Nearly a year after European Commission President Ursula von der Leyen tasked Mario Draghi with assessing the future of European competitiveness in her State of the Union address, the former Italian Prime Minister presented his 400-page report on 9 September.
While analysing the 172 policy proposals and recommendations will undoubtedly keep analysts and stakeholders busy for the foreseeable future, it is worth highlighting the main messages Draghi is sending to European leaders.
1. Decarbonisation is now a core facet of the future of the European economy
Gone are the days when policymakers presented decarbonisation and competitiveness as separate objectives involving inherent trade-offs.
Decarbonisation is now recognised as a major economic opportunity for Europe, given its dependence on fossil fuels, which is one of the root causes of its competitiveness challenges.
2. Europe’s economic challenges will only be overcome through investing
Draghi’s primary message is clear: Europe must invest to secure its future prosperity. He identifies additional annual investment needs of about EUR 800 billion, acknowledging the necessity of increasing the EU budget, investing in EU public goods and proposing ways to unlock private capital.
Crucially, Draghi highlights that investing in productivity gains is not incompatible with sustainable public finances. Rather, he stresses that investing in productivity and innovation will yield positive results in the medium term.
3. The new geopolitical context requires a stronger role of the state
Drawing on a sobering assessment of the geopolitical context, Draghi confirms the shift in EU foreign policy away from a neoliberal, rules-based laissez-faire approach towards a more state-led intervention strategy aimed at defending strategic European interests and navigating the US-China rivalry.
The report calls for public institutions to take the lead and place economic security concerns at the heart of EU energy, industrial and foreign policy. Draghi situates other policies like trade as functions of a broader EU industrial strategy, which should not only enhance competitiveness but also prioritise resilience, security and strategic autonomy. His vision of EU foreign policy relies less on multilateral institutions than previous EU doctrines, instead proposing new industrial partnerships to facilitate international public-private cooperation.
4. More European coordination to secure future competitiveness and prosperity
In line with Enrico Letta’s report on the future of the Internal Market, Draghi states that policy and regulatory fragmentation in Europe is impeding progress on collective priorities.
He proposed ways to strengthen governance for the energy transition, with a focus on strengthening electricity grids and deepening market integration. With his proposal for a competitiveness governance framework, Draghi takes a first step towards addressing many of the difficulties that have hindered the EU in developing new cross-border value chains, which would leverage Europe’s diverse regional strengths and assets.
What about the politics?
While the report is rich in policy proposals and recommendations, Draghi does not offer a concrete solution for navigating the complex politics to implement his ideas.
Considering the report was commissioned by von der Leyen and has already shaped her political guidelines for the incoming Commission, it was expected that Member States would receive it with caution. Unlike Letta’s report, Draghi did not extensively consult with European capitals when drafting his recommendations. While this allowed him to provide a refreshingly candid assessment, it also means the report challenges long-standing national red lines concerning common European debt, the expansion of the European budget and further integration of energy and industrial policy.
As a result, some key policymakers, including German conservatives and chancellor hopeful Friedrich Merz have already dismissed the report.
While it remains to be seen whether Member States will engage seriously with the report’s content, a coalition may be forming in support of its agenda. Most political groups of the European Parliament have expressed backing, describing it as a “wake-up call” for urgent action. Industry group representatives have also voiced support, especially for the investment agenda at its core.
If the new European Commission seeks to shape its political and policy agenda around Draghi’s recommendations, it must strengthen and activate this fragile coalition by engaging civil society. This will require addressing some of the underdeveloped aspects of the report in the Commission’s policy agenda, such as strengthening the social agenda, enhancing climate resilience, and addressing other aspects of environmental sustainability to win over social actors and environmental organisations.
