Reviving the EU’s Economy: Former ECB President Mario Draghi’s Proposal

New investment of 4.4-4.7% of EU GDP is needed to create a competitive digital and carbon-neutral economy. This is equivalent to 750-800 billion euros (about 1,114-1,188 trillion won) of new investment annually.

Former European Central Bank (ECB) President and Italian Prime Minister Mario Draghi proposed aggressive new investments to revive the European Union (EU)’s stagnant economy on the 9th (local time). The analysis is that as the global economic order is reorganized from free trade to protectionism, competition among countries to pour astronomical amounts of money into strategic industries is heating up.

According to the Wall Street Journal (WSJ), former President Draghi warned that “if Europe fails to implement reforms, it will face an existential crisis,” while announcing a report titled “The Future of European Competitiveness” that contains more than 150 recommendations to address Europe’s low productivity problem.

Draghi, who earned the nickname “Super Mario” for preventing the debt crisis of the Eurozone (20 countries that use the Euro) and saving the Euro during the EU’s financial crisis in the early 2010s with a bold monetary easing policy, was commissioned by European Commission President Ursula von der Leyen in September of last year to write a report on how to save Europe.

He proposed that the EU should be competitive in digital and carbon-neutral technologies. He also recommended that active support is needed for manufacturers of clean technologies, including electric vehicles, and that antitrust authorities should give more weight to whether mergers and acquisitions (M&A) would help foster innovation in the EU and create globally competitive companies.

In the telecommunications sector, where huge amounts of money are needed to develop new technologies, the idea of integration between European companies has also been put forward. He also called for increased research funding for defense industries, including drones, hypersonic missiles, and artificial intelligence (AI) for defense, to address rising geopolitical tensions, including Russia’s military threats.

Draghi suggested that to finance these policy proposals, the eurozone countries would need to actively issue Eurobonds, bonds issued jointly by the eurozone countries with a joint guarantee. Some of the report’s contents are expected to be reflected to some extent in policymaking during the five-year term of the second von der Leyen administration, which begins in November.

Key Recommendations

• New investment of 4.4-4.7% of EU GDP is needed to create a competitive digital and carbon-neutral economy.
• Active support is needed for manufacturers of clean technologies, including electric vehicles.
• Antitrust authorities should give more weight to whether mergers and acquisitions (M&A) would help foster innovation in the EU and create globally competitive companies.
• Increase research funding for defense industries, including drones, hypersonic missiles, and artificial intelligence (AI) for defense.
• The eurozone countries should actively issue Eurobonds, bonds issued jointly by the eurozone countries with a joint guarantee.