Italian Prime Minister Mario Draghi held a press conference at the Prime Minister’s Multipurpose Hall in Rome, Italy on July 12, 2022.
Massimo Di Vita | Massimo Di Vita Mondadori Portfolio | Getty Images
Economist and politician Mario Draghi said in a report that the EU’s economic growth continues to lag behind that of China and the United States, threatening the EU’s goals of greater geopolitical relevance, social equality and decarbonization .
The much-anticipated report led by Draghi, who served as Italian prime minister and European Central Bank president during the euro zone debt crisis, found that those EU ambitions are now being hampered by weaker productivity growth and a slowdown in overall euro zone economic expansion. question.
The wide-ranging report sets out the main challenges that the EU must address through its new industrial strategy, including lowering energy prices, improving competitiveness and boosting defense investment.
The EU must also adapt to a world in which “dependence is becoming fragile and it can no longer rely on other countries for its security,” the report found, noting the EU’s reliance on China for critical minerals and China’s reliance on the EU to absorb its resources .
The EU’s high degree of trade openness puts it at risk if the trend toward supply chain autonomy accelerates, the report continues. The report said that about 40% of Europe’s imports come from a small number of suppliers that are difficult to replace, and about half of them come from countries that are “strategically non-aligned” with the EU.
“The EU needs to develop a real ‘foreign economic policy’, coordinating preferential trade agreements and direct investment with resource-rich countries, building inventories in selected key areas and establishing industrial partnerships to secure supply chains for key technologies, ” the report stated.
The EU needs to ensure dependence does not increase and seek to “harness the potential of domestic resources through innovation in mining, recycling and alternative materials”.
Other goals include the full implementation of the single market, which includes 440 million consumers and 23 million companies, by reducing trade frictions. The EU also seeks to ensure that its competition policy does not become an “obstacle to European goals”, particularly in the technology sector. The European Union must also promote “investment needs on a scale not seen in Europe for half a century” through a combination of private financing and public support. The report points out that the EU is also facing an “innovation deficit” that must be resolved through reform.
Research shows that the EU’s total investment as a share of GDP must rise by about 5 percentage points per year, reaching the level of the 1960s and 1970s, in order to achieve defence, digitalization and decarbonization goals.
Regarding steps to mobilize private funds, the report recommends transforming the European Securities and Markets Authority (ESMA) from a coordinating body of national regulators into a single regulator for all EU securities markets, able to focus on overall objectives, similar to the U.S. Securities and Markets Administration bureau.
The report was commissioned last year by European Commission President Ursula von der Leyen, who was elected to a second five-year term in July and will appoint new commissioners this week.
Lorenzo Codogno, founder of Lorenzo Codogno Macro Advisors, said in emailed comments that the findings “will spark a crucial debate about the future of the EU/Eurozone, but there is no need to hold back” breathe”.
“Nothing will happen until the new Commission is fully operational, and even then the thorny, fragmented and fragile political situation among member states makes it challenging to obtain the political support needed for action. However, some contingencies cannot be ruled out , and therefore the ensuing political debate needs to be carefully monitored,” he said.
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