Mario Draghi has plenty of ideas. The former European Central Bank president, a prominent figure during the euro-zone crisis, delivered an extensive report on Monday about how the European Union risked becoming a fading economic force.
The report, which runs to just shy of about 400 pages, recommended a series of changes and reforms to allow the bloc to try to keep up with the US and China. Draghi, who finished up as the head of the ECB in 2019, was last year tapped by Ursula von der Leyen to write up the report, which it was hoped might provide a push to drive on several long stalled policy debates.
Setting out the problem in the lengthy report and a press conference in Brussels, it is clear the former Italian prime minister believes the current picture is stark. If nothing was done, the EU would be left trying to cut slices of a smaller and smaller cake, unable to find the resources to fund its big ticket plans, such as transitioning towards a green economy, or bolstering its defence capabilities.
The report recommends reforming EU financial, competition and budgetary rules, to put Europe in a better spot to compete economically.
Heavily implied but not explicitly written down is support for more common EU borrowing, like the European Commission’s then-unprecedented move to borrow to finance a huge pandemic recovery fund.
Expect member states known as “the frugals”, such as the Netherlands, Germany and Austria, to heavily resist any normalisation of the EU taking on common debt. Meanwhile, Ireland and Luxembourg will be sensitive to proposed capital market reforms.
The report lands at a time when the two big beasts of the union, France and Germany, are limping along. Domestic political woes mean both Emmanuel Macron and Olaf Scholz are in no position to pick up the baton and lead on from here. Other leaders, like Hungary’s Viktor Orban, are determined to undermine the union from the inside.
Draghi’s report has diagnosed the illness, but it seems for the moment the EU will be unable to agree on exactly how it should take its medicine.
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