Mario Draghi’s plan to save Europe

“Urgency and concreteness” are the two words Mario Draghi said he’d use to sum up the highly-anticipated 400-page report he dropped on us yesterday (Monday).

Titled ‘The future of European competitiveness’, EU leader Ursula von der Leyen commissioned Draghi to lead the report last year as part of a broader strategy to help the bloc adapt to global changes.

And Europe’s Mr. Nice Guy was a popular if bold choice – popular, because he’s still beloved as the one who saved the euro, calming markets everywhere with his famous “whatever it takes” pledge at the height of the eurozone crisis in 2012.

But also bold, because his stint as European Central Bank chief and then Italian prime minister revealed he’s not the type of guy who was going to ctrl-c and ctrl-v his way through this thing.

So, we’ve leafed through all 400 pages, with a little help from our esteemed colleagues Jack Daniels and Tim Hortons, to get you the top five quotes:

1. “We lack focus on key priorities, we don’t combine our resources to generate scale and we do not coordinate the policies that matter”

Draghi dropped this line at his press conference in Brussels, and it encapsulates much of the report’s opening vibe that the bloc has really struggled for cohesion. Draghi blames this for several of the EU’s downstream problems:

• US incomes have grown twice as fast in the last couple of decades
• The EU has lost 30% of its tech unicorns (mostly to the US) since 2008, and
• The EU hasn’t created a single €100B company from scratch in the last half century, while the US has created six firms valued at more than a trillion euros over the same period.

2. “Europe has the foundations in place to be a highly competitive economy” 

Draghi mentions “competitive” a cool 782 times. Heck, it’s in the title. But while his more dramatic lines will make the headlines, it’s important to note he believes the foundations to recover EU competitiveness are already there.

He wants much more, though. How? With Europe’s population set to decline, Draghi wants more productivity. So in addition to things like centralising market supervision, relaxing antitrust rules, and pushing for a genuine single EU market, he says a big priority is to foster more innovation. That means things like:

• Better commercialising the EU’s ideas, fostering sharper digital skills, and streamlining unwieldy EU regulations to help stem the startup outflow.

3. “We are punching under our power”

Interestingly, Draghi also sees defence spending as part of the solution. He points out that 78% of the $86B that EU governments spent on defence last year departed Europe, with most of it filling the coffers of US companies.

So he wants to re-shore that spending. We’ve written previously how these kinds of pro-EU rules can sometimes result in slow-EU outcomes. But with a war at Europe’s doorstep, economic malaise in the air, and tech innovation lagging, Draghi sees defence onshoring as a three-birds-one-stone kinda situation.

He also wants Europe to curb its other dependencies, including by securing its own critical raw material supplies (currently dominated by China).

4. “If we fail to coordinate our policies, there is a risk that decarbonisation could run contrary to competitiveness and growth”

To illustrate this point, Draghi drops arguably his spiciest line of all, referring to the EU’s automotive woes as an example of “applying a climate policy without an industrial policy.” To put it another way, he’s saying the EU charged ahead with its climate policy, without thinking what this would mean for one of Europe’s biggest industries: cars.

But to be clear – he’s not urging the EU to tap the energy transition brakes. To the contrary, he’s calling for more – and better coordinated – investment in decarbonising European industry. And he argues that’ll bring energy prices back down nearer to the US (where it’s two to three times cheaper), and thereby win over more European voters as their bills go down.

5. “Do this, or it’s a slow agony”

Draghi dropped this line at his press conference, amusingly pushing back on a journalist’s suggestion that his report was a list of “do or die” demands for the EU.

But however you want to describe it, his report has 170 recommendations across 10 sectors. And they’re not cheap. In fact, they’d cost an extra $850B, or 4.5% of the EU’s GDP… per year! With his finely tuned ear for a headline, Draghi likened it all to the vast Marshall Plan for Europe’s post-WWII reconstruction. But as a percentage of GDP, this full Draghi plan would be triple the Marshall Plan.

And if Europe’s 27 members aren’t buying it? Draghi also dropped this line: “For the first time since the cold war we must genuinely fear for our self-preservation”.

INTRIGUE’S TAKE

Ahhh… Europe. In 24 hours, you can flex your French in Marseille, punish some pizza in Naples, then maybe climb Mt Triglav in Slovenia. It’s a backpacker’s paradise. But over the past ~20 years, Draghi says some of this same kaleidoscopic wonder has become a weakness, with divergent national industries and interests producing the opposite of synergy – maybe antergy?

But 400 pages and thousands of headlines later, will Draghi’s report make a difference? At the heart of Draghi’s report is arguably a view that the European project is incomplete: it needs more joint markets, more joint investments, and more joint spending. But he’s making that case to many Europeans who’ve just elected more Eurosceptics.

Even relatively pro-Europe lawmakers will baulk at parts. For example, the Draghi plan will need to be co-financed via more joint debt. But guess how long it took Germany’s fiscally-hardline finance minister to say nein? Three hours.

Oh, but Draghi has a solution for that too: he suggests the EU move away from its current system that often allows single countries to veto big changes.