Mario Draghi has a message to the EU’s leaders: I did my bit, now you do yours.
Member countries had praised his proposals for fixing the bloc’s sagging economy when he delivered them. One year on, they’re still dragging their feet on actually following the advice — and Draghi is taking on the role of agitator.
Europe has introduced few of the recommendations from his European Commission-backed plan to boost competitiveness, which includes continental-scale investments in infrastructure, a revamped energy grid providing affordable power to industry, coordinated military procurement to wean the bloc off of U.S. arms, and a unified financial sector that can pour capital into EU tech startups.
Only last month, Draghi warned that governments must make “the massive investments needed in the future,” and “must do it not when circumstances have become unsustainable, but now, when we still have the power to shape our future.”
Dragging it out
It’s not the first time that the ex-European Central Bank chief has issued dire warnings on Europe’s dimming prospects. When he first presented his report in Brussels, Draghi spoke of the “slow agony” of decline.
At the time, EU leaders across the political spectrum heaped praise on the MIT-trained economist’s reforming vision.
French President Emmanuel Macron said that Europe needed to “rush” to deliver the Draghi agenda. Spanish Prime Minister Pedro Sánchez threw his weight behind the reforms to avoid what he called the risk of falling behind in the most “cutting-edge technological sectors.”
Even Germany’s Friedrich Merz, who disagrees with Draghi on the key issue of joint EU debt, parroted the economist when he said that Germany would “do whatever it takes” to shore up its defense sector — a reference to Draghi’s now-famous dictum on the eurozone crisis.
But while leaders say they agree on the need for a more cohesive EU, behind the scenes the reform agenda is stalling.
“The Draghi report has become the economic doctrine of the EU, and everything we’ve proposed since has been aligned with it,” Stéphane Séjourné, the Commission executive vice president charged with industrial strategy, told POLITICO. Still, he admitted that the “’Draghi effect’ too often fades when legislative texts are discussed by member states.”
A report by the European Policy Innovation Council think tank found that only 11 percent of the Draghi report had been acted on. In the field of energy, no actions have been completed at all.
“It’s national interests, it’s national policies, sometimes it’s party political,” said MEP Anna Stürgkh, who recently authored a European Parliament study on the electricity grid. Speaking at an event about the Draghi report one year on, the Austrian Renew Europe lawmaker explained that it often came down to individual countries not wanting to share cheap energy with their neighbors.
“If they interconnect with countries that have higher energy prices, their prices will go up,” she said. “That is a fact.”
“It’s not the Commission which is not doing the banking union,” Spanish economist and former MEP Luis Garicano said at the same event, referencing the push to break down the thicket of national rules and vested interests that keeps the banking sector fragmented and country-specific. “It’s the governments that don’t actually want to allow the capital to flow from one country to the next.”
That same parochialism comes up again and again, from common debt — vetoed by so-called frugal countries like Germany and the Netherlands — to defense or to financial sector integration. It doesn’t help that countries are tightening their belts after the Covid-era spending splurge, leaving little money to pursue strategic aims.
The bully pulpit
Draghi is a man used to wielding power directly, having injected hundreds of billions of euros into the eurozone economy during his tenure as ECB president. Earlier this decade he served over a year and a half as the prime minister of Italy.
In his latest incarnation as Europe’s Jiminy Cricket — the unheeded moral advisor — Draghi only has persuasion at his disposal.
If on the one hand the frantic pace of events has drawn attention and bureaucratic resources away from the reform program, it’s also served as a powerful validation of his thesis. Draghi has long been a proponent of pooled sovereignty — which is to say that the EU’s member countries are more powerful when they act as a bloc, even if they lose some freedom at the national level. The problem is that it’s up to governments to decide to act.
By February, Draghi was already chiding governments for putting the brakes on meaningful change during an appearance in front of the European Parliament.
“You say no to public debt, you say no to the single market, you say no to create the capital market union. You can’t say no to everybody [and] everything,” he said.
Now, as an intransigent U.S. embarrasses Europe on the world stage, Draghi has warned the window for change may be closing.
The way that President Donald Trump got the better of EU negotiators, who were under pressure from capitals to come to a deal, was a case in point.
This was a “very brutal wake-up call,” Draghi warned at a meeting in the Italian seaside town of Rimini last month.
“We had to resign ourselves to tariffs imposed by our largest trading partner and long-standing ally, the United States,” he said. “We have been pushed by the same ally to increase military spending, a decision we might have had to make anyway — but in ways that probably do not reflect Europe’s interests.”
Eyes on Brussels
If Draghi is the brain that dreamed up the EU’s economic reform program, then the Commission’s bureaucrats are the hands charged with implementing it.
The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. It’s headed by Heinz Jansen, a German official previously in the Economic Affairs Directorate, and eight staff in total.
Critics argue this is a paltry number of staff to be attached to the task force, and that the EU executive could have set up a dedicated directorate. “The president attaches great importance to the implementation of the Competitiveness Compass,” a Commission spokesperson told POLITICO, referring to the EU executive’s plans to implement Draghi’s recommendations.
According to officials who spoke with POLITICO, the task force mainly works on delivering wins on the ground, pooling funds and channeling them into a handful of core projects that might give Europe a shot at competing with the U.S. and China technologically. The Commission merged several programs into a new €410 billion fund to finance common industrial aims in its budget proposal, and is issuing a recommendation to governments to coordinate their investments this fall.
But here, too, that will inevitably trigger tensions.
“Can you really imagine a big EU country funding an industrial plant in Slovenia with its own taxpayers’ money?” asked one EU official. “There is a lack of ambition … the EU executive is taken hostage by some big countries.”
“For years, the European Union believed that its economic size, with 450 million consumers, brought with it geopolitical power and influence in international trade relations,” Draghi said. “This year will be remembered as the year in which this illusion evaporated.”
Jacopo Barigazzi and Nicholas Vinocur contributed reporting to the article.
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