance the lion’s share of this investment without the support of the public sector”Draghi wrote, adding that “some common funding will be needed to invest in key European public goods such as breakthrough innovation”. He reiterated the call for a common secure asset and common EU funding to support “European public goods” such as common energy infrastructure and common defense procurement, as well as new EU-level contributions to fund more effective spending through the public budget.
The main points
The European Commission asked Draghi a year ago to draft the report on how the EU will keep its greener and more digital economy competitive in an era of increased global friction.
EU countries have already responded to the new data, Draghi’s report said, but their effectiveness is limited by a lack of coordination.
Dear Mario Draghi, a year ago, I asked you to prepare a report on the future of Europe’s competitiveness.
No one was better placed than you to take up this challenge.
Now, we are eager to listen to your views ↓
https://t.co/aHjnX6Si5D— Ursula von der Leyen (@vonderleyen) September 9, 2024
Different levels of subsidies between countries distort the single market, fragmentation limits the scale needed to compete globally and EU decision-making is complex and slow.
“It will require refocusing the EU’s work on the most pressing issues, ensuring effective policy coordination behind common objectives and use existing governance processes in a new way that will allow Member States that want to move faster to do so”the report states.
He urged the bloc to develop its advanced technologies, create a plan to meet its climate goals and strengthen defense and security of critical raw materials, calling the project an “existential challenge.”
The European Union needs a much more coordinated industrial policy, faster decisions and massive investment if it is to keep pace economically with its rivals the United States and China, he said.
He warned that the EU’s economic growth was “persistently slower” than in the US, calling into question the bloc’s ability to digitize and liberalize the economy fast enough to compete with its rivals to the east and west. “If Europe cannot become more productive, we will be forced to choose. We will not be able to become, immediately, a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage,” he wrote in the report. “We will have to scale back some, if not all, of our ambitions.”
Energy, capital markets and telecommunications
The report comes as European leaders become increasingly aware of a loss of competitiveness against the bloc’s main rivals, in part due to Europe’s energy dependence and shortage of raw materials. Meanwhile, the EU continues to be hampered by the inability of its telecommunications and defense industries to exploit economies of scale and be better prepared for a more agile security posture.
The EU has also so far failed to put forward a roadmap to reduce barriers to its capital markets to mobilize billions of euros across its borders needed to accelerate the development of clean technologies to meet its ambitious green goals or to create the next generation of technology champions.
Significant is Draghi’s call for more consolidation in the telecommunications industry, which he said is “needed to deliver higher rates of investment in connectivity.” He also proposed an adjustment of the EU’s competition policy so that it “does not become an obstacle” to the bloc’s industrial goals. In particular, it called for new assessments on technology deals that would look at how certain deals could boost innovation in Europe, as well as further loosening of EU safeguards for state aid in strategically important sectors.
The statements of Ursula von der Leyen
The president of the European Commission, Ursula von der Leyen, prefaced the presentation of the report by Mario Draghi, made three points.
“First, to be competitive, we must master the clean and digital transition. We laid the groundwork for that, as you know, the clean and digital transition, in my first term. Now it’s time to implement it. We need to support our industry to decarbonise through innovation and turn this into a competitive advantage. That is why we must act with all the main levers at our disposal: reduce energy prices, mobilize public and private investment, improve the business environment and reduce unnecessary bureaucracy.
»Secondly, we strongly agree that we need more skills because technologies are only as good as the people who design them, produce them and of course operate them. We need to increase investment in skills and get more people into the workforce, equipped with the skills needed for the clean and digital transition.
»Finally, let’s not forget that to be competitive, we must be resilient. We have been through multiple shocks in recent years and are working to build 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.”
SOURCE: ot.gr
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