Draghi’s ‘EU Survival Guide’
The title is wrong. “The Future of European Competitiveness” does not reflect the importance of a report which examines closely the weaknesses and strengths of the European Union, which proposes solutions that are obviously necessary yet at the same time radical, which warns of the consequences that the EU faces if its member-states do not unite in a joint effort to save the Union and themselves. “An EU Survival Guide” would be a more appropriate title for the report drawn up by Mario Draghi with the help of many academics, EU specialists, “social partner” representatives, and others. Whether the Union unites or falls apart, this report will provide a measure of where we are, where we could go, and the decisions that will be taken.
The starting point is positive. “Europe has the foundations in place to be a highly competitive economy,” the report notes. “The European model combines an open economy, a high degree of market competition and a strong legal framework and active policies to fight poverty and redistribute wealth.” The Single Market of 440 million consumers and 23 million companies accounts for around 17 percent of global GDP, about the same as China, behind the United States with 26 percent. Also, the EU has achieved “rates of income equality that are around 10 percentage points below those seen in the United States and China,” the report says. “The EU’s approach has delivered outstanding outcomes in terms of governance, health, education and environmental protection.” However, weakening productivity growth is “calling into question Europe’s ability to meet its ambitions.” It notes that “on a per capita basis, real disposable income has grown almost twice as much in the US as in the EU since 2000.”
The EU is falling behind at a time when global trade is slowing down, competition with China is intensifying, energy is expensive and defense needs are growing. Also, demographic decline means that millions of jobs will remain vacant each year. According to the report, Europe needs to “accelerate innovation and find new growth engines,” to “bring down high energy prices while continuing to decarbonize,” and to “react to a world of less stable geopolitics, where dependencies are becoming vulnerabilities and it can no longer rely on others for its security.”
“We have to understand we are becoming ever smaller relative to the challenges we face. For the first time since the Cold War we must genuinely fear for our self-preservation,” Draghi said at the report’s presentation on Monday. Among his many proposals: an annual investment of around 800 billion euros to be raised through a “joint safe asset,” integrated capital markets, protection of small and medium-sized companies, trade protections and scrapping unanimity in favor of reinforced majorities in EU decision-making.
We know already the arguments against these proposals (and many others). But now we also know where we are headed if we do not take these reforms seriously.
