Reimagining European Competitiveness: Lessons from the Draghi Report
The Draghi Report reveals Europe’s declining global influence and presents a bold strategy to reverse it. From closing the innovation gap to balancing green energy goals with industrial competitiveness, this article unpacks the critical steps Europe must take to reclaim its place among the world’s leading economies. Dive into the key insights and recommendations that could shape the future of European prosperity.
In September 2024, Mario Draghi, the former president of the European Central Bank, delivered an in-depth report on the future of European competitiveness. With over 400 pages of analysis and recommendations, the Draghi Report addresses Europe’s declining economic influence in the face of increasing global competition. It underscores the urgency for Europe to reform its economic structures to restore its global standing, outlining innovation, decarbonization, and industrial security as key pillars of this transformation. This report emphasizes the urgency for Europe to reinvent itself in a world where it is gradually being surpassed by other economic powers such as the United States and China. Draghi puts forward several recommendations to restore Europe's competitiveness in strategic sectors while highlighting ecological transition and industrial security.
The European Context: A Worrying Decline
Despite having solid foundations, Europe is losing its competitive edge on the global stage. The Draghi Report underscores that, since the 2000s, the EU has been falling behind the United States, particularly in terms of productivity. While Europe’s GDP lags 30% behind that of the United States, compared to 15% in 2002, the gap is also widening with China, whose economy has been steadily catching up, notably benefiting from the pandemic crisis (Le Grand Continent, 2024 p.2).
This loss of competitiveness is largely due to stagnating European productivity. While Europe excels in certain mature sectors like the automotive industry, it struggles to position itself in breakthrough technologies, particularly in digital and biotechnology sectors. This lack of innovation and technological dynamism has resulted in structural delays, which the report attributes partly to a failure to convert European talent into commercial success (Draghi, 2024 p.15).
Pillars of Transformation: Innovation, Ecological Transition, and Security
The Draghi Report identifies three major transformations that Europe must undertake to regain its competitiveness.
1. Closing the Innovation Gap
Innovation is a key area where Europe must catch up. The report emphasizes the need to strengthen research and development (R&D) and invest heavily in cutting-edge technologies such as artificial intelligence (AI) and biotechnology. Currently, only four of the world’s top fifty tech companies are European, highlighting the continent’s weakness in future growth sectors (Draghi, 2024 p.18), (Tavanti-Geuzimian, 2024, p.6).
To accelerate innovation, it is essential to create favorable ecosystems for start-ups and the commercialization of new technologies. Europe must also revise its regulatory framework to stimulate competition and enable the emergence of industrial champions capable of competing on the global stage (Draghi, 2024, p.25), (Le Grand Continent, 2024, p.6).
2. A Joint Decarbonization and Competitiveness Plan
While the ecological transition is seen as a potential asset, it also presents a challenge for European competitiveness. The report highlights that Europe is at the forefront of the energy transition, but its lack of political coordination and absence of natural resources weigh heavily on its energy competitiveness. For example, in 2023, gas set electricity prices 63% of the time in Europe, even though it only accounts for 20% of the European energy mix (Draghi, 2024 p.35),(Tavanti-Geuzimian, 2024, p.3).
For the energy transition to become a lever for competitiveness, Europe must commit to greater coordination of energy policies, invest in renewable energy, and modernize its infrastructure to prevent high energy prices from further damaging its competitiveness (Draghi, 2024 p.38).
3. Strengthening Security and Reducing Dependencies
Industrial security and resilience to geopolitical shocks are growing concerns for the EU. The report highlights Europe’s dangerous dependencies, particularly on China for certain decarbonized technologies and on the United States in the digital sector (Tavanti-Geuzimian, 2024 p.3). The war in Ukraine has also exposed the fragility of European energy supply chains, exacerbating competitiveness gaps between Member States. (Tavanti-Geuzimian, 2024, p.7)
To strengthen its sovereignty, Europe must build a strong industrial base capable of ensuring strategic independence in key sectors such as defense and energy (Draghi, 2024, p.55).
Recommendations for a Competitive Europe
The Draghi Report proposes several pathways for Europe to reposition itself among the world’s major economic powers.
1. A Framework for Investment and Governance
Europe must mobilize massive investments, particularly in infrastructure and innovation. The report recommends increasing investment by 5% of GDP, levels not seen since the 1960s and 1970s, to meet the challenges of digitizing and decarbonizing the economy (Le Grand Continent, 2024, p.3).
To achieve this, better coordination between Member States and a simplification of governance rules at the European level are essential. The report calls for institutional reforms to accelerate decision-making and facilitate investments in transnational projects (Draghi, 2024 p.70).
2. Revitalizing Competition
Revitalizing competition within the EU is another priority. The report advocates strengthening the Single Market by removing obstacles that hinder the growth of businesses, particularly in the technology sector. Increased competition will foster innovation and enable Europe to position itself in global markets (Draghi, 2024 p.82).
3. A Coordinated Industrial Strategy
Finally, the report recommends developing a genuine European industrial strategy. This strategy should focus on key sectors for the future competitiveness of the EU, such as green technologies, the automotive industry, and defense. Supporting the emergence of European champions in these areas is essential to closing the gap with the United States and China (Le Grand Continent, 2024 p.4).
The Draghi Report offers an ambitious vision for restoring European competitiveness. In the face of rising geopolitical tensions, energy transition, and technological transformations, Europe must urgently strengthen its industrial base and invest in innovation to regain its place among the world’s economic powers. If the EU follows these recommendations, it will not only overcome its internal challenges but also play a more influential role on the global stage.
References
Draghi, Mario. The Future of European Competitiveness: A Strategy for Europe. European Commission, September 2024. https://legrandcontinent.eu/fr/wp-content/uploads/sites/2/2024/09/2024_Draghi-report_PART-A_V3.pdf
https://legrandcontinent.eu/fr/wp-content/uploads/sites/2/2024/09/Draghi-report-Part-B-1.pdf
Le Grand Continent, Le rapport Draghi : La force de réformer, Le Grand Continent, Septembre 2024. https://legrandcontinent.eu/fr/2024/09/09/le-rapport-draghi/
Tavanti-Geuzimian, Raphaël. Rapport Draghi : façonner l’Europe puissance, Institut Montaigne, Octobre 2024. https://www.institutmontaigne.org/expressions/rapport-draghi-faconner-leurope-puissance