Draghi’s report on Europe’s declining competitiveness offers a comprehensive analysis, but many of its findings are not new. Yet, Draghi’s stature may lend urgency to these recommendations. Those requiring EU funding or treaty changes are likely to encounter substantial political resistance. The report provides a clear direction of travel and some of the reforms that do not require new funding (e.g., regulatory changes) could move the dial sooner.
Key Takeaways
- Mario Draghi’s report on Europe’s declining competitiveness poses a significant challenge for policymakers. While it has broad support, implementation will be hindered by fragmentation and a lack of political consensus.
- A combination of low investment and low productivity has undermined Europe’s competitiveness. Companies are hesitant to invest due to weak expected growth, creating a vicious cycle that is stifling further economic progress.
- Draghi advocates significant structural reforms — including a rethink of regulation and more financial market integration — and a more flexible governance framework within the EU that will not stifle progress in the adoption of new technologies.
Key findings
Draghi’s report is more than an economic analysis. It is framed within the broader European objectives of addressing climate change and preserving the continent’s social model. Central to his recommendations are the themes of decarbonisation and inequality, which are not treated as afterthoughts, but as integral components of Europe’s future.
The report highlights a critical dilemma: Europe’s productivity and investment gap with the United States is not only large, but is also widening, and a similar trend is emerging in connection to China. The risk of Europe falling behind has already materialised and the threat of becoming irrelevant is escalating, particularly in light of advancements in the digital economy and artificial intelligence (AI).
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