Mario Draghi has solutions for Europe's sluggish economy. Will EU governments listen?
BRUSSELS (AP) — A long-awaited report on how to rescue Europe's economy from weak growth and red tape is in. The question is, how many of its recommendations will actually be enacted by the drawn-out decision-making process of the European Union?
The report stands out from other recipes for improvement because the project was headed by Mario Draghi, the former head of the European Central Bank who also served as Italy's prime minister in 2021-22.
Draghi is regarded as having saved the euro currency union with his 2012 promise that the ECB would do “whatever it takes” to save the shared currency from the debt and financial crisis then engulfing it.
Now the EU and its 440 million people are facing a persistent and growing growth gap with the US, the report says. Last year the EU economy grew 0.4% compared with 2.5% in the U.S.
Europe is also struggling with three areas where it has become dependent on outsiders: Russia for energy, China for growth and trade, and the U.S. for defense. All three are now disrupted or in question. Draghi says the EU and its 27 member governments have to work better together to develop their own capacities.
The report, requested by the European Union's executive commission, says Europe needs to massively ramp up infrastructure and green energy investments while slashing burdensome regulation in order to return to consistent, strong growth.
Whether any of it will actually take effect over the upcoming 5-year term of the re-elected commission President Ursula von der Leyen depends on backing from the EU's member governments and its parliament.
Here are some key takeaways from the report's nearly 400 pages:
Investment, investment, investment
To pay for the transition to clean energy and boost defense capacity, the EU would need to increase public investments by a massive 4.4%-4.7% of annual economic output, or 750 billion-800 billion ($828 billion-$883 billion), levels not seen since the 1960s and 1970s and dwarfing the post-World War II Marshall Plan. To find the money, the EU needs to integrate its financial markets so that companies can raise more capital through stock and bond sales rather than bank loans as they tend to do now. That has been one of the EU's long-standing projects, but it has moved slowly amid resistance to some aspects, such as shared deposit insurance.
Draghi also said that issuing shared debt would be one way to both fund investment in specific projects such as defense or cross-border energy grids. That's what the EU did to fund its pandemic recovery program. But the idea faces political resistance, and von der Leyen, the commission president, said at a news conference introducing the report that Europe's national governments would have to “look at the political will to have these common European projects.”