The Irish Times view on the Draghi report on EU competitiveness: a wake-up call for Europe

The report by former Italian prime minister Mario Draghi to the European Union on competitiveness is a sobering document. The EU has fallen well behind the US, he finds, and is facing increasing threats from China. The required response is far-reaching, involving sweeping change to boost innovation, to decarbonise while boosting competitiveness and to ensure economic security.
The value of commissioning the report from a senior figure outside the system, but intimately familiar with it, is evident. This is not a bureaucratic report calling for incremental change, but rather an analysis of the massive investment and policy change which is required if the EU is to boost productivity and meet what Draghi calls the “existential challenge” of underpinning living standards.
Many of the problems identified have been hiding in plain sight for years, but were not addressed as the EU benefited from an era of globalisation, cheap energy and free trade. Now, with EU growth lagging, its deficiencies – in key areas of technology in particular – are coming to the fore, as is the imperative of climate action. Without action, Draghi says, the EU faces a slow and painful economic decline.
While the analysis is compelling, some of the policy prescriptions will be controversial. Draghi says a massive investment programme, involving addition spending of some €800 billion a year, is needed, as well as reductions in EU regulation and a drive to complete the single market, a call also made by a recent EU report from another former Italian prime minister, Enrico Letta.
To underpin investment, Draghi calls for an element of common fund-raising via a new EU debt instrument, a route certain to raise hackles in some European states. He also calls for a more nimble EU, involving not only a sharp cut in regulation but also the end of the national veto on new legislation in more policy areas. This will be sensitive in countries like Ireland, which has long protected the independence of tax policy. However, the report is not a full-scale call for integration, rather urging centralisation where EU competence is needed and national control elsewhere.
Draghi underlines the changing international economic environment, with free trade replaced by a desire to underpin security in key raw materials and products such as computer chips. He calls for the return of more active, though nuanced, industrial policies. A recommendation that the EU retains a role in monitoring and controlling FDI would not be popular in Dublin.
The report raises big questions and maps out a wide policy agenda. Much may be popular in the European Commission, but the response in member states will be varied. It is, however, a comprehensive response to Europe’s position in a fast-changing economic world. And it points out clearly that the price of inaction will be high.