Home » Draghi and the competitiveness report: financial and political challenges for the future of the EU

Draghi and the competitiveness report: financial and political challenges for the future of the EU

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Draghi and the competitiveness report: financial and political challenges for the future of the EU

by Antonio Pollio Salimbeni

There is a lot of anticipation for the competitiveness report That Mario Draghi it will be presented at the end of June and will be used for the next European cycle after the elections (i.e. from 2025). In all likelihood, that’s more than you can ask for in a job like this. In search of a compass to distinguish among the numerous priorities which are actually the most important, the EU relies on the credibility and wit of the former central banker and former prime minister to better define what is already abundantly clear must be done: how hold together the many red threads that bind capacity for economic growth well beyond “zero point”; recovery of a competitive position that effectively reflects European levels of technical development and market size; reach a “strategic autonomy” – now almost become a buzzword of political jargon – in energy, in the supply of raw materials necessary to achieve pro-climate objectives and digital transformation; defend the industrial dimension of the continent. More security and defensea dimension that constitutes the real novelty that the EU can no longer consider a simple addition to a long list.

The report on the internal market by Enrico Letta

There is less talk about relationship which the former prime minister is preparing Enrico Letta on the internal market. In mid-September, in the same days, there was the announcement by the President of the Commission von der Leyen that Draghi would prepare the report on the future of European competitiveness with the aim of doing “everything necessary, whatever the cost, to maintain one’s competitive advantage” (remember the Draghian whatever it takes of the summer of 2012 which spread the safety net over the euro and only the warning was enough); and the announcement of Letta’s assignment by the EU Presidency to produce one by March 2024 high level relationship on mandate from the European Council last June. Brussels oddities, at the limit of understanding, a reflection of much confusion at the top levels of the European institutions. Because if there is one thing that is clear it is that “the single market, one of the largest and most integrated in the world, is at the heart of our competitiveness”, as is written in the first two lines of yet another report on the internal market and EU competitiveness published and mid-February by the Commission.

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Mario Draghi’s report on European competitiveness

Draghi is asked to produce aanalysis and assessment of the state of affairs present, of the risks that the EU runs if one attitude prevails business as usual. It is now very clear that it will not only be a robust factual examination of the competitive gaps from which Europe suffers due to its own limitations but also – it should finally be recognized – due to capacity and not only due to the disloyalty of other major global competitors. On the other hand, it is not that there is a lack of analysis, it is a lack of clarity of the work agenda and effective political cohesion between governments in implementing it. Therefore, the Draghi report is also announced – and above all – as an examination of the options to get out of the vague and establish the boundaries of a credible strategy. A wake-up call to the EU, the sound of which has already reached governments and the European Parliament, we will see with what results later.

The discussions between finance ministers last week in Ghent and Draghi shed light on a decisive aspect of the issue: the question of necessary financing to realize the strategic objectives which are as much economic (double green and digital transition) as they are political (security and defence). Public capital, neither that of each individual country nor that shared at EU level, is not sufficient to finance and/or attract capital in the face of an enormous mass of expenses estimated at several hundred billion euros per year for 10-20 years. Many states are highly indebted and cannot go into even more debt, indeed they will have to go into debt less in a context in which it is increasingly difficult to manage social protests. Even the capital lent through the banking system, on which European non-financial companies remain predominantly dependent, will not be enough. Paradoxical that no one claims the value of the reform of the budget rules just agreed upon, a sign that for the necessary investments it will be a hot mess.

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Finance and politics: a unified European approach

It’s necessary act on investments and private savings. France envisions a major league group of countries unifying its capital market with the voluntary consent of banks and fund managers, under single supervision, to offer common debt securities with common tax treatment. The German no was immediate. French Minister Le Maire recalls that European savings are worth 35 trillion euros, of which approximately a third is “dormant” in banks. Last year the net financial outflow from the euro area amounted to around 250 billion, the bulk of it directed towards the United States, reports the ECB. The real problem emerges: attract private capital to finance European policies, which translate into investment projects, into national spending (including defense), therefore into the production of common goods, into research and innovation. Things that are done in Europe, but now it is the scale that changes the nature of things.

The financial challenge becomes political challenge and vice versa and it is precisely on this plot that, in all likelihood, Draghi will be able to give work indications of a certain depth. For now he has limited himself to indicating that secure public money at EU level it is one of the factors that will make the difference. He actually presented options to the ministers that were not necessarily alternative: special fund to finance investments for competitiveness; loan (come Next Generation EU); partnership public/private centered on European Investment Bank. His preference for “un unified European approach”. In mid-February he again spoke out in favor of issuing common debt to finance investments (“it would expand the collective fiscal space at our disposal, alleviating some pressures on national budgets”). He has long reiterated that the real risk for Europe is that “if it does not become a deeper union, a union capable of expressing a foreign policy and a defense policy, in addition to economic policy, it will not survive except as a single market” . Whether the political conditions exist at the moment is another matter. It will also depend on whether or not the global context worsens (ongoing wars, who will go to the White House, relations with China) and whether “courageous” solutions are opted for, a term repeated several times in Ghent or Brussels, but not by everyone .

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