Mario Draghi's Vision for Europe's Future: Is It Enough?

by Samir El Khanza - MSCA PhD Fellow (Luiss / UL / ULB)

Introduction

On September 9th, 2024, Mario Draghi presented a detailed report titled "The Future of European Competitiveness”. This nearly 400-page document examines the significant challenges facing the European Union's industries and the Single Market. Draghi's assessment is sharp, warning that continuous slow economic growth could threaten the prosperity and well-being of Europeans. Alongside Enrico Letta’s earlier report on the Single Market, Draghi's insights are set to influence the next European Commission's agenda. But what does the report say, and are its proposed solutions enough to boost the EU's competitiveness?

The Main Content of the Report: Identifying Problems and Proposing Solutions

Mario Draghi's report highlights a growing gap in economic performance between the EU and its global competitors, especially the United States and China. Since the early 2000s, Europe's efforts to boost growth have fallen short, leading to stagnant living standards for many Europeans. Real disposable income per person has grown almost twice as much in the U.S. compared to the EU since 2000. To tackle these pressing issues, the report outlines four main areas for action:

• Closing the Innovation Gap

The top priority is to bridge the innovation gap between the U.S. and China, particularly in advanced technologies. While Europe has strong education and healthcare systems, it struggles to turn these strengths into globally competitive industries. The EU needs to refocus its efforts on promoting innovation, reducing red tape for companies, and encouraging collaboration on groundbreaking technologies. Public investments in innovation require significant funding and can have widespread benefits, making a coordinated European approach essential.

• A Joint Plan for Decarbonization and Competitiveness

Decarbonization is crucial for the planet and a potential driver of economic growth in Europe. The report suggests a comprehensive plan that includes both energy-producing industries and those enabling decarbonization, like clean technology and automotive sectors. By uniting these industries under a common strategy, the EU can turn the challenge of reducing emissions into an opportunity for economic renewal.

• Increasing Security and Reducing Dependencies

Security is seen as a fundamental requirement for sustainable growth. In a world where geopolitical stability is decreasing, rising uncertainties can hinder investment and disrupt trade. The report emphasizes the need for the EU to reduce its reliance on external parties and enhance its strategic independence. This includes building a more integrated defense industry and working more closely on security issues to lessen risks that could harm growth and freedom.

• Addressing Institutional Weaknesses

The report doesn't avoid criticizing the EU's institutional setup. It points out that Europe's lack of focus and coordination makes it hard to act decisively. Common goals are often not supported by clear priorities or unified policies. Decision-making processes are slowed by the need for unanimous agreement and multiple veto points, making the EU seem slow compared to more centralized competitors like the U.S. and China.

To overcome these hurdles, Draghi proposes several institutional reforms:

• Creating a New Competitiveness Coordination Framework

This framework would replace overlapping coordination tools, focusing only on EU-level strategic priorities set by the European Council. It aims to align economic policies relevant to competitiveness, ensuring they are coordinated and properly funded, except for fiscal policy surveillance, which would remain under the European Semester.

• Expanding Qualified Majority Voting (QMV)

The report recommends using QMV in more policy areas within the Council of the European Union. This change would prevent individual member states from blocking initiatives that have wide support, allowing for quicker and more unified action on important issues.

• Simplifying and Harmonizing Regulations

Excessive rules and administrative burdens are identified as major obstacles to competitiveness. The report suggests a systematic review of EU laws, led by a Vice-President for Simplification. By making regulations fewer, clearer, and more forward-looking, the EU can improve legal certainty and make it easier for businesses to operate.

• Refocusing EU Efforts and Deepening Integration

The EU should focus on policies where working together adds the most value, following the principle of subsidiarity (handling matters at the most immediate level consistent with their resolution). This approach calls for "more Europe" where it counts while giving member states more freedom in areas best managed locally. It is considered necessary to speed up integration in key policy areas, even if it means deeper integration based on "concentric circles" (different levels of participation among countries).

Conclusion

Mario Draghi's report is a bold and thorough attempt to set a new direction for the European Union's competitiveness. It offers a clear look at the challenges and proposes a wide-ranging strategy to address them. Focusing on innovation, decarbonization, and security is timely and matches the urgent issues of our time.

However, while the report is praiseworthy for its depth and ambition, there are concerns about whether its proposed solutions are enough. The report's heavy reliance on substantial financial investment—estimated at over €800 billion annually or about 5% of EU GDP—raises questions about its practical feasibility and real-world efficacy. Financial investment alone may not solve the deep-rooted political and social issues facing the EU. The rise of populism reflects broader societal concerns that go beyond economic stagnation, including issues of national identity, cultural values, and trust in institutions. The section on governance, though important, seems too brief and might underestimate how hard it is to make such institutional changes. Suggesting treaty changes and expanding qualified majority voting, while sensible in theory, face significant political challenges. The rise of populist governments within the EU has led to more division, making unanimous agreement on such reforms unlikely anytime soon.

As the European Commission embraces the report, with President Ursula von der Leyen, integrating its recommendations into the mission letters for new commissioners, there's a risk that the focus may lean towards the more tangible aspects, like investment and regulatory changes, while overlooking the nuanced governance reforms needed to make them work effectively.  In essence, Draghi's report is a crucial starting point for discussions on revitalizing European competitiveness. But it needs to be paired with a deeper engagement with the political realities of the EU. Addressing the institutional slowdowns and the rise of internal disagreements requires not just policy ideas but also political will and efforts to build consensus during times of dissensus. Without this, the EU might find itself equipped with strategies and recommendations but lacking the unity and decisiveness needed to put them into action.

This institutional shortcoming has direct implications for national parliaments, the very actors central to my research. In theory, national parliaments have the power to check the EU decisionmaking process through subsidiarity scrutiny mechanisms, such as the "yellow card procedure." In practice, however, only a small fraction of national chambers actively issue reasoned opinions. In 2023, just nine chambers from seven Member States did so. This passivity weakens democratic oversight and blunts the ability of parliaments to hold EU institutions accountable in areas with direct socio-economic consequences, such as trade agreements.Draghi’s suggestion to launch an EU-wide inquiry into the role of national parliaments in subsidiarity control is therefore particularly relevant. Beyond mere administrative reform, it signals the need for a deeper political engagement with how competences are exercised and controlled across the EU’s multi-level system. Empowering national parliaments with both the capacity and the tools to engage meaningfully with EU legislation, especially in strategic areas like trade, is essential not only for legitimacy, but also for policy effectiveness.

In sum, Draghi’s report should be viewed not only as a technocratic blueprint for competitiveness, but as a political challenge to the EU's governance system. The future of the EU depends on its ability to adapt and respond to both internal and external challenges tackling the causes of division and stagnation. Only then can the EU hope to ensure prosperity and well-being for its citizens in an increasingly competitive global environment.