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Draghi: EU economy must become more productive

by AI | 10.Sep 2024 | Europe in brief AI

The EU must become more competitive and productive according to former ECB chief Mario Draghi in order not to fall behind China and the USA. For this, additional investments of 750 to 800 billion euros per year are necessary. According to the Italian, these should also come from a joint EU debt issuance.

Europe is stuck in a static industrial structure, criticizes former ECB chief Draghi.

EU-wide/Brussels – The European Union (EU) is at risk of falling behind economically, especially compared to China and the USA. To prevent this, Europe must increase its productivity, demands the former head of the European Central Bank (ECB), Mario Draghi, in his report on EU competitiveness presented in Brussels on Monday. For this, additional annual investments of 750 to 800 billion euros are needed.

As an example of the lack of productivity, Draghi cites a growing gap in economic output per capita between the USA and the EU in recent years. About 70 percent of the difference is due to productivity differences, which in turn are related to the rapid rise of large US technology companies. Europe, on the other hand, is stuck in a static industrial structure: the largest investors in research and development in Europe over the past 20 years have come from the automotive industry. In the USA, technology companies have long since taken the lead.

To tackle the problem from a European perspective, the “innovation gap” with the USA must be closed. This also includes better converting advances in research into commercial ventures. In addition, a European plan for decarbonisation should both ensure lower energy prices and ensure that “the industrial opportunities of decarbonisation” are exploited – in other words: European companies benefit from it. Thirdly, the EU must reduce its dependencies on third countries, including in the area of defense.

As “building blocks” for achieving these goals, the former Italian Prime Minister names the removal of obstacles in the EU internal market. Furthermore, competition policy should pay more attention to not weakening the innovative capacity of companies in key sectors; thus also allowing the emergence of larger European companies with corresponding investment power. Additionally, the capital markets of the EU countries need to be more integrated, bureaucracy should be reduced to relieve companies, and the EU as a whole must become more capable of taking action. (09/09/2024)