The News
Former European Central Bank chief Mario Draghi warned that the European Union faced an “existential challenge” and risked falling behind the US and China without a €800 billion boost in investment.
Red tape, weak innovation, and high energy prices are eating away at the bloc’s competitiveness, said Draghi, who also served as Italy’s prime minister between 2021 and 2022, in a highly awaited report published on Monday.
The assessment underscores European Commission President Ursula von der Leyen’s previous sentiments; she had said last year that Europe’s mode of doing business must be “faster and easier,” with “less red tape.”
SIGNALS
Red tape snags all sectors, and small businesses in particular
The vast amount of paperwork required to operate in Europe has an outsized effect on small businesses, the Financial Times wrote: The 2019 “Green Deal” climate law alone “has spawned reams of legislation that businesses across the EU are struggling to implement, or even understand.” The textiles industry, meanwhile, is subject to 16 new laws requiring it to collect various forms of data — significantly increasing the paperwork and burden on companies, particularly small ones. Even the length of Mario Draghi’s report itself inspired chatter about the EU’s penchant for administration: “You can say what you want about European competitiveness, but there is absolutely no disputing the fact that the EU leads the world in 400-page reports,” a popular EU-focused satire account posted on X.
The core of the EU’s economic struggle is the cost of energy
The real issue plaguing the EU’s economy are high energy prices, Politico noted in an analysis of the report. The bloc currently pays 158% more for electricity than the US, and 345% more for natural gas. One way to solve this issue and secure enough materials for the energy transition would be to set up a “mining-to-shipping” model similar to that employed by China. Indeed, Draghi’s analysis cites China several times, Euronews added, both as a potential partner to help accelerate the bloc’s decarbonization, but also as a “threat” to Europe’s clean technology and automotive industries.
AI and digital technologies emerge as key issues in the report
With the focus of the report being competitiveness, Draghi posits that a productivity gap between the EU and the US began in the 1990s, with the emergence of digital technology and the internet, which the EU “failed to capitalize on,” an AI-focused journalist noted on X. That gap has only widened, and the report argues that the bloc’s heavy regulation of tech and AI may be stifling progress for European companies. “We are killing our companies” with complex and inconsistent regulation, Draghi wrote. He also called for a reform of the EU’s research funding program to support “high-risk projects” that could lead to major technological breakthroughs.
— J.D. Capelouto contributed to this analysis