Factbox: Key Elements of Draghi’s Competitiveness Report by Reuters

BRUSSELS – The European Union must adopt a more coordinated industrial policy, make quicker decisions, and commit to substantial investments to remain competitive against economic giants like the United States and China, according to Mario Draghi in a recently released report.

Draghi, the former president of the European Central Bank, was tasked with exploring strategies to enhance the EU’s economic competitiveness. Here are the key recommendations outlined in his report.

Investments

The report indicates that the EU will need to secure an additional annual investment of 750-800 billion euros, a scale of funding not seen in Europe for half a century. This would amount to a 5 percentage-point increase in the bloc’s investment-to-GDP ratio. For context, the Marshall Plan provided annual investments equivalent to 1-2% of GDP for recipient countries between 1948 and 1951.

While emphasizing that the EU can meet these investment needs without straining its resources, the report contends that the private sector will require public backing to implement the proposed plans. A notable suggestion includes moving toward regular joint borrowing among EU member states to facilitate collective investment projects—an idea that has faced resistance from some countries, including Germany.

Competition

The report advocates for a reform of EU competition regulations, urging regulators to adopt a more proactive and agile approach to bolster European businesses’ capacity to compete against large American and Chinese firms. It recommends assessing telecom mergers on an EU level rather than nationally and urges regulators to consider operators’ investment strategies during evaluations.

Moreover, the report stresses the importance of incorporating security and resilience into antitrust decision-making and calls for increased resources to enforce major tech regulations like the Digital Markets Act, aimed at curbing the influence of large technology companies, and the Foreign Subsidies Regulation, which addresses illegal state aid from non-EU countries.

Decision-Making

Draghi suggested that the EU should extend qualified majority voting to more areas, allowing for more flexible decision-making. In cases where unanimous consent is challenging, like-minded countries should be allowed to pursue certain initiatives independently.

"This will entail refocusing the EU’s efforts on the most urgent issues, promoting effective policy coordination around shared objectives, and leveraging existing governance mechanisms in innovative ways that allow willing member states to progress more quickly," he stated.

Trade

Despite being the world’s most open economy, Draghi pointed out that Europe is vulnerable when partners do not adhere to global standards. He emphasized the need for the EU to prioritize trade agreements and direct investments with resource-rich nations and to implement defensive measures to ensure a level playing field.

Draghi argued for a nuanced approach to supporting industries, suggesting that resources should not be allocated to sectors where Europe has lost its competitive edge, like solar panels, but rather focus on nurturing local industries that face state-led competition.

Skills and Innovation

The report highlights Europe’s strengths in patenting and scientific research, but notes that the continent lags behind the United States and China in terms of innovative firms and start-up scalability, with many relocating to the U.S.

An urgent skills shortage was also identified, as approximately 25% of European companies struggle to find appropriately skilled employees, with another 50% facing some difficulties. Draghi stressed the importance of addressing this issue through adult education and equipping students with relevant skills for a rapidly evolving job market, rather than merely awarding diplomas.

This comprehensive assessment by Draghi lays out a vision for revitalizing the EU’s competitiveness in a challenging global economic landscape.