In September 2023, Mario Draghi, previously the head of the European Central Bank (ECB), was asked by Ursula von der Leyen, the President of the Commission, to devise a plan to boost economic growth and competitiveness in the European Union. Yesterday, Draghi delivered an address to the European Parliament that apparently hammered the EU as “falling behind” concerning global competition.
According to multiple reports, Draghi lambasted officials for policies that do not boost innovation while pointing to skills gaps and other systemic challenges. Draghi was said to have called for “radical change” and a strong role for the private sector in the land of dirigism and government intervention.
The final report has not been published, but according to Reuters, it is 400 pages long and outlines changes to tackle ten major economic sectors. Draghi was apparently criticized by MEPs for not providing prescriptive solutions for the lumbering EU economy.
The FT reports that Draghi said some aspects of the European economy “gave him nightmares.” The same report says Draghi declared the EU needs “360-degree reform.”
Europe has long struggled under many barriers to efficient capital allocation and high taxes that stifle entrepreneurship and innovation. At the same time, entrenched social programs and affiliated costs make it very difficult to free up the power of markets to drive an innovation-driven economy. You cannot have it both ways. Streamlining markets by reducing regulation and other structural barriers while reducing taxes to allow private sector decisions to trump government aspirations is practically impossible to imagine in Europe. Of course, improving access to capital (and online capital formation) while incentivizing risk-taking could help the EU improve its economic prospects.
The report is expected to be officially delivered to the Commission next week.
