Confronting Trump: The Necessity of Europe Reinvesting in Joint Liabilities
Mario Draghi's report on European competitiveness, released last autumn, originally signaled a shift away from neoliberal policies and a renewed focus on building the EU's strategic autonomy. However, six months on, the report is serving as a catalyst for a deregulatory push across Europe, aligning the continent with the deregulatory agendas of the United States and powerful business lobbies.
The report issued by former European Central Bank chief Mario Draghi presented an unsparing analysis of Europe's economic decline in critical sectors such as artificial intelligence, digital platforms, microelectronics, electric vehicles, and renewable energy. To catch up and ensure a rapid and substantial investment effort, Draghi estimated that the EU needed to increase investment by approximately 800 billion Euros per year. Yet, the concept of issuing new common debt to finance Europe's investment surge has been dismissed by European Commission President Ursula von der Leyen.
Draghi's report outlined several means to generate the required surge in investment. One method includes unifying capital markets and channeling abundant savings into innovative companies, a recommendation that requires significant changes in European legislation and a cultural transformation within European financial institutions. Another approach emphasizes the necessity of public funding for high-risk, capital-intensive sectors to maximize productivity. Nonetheless, the required financing, particularly via joint action and joint funding, remains elusive.
Ursula von der Leyen has rejected the idea of issuing new common debt, instead opting to rely on limited additional support from the European Investment Bank and the renegotiation of the EU's multiannual financial framework for the 2028-2034 period. However, these ambitions face structural constraints due to the EU budget being capped at one percent of European GDP, making it challenging to meet Draghi's identified needs.
Despite the skepticism surrounding Europe's capacity to finance its investment surge, Draghi's report has become a justification for powerful industrial, agricultural, and business lobbies to push for deregulation. The European Commission's "Competitiveness Compass" and "omnibus directive" reflect this trend, with an emphasis on cutting red tape to stimulate Europe's competitiveness with the United States and China.
However, excessive deregulation could undermine social and environmental protections, decreasing living standards, increasing dependence on foreign technologies, and fueling public discontent. Historically, social and environmental protections have spurred, rather than hindered, innovation, pushing companies to develop cleaner technologies and alternatives to fossil fuels.
To avoid this deregulatory push, the EU must reconsider the issue of common debt and mobilize at least 250 billion euros in additional public investment each year. This would require borrowing an amount equivalent to just 1.3 percentage points of EU GDP and could bring the European economy closer to the technological, environmental, and defense strengths of the US, South Korea, and China.
Originally published in French on Le Grand Continent website.
Guillaume Duval, the former editor-in-chief of Alternatives Economiques and former speechwriter of Josep Borrell, contributed to the article.
In terms of the Enrichment Data, the productivity gap between Europe and the US, regulatory complexity, demographic challenges, and global competition are essential factors to consider in the context of generating an investment surge in Europe. These factors help illustrate the need for a comprehensive approach to tackle the challenges highlighted by Mario Draghi's report. The data on the influences of corporate leaders, such as those in the European Round Table for Industry, also underscores the importance of collaboration and strategic partnerships in driving Europe's competitiveness.
- The report by Mario Draghi, a former European Central Bank chief, proposes finance-related solutions to enhance Europe's competitiveness, such as unifying capital markets and increasing public funding in high-risk sectors, but the issue of financing, particularly via joint action and joint funding, remains challenging in the context of business, politics, and general-news.
- The European Commission's current deregulatory push, as reflected in the "Competitiveness Compass" and "omnibus directive," poses a threat to social and environmental protections, potentially decreasing living standards, increasing dependence on foreign technologies, and fueling public discontent – a concern that should be addressed in the intersection of finance, business, politics, and general-news.
