After the pandemic and the war in Ukraine, one thing became clear, Europe was in trouble. Every economic metric indicated that Europe was likely heading into an existential crisis regarding the model that European countries want for the future of the Union. Yes, the 2008 economic crisis and the struggles of southern countries were bad, but they were contained, and the larger nations were profiting and growing their economies. Only a few, like Greece, faced an existential crisis in Europe at that time.
However, now the problems are affecting every country, big or small, and it seems they can't respond effectively. In my opinion, the reason the Union cannot respond is because the problem lies at its core, and there is no strong leader at the top with the courage to guide everyone and say, This is the way, as Angela Merkel once did. Even if her decisions were bad for some, they were beneficial for the majority.
Recently, Mario Draghi, a prominent figure who has held many official positions in Europe and Italy, made a statement about the core problems and how to address them. I haven't read all of it ,it’s 400 pages, and I don’t get paid enough to go through it all, but I did some research on the key aspects I want to discuss.
Productivity and Innovation Gap
The problem: Europe lags behind the U.S. in productivity (don’t get me started on China). The reason for this is that Europe is not investing enough; American companies outspend European companies by around €700 billion annually.
Draghi’s solution is to create regulations that allow companies to invest in riskier ventures, particularly in technology and startups. In my opinion, this is the right approach. Across Europe, we are seeing less and less innovation and fewer things being invented in European countries. Have you heard much about AI innovations comin
Reducing Dependencies
The problem: Europe is highly dependent on foreign suppliers for critical resources, especially in technology, raw materials, and energy. This became evident after the war in Ukraine, where Germany's dependence on Russian gas and raw materials sank its economy into a depression. The U.S. is ready to go to war to remain independent in its supply of critical resources.
Draghi’s solution: Draghi suggests making Europe more self-reliant by negotiating new trade agreements for crucial raw materials and promoting a buy from Europe movement to encourage production within the continent. At some point, Europe surrendered its production in farming, agriculture, clothing, and other sectors to countries like China, and this needs to change.
Climate Change and Clean Energy
The problem: We all probably know that this is a problem affecting all of Europe. We're not doing enough to make clean energy and products using clean energy cheaper and more accessible.
Draghi’s solution: The report calls for greater investment in renewable energy infrastructure and increasing demand for green technologies, including electric vehicles and sustainable industrial processes. We need better connectivity to the European electrical grid. Countries like Greece, Italy, and Spain can produce clean energy from solar power for all of Europe, but due to poor connectivity, half of what Greece produces is wasted and not utilized.
Social Inclusion and Inequality
Okay, the former central banker is now addressing the core problems in our society, but he doesn’t really understand that the issue isn't about not being inclusive, it's that we’re not trying to achieve inclusion organically. Instead, we’re attempting to force it, and that approach is not going to work.
Sectoral Reforms and Strategic Autonomy
TThe problem: Several critical industries, including defense and telecommunications, face unique challenges that hinder Europe’s global competitiveness.
Draghi’s solution: For industries like defense and telecommunications, Draghi proposes loosening competition rules to allow for larger mergers and consolidations. This would create European giants capable of competing with their U.S. and Chinese counterparts. Additionally, Draghi advocates for fostering strategic autonomy in sectors where Europe is dependent on foreign imports, such as semiconductors and defense technologies.
I believe Europe needs to have its own defense, with NATO serving as added security rather than the primary one. We need a robust European defense industry and a common military.
Another issue highlighted in Draghi’s report is the lack of coordination within the European Union on political and economic levels. In my opinion, Europe should move toward becoming a single state,not in 2-3 years, but with a clear timeline and steps, similar to how the U.S. federal system operates.
To accomplish all this, Draghi suggests an investment of €900 billion over the next 5-6 years.
The report
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