Italian-European banker and senior politician Mario Draghi (77) is once again in action to save Europe. The former head of the European Central Bank, who earned the nickname Super Mario after saving the eurozone threatened by the Greek debt crisis (2011), reconciling seemingly irreconcilable views of European northerners on strict financial discipline and Mediterranean Europeans on fiscal flexibility, has been called to a new rescue mission by the old/new head of the European Commission (EC) Ursula von der Leyen. She commissioned him to report on the EU’s competitiveness, which after publication and presentation became the main European topic.
Heading Down
In his four hundred pages of gloomy diagnosis of the state and recommendations for action, Draghi did not write anything that planners and implementers of European and national economic policies would not already know: that Europe has a serious problem with productivity and competitiveness, especially in relation to the USA and China; that it lags in technological development and AI technologies, that its antitrust purity often benefits non-European competition, that it has excessively expensive energy, that the EU industry cannot compete with the USA while paying gas three and a half times more than the industry in that country, that the irrational push for green energies leads to 90% dependence on China, that its defense industry is fragmented and uncoordinated…
But Ursula von der Leyen also knows why the task of confronting the harsh European economic reality and the recommendation for therapy was entrusted to the old financial-political fox Mario Draghi. Experienced in managing economic-financial crises, Draghi does not hesitate to clearly, even dramatically, address the seriousness of the problem. Thus, while presenting his report, he sent the message: – We have reached the point where, if we do not act decisively, we will have to give up our standard, our environmental protection, or our freedom.
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Draghi has learned to balance fears and the power of money in previous missions to save the European economic and financial system – the EU will fund the money
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Or, even simpler – we are heading down. The lifesaving remedy that Draghi recommends if Europe wants to remain any factor in the global economy is strong and targeted investment, specifically 800 billion euros per year, in areas where we lag behind global competition, primarily investment in research and new technologies, including artificial intelligence. This immediately provokes resistance in the less developed and poorer part of the EU.
Where will they get the money for such investments? But Draghi has a solution already partially established during the eurozone crisis, refined during the COVID-19 pandemic crisis: the EU will fund this large investment cycle. Immediately, Germany and the financially disciplined northern EU countries are alarmed, assuming that a larger part of the burden of this new investment wave will fall on them and fearing uncontrolled waste of money. However, Draghi has learned to balance fears and the power of money in previous missions to save the European economic and financial system – the EU will fund the money. This promising European financial injection is motivating for the fiscally relaxed and poorer member states, including Croatia, which are already looking with concern at what will happen after 2027, when funding from cohesion funds intended for infrastructural connectivity of the EU is expected to cease. Looking towards that huge investment pie, it is likely that all EU members, both those from the organized, wealthier north, and those from the relaxed and poorer south, regardless of the political options in power, will be ready to align their economic policies with the priorities proposed by Draghi.
Money is the Most Successful Unifier
Italy and France will surely like the initiative. The fears of Germany and its northern neighbors that the financial burden of the large investment wave will ultimately fall on their account will be mitigated by stricter oversight of funded investment projects, ensuring that their money intended for the development of the AI sector will not be spent on paving unclassified forest roads in less developed member states. For Germany’s acceptance of the initiative, it is also important to realize that without these relaxed and poorer member states, there is no EU, and without them, Germany would remain – just Germany.
Although in initial comments Draghi’s plan for large European investments was often deemed impractical, especially due to the complexity of European decision-making, I believe it has a good chance of becoming the EU’s official policy in the upcoming period. Namely, money has so far proven to be the most successful unifier of the EU and its differences. How successful it will be – is another question.
