OR European Union is economically lagging behind the United States and should continue joint debt issuance to improve productivity and strengthen its security, it warns in Mario Draghi’s long-awaited report speaking of an “existential problem”.

The Union needs much more coordination in industrial policy, faster decisions and massive investment if it is to keep pace economically with rivals such as the United States and China.

Following the success of the historic recovery plan following the Covid pandemic, the EU should “continue to issue common debt instruments to finance common investment programs aimed at increasing EU productivity and security,” he notes in the introduction to the 400-page report the former prime minister of Italy pointing out the economic “chasm” that separates Europe from the US.

The European Union needs additional investments of 750-800 billion euros per year – corresponding to 5% of GDP -, much higher than the 1%-2% of the Marshall Plan to rebuild Europe after World War II.

Financing innovation

“The needs for investments are huge” warned Mario Draghi during a press conference in Brussels in the presence of the president of the European Commission Ursula von der Leyen. Insisting that there is a need for “dramatic change” in the European approach, he presented some of his “170 proposals”.

However, the idea of ​​issuing common debt remains a red line for many northern European countries, with Germany leading the way, who still fear that they will become over-indebted to cover the arrears of southern European countries.

Mario Draghi admits that this plan is not feasible, unless “the political and institutional conditions come together”.

He points out the need to mobilize private capital for the financing innovation through the creation of a real “Capital Markets Union”.

“Real disposable income per inhabitant has increased almost twice as much in the United States as compared to Europe since 2000,” warns the former president of the European Central Bank in this report, which was requested by the president of the Commission.

The findings of Mario Draghi’s report are intended to become a source of inspiration for her work new European Commission for the next five years.

The European Union has been suffering from economic stagnation for a year and a half. Its performance in overcoming the crisis caused by the pandemic was lower than that of the US, as was the case with the 2008 financial crisis.

The lag is explained “mainly by the biggest slowdown in productivity in Europe” and represents a threat to its social model, warns Mario Draghi.

“If Europe fails to become more productive, we will be forced to make choices. We will not be able to simultaneously have a leading position in the field of new technologies, to be a model of climate responsibility and an independent actor on the international stage. We will not be able to finance our social model. We will have to revise down some or all of our ambitions. It is an existential challenge”.