Mario Draghi, Europe's arch-technocrat, is on a mission to save the eurozone and fix the EU – again.
The former central bank chief – who famously said he would "do whatever it takes" to save the euro during the post-financial crash debt crisis of the early 2010s – this week launched a landmark report on how to stem Europe's economic decline and reverse the swing towards US and Chinese dominance.
Coming just months after a report into the single market by another former Italian PM, Enrico Letta, the focus is on how to make Europe more competitive by boosting innovation, increasing investment and exploiting the bloc's scale by bringing together fragmented markets.
In short, said The Economist , "they want to make Europe a bit more European, which in these areas at least is smart". The questions this raises are "will countries be willing to see integration in sensitive sectors such as defence? Will they be able to overcome the narcissism of small differences? And will they be willing to spend as required?"
"We're going to be a society that basically shrinks," said Draghi. "We share this cake which becomes smaller and smaller – with a smaller number of people."
The diagnosis put forward by Draghi as Europe slides into the "economic wilderness" is "widely shared by experts", said Politico . Even Elon Musk, owner of Tesla and X and a vocal critic of the EU, has applauded his "critique". But "what to do about it is the hard part."
Given the "scale of the challenge", said the Financial Times (FT), the bloc needs an "ambitious agenda to jump-start its long-subdued productivity growth" which has fallen well behind the US, China and India over the past three decades.
A brief look at the numbers makes uneasy reading. In the 1980s, when the single market was being formed, Italy's economy was as big as China's and India's combined. In 1995, European productivity was 95% of America's; today it is less than 80%.
The solution, Draghi argues, is a "new industrial strategy" that raises public and private investment by €800 billion (£674 billion) a year – or 4.7% of total eurozone GDP – to boost growth. Other proposals include energy market reform, looser merger rules, and collective efforts to close the innovation gap with the US and China, particularly in technology. Decision-making processes also need to be reformed to make them more efficient and faster.
"To people for whom 'more Europe' and 'more debt' are the answers to almost every problem," said The Daily Telegraph , "the report will no doubt be hailed as a masterful plan for restoring the bloc's place in the global economy."
"In reality, even 'Super Mario', as he used to be known in the financial markets, can't rescue a failing system," added the paper, because it is the institution of the EU itself "that is to blame".
The eurozone's competitivity crisis has "too many moving parts for a straightforward fix" agreed Bloomberg , with neither Draghi, nor anyone else, having "direct control over the levers needed to make it happen".
What next?
Draghi's findings and recommendations have "gained significant attention", said Euronews , and should provide a valuable framework for newly re-elected European Commission president Ursula von der Leyen, "but their long-term impact is unclear".
While Europe faces a series of economic, political and defence crisis, Draghi's proposals – financing bigger EU spending, consolidating capital markets, and removing national vetoes – are "longstanding Brussels demands that have been repeatedly opposed by the EU's own members".
Acting on them will be the "real challenge", agreed the FT. The bloc’s two largest economies, France and Germany, are "grappling with unstable coalition governments that may hinder any progress on EU-wide matters". Strategic co-operation – especially around common debt and plans for a capital market union – is "easier said than done".
Yet not everyone is so downbeat. Davide Oneglia of TSLombard told Bloomberg it can be "different" this time. Draghi's proposals, he said, "lay out the path of least resistance for EU politicians across parties and member states". Describing centralised EU fiscal activism as "the inevitable endgame," he argued that the "difficult political situations in France and Germany compound the fiscal constraints on them, and could make their leaders more open to increasing the EU's central fiscal capacity".
"The EU has reached a point where, without action, it will have to compromise either its welfare, the environment or its freedom," Draghi recently wrote in an guest article for The Economist .
Europe has shown it can adapt under pressure, responding quickly to both the Covid pandemic and war in Ukraine. "Weakening competitiveness may feel less impending" than either of those crises, but "it is no less important", concluded the FT.
"The further Europe falls behind, the harder it will be to catch up. Draghi's timely report should focus the minds."
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