Draghi Proposes 'Radical Changes' For EU Economy

 

"BRUSSELS -- Mario Draghi wants to rescue Europe again.

The 77-year-old former European Central Bank president on Monday delivered his prescription for jump-starting Europe's sluggish economy and strengthening its defense industry.

Draghi was tapped by the European Union's top official last September to create a much-anticipated report amid escalating worries about how far Europe is falling behind the U.S. and China economically.

Draghi promised to offer a prescription for "radical change" to enable Europe to compete internationally. His report includes more than 150 recommendations aimed at tackling Europe's lagging productivity, including calls for a more aggressive industrial policy and subsidies, changes to the bloc's competition policy, and a reshaping of European capital markets to attract investment.

The report likely will trigger arguments across the bloc, with some countries worried about Europe's becoming too protectionist. It comes as political crises in big European economies complicate agreement on EU-wide changes.

Some of Draghi's ideas, including expanding the single market and building a pan-EU capital union to boost investment, have been on the table for years. The EU's 27 national governments haven't advanced them. He said failure to implement changes would leave Europe in an existential crisis.

"If Europe cannot become more productive . . . we will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage," he said in the report. "We will have to scale back some, if not all, of our ambitions."

Draghi said EU countries need additional annual investment of at least 750 billion to 800 billion euros, equivalent to $830 billion to $885 billion, to create a competitive digital and carbon-neutral economy. Public investment in areas like breakthrough innovation, defense procurement and energy is critical to promote private investment that would boost productivity, he said.

The bloc's competition policy should change so that the rules don't become a barrier to economic growth. The EU's antitrust authorities should put more weight on whether a merger can boost EU innovation and can help create globally competitive companies, he said. EU officials should seek to ease the regulatory burden to make it easier for companies to scale up, Draghi said.

Prompting the report is 15 years of European economic underperformance that leaders are struggling to address.

According to the International Monetary Fund, the EU's 27 economies account for just 14% of global output on a purchasing-power basis, down from more than 20% in 2000. Europe's recovery from the pandemic has been more sluggish than the U.S.'s and China's, with the continent taking a big economic hit from sanctions on Russia, which pushed up energy prices.

Among the most controversial parts of Draghi's proposals concern industrial policy, increased fiscal outlays and proposed changes to competition policy, which has long been viewed as untouchable.

European Commission President Ursula von der Leyen said she is working to incorporate many of Draghi's proposals into her priorities. She said common economic priorities must be "funded by common European money."

Draghi said Europe is in an economic "crisis mode."" [1]

1. World News: Draghi Proposes 'Radical Changes' For EU Economy. Kim Mackrael; Norman, Laurence.  Wall Street Journal, Eastern edition; New York, N.Y.. 10 Sep 2024: A.7.