“Without access to cutting-edge technologies, Europe will lose its power”

These sources shed light on the “existential challenges” facing Europe. Mario Draghi, former ECB President and Italian Prime Minister, warns that Europe will lose its power and standard of living if it does not respond decisively to changing global realities. The core message of both speeches is the urgent need for a fundamental adjustment of EU structures and policies in order to survive in an increasingly geo-economic and multipolar world.

Main topics and key ideas/facts

1. Europe’s loss of competitiveness and productivity

• Lagging behind the USA: Draghi states that “Europe is lagging well behind the USA in terms of productivity – at the expense of European living standards.” This gap was already addressed almost a year ago and has since become “even more urgent.”
• Slowing productivity growth: If productivity growth continues to slow, “Europe will no longer be able to realize all of its ambitions in ten years’ time.” These ambitions include leadership in new technologies, climate policy and being an independent player on the world stage.
• Lack of “hunger for innovation”: Physicist Steven Chu, US Secretary of Energy under Barack Obama, who was also present in Lindau, notes: “In contrast to China, there is a lack of hunger for innovation.” Thomas Schafbauer from Infineon adds: “Not striving to be first is dangerous.”

2. geopolitical impotence and the end of the illusion of the “economic dimension”

• Loss of illusion: Draghi emphasizes that “for years, the European Union believed that its economic dimension, with 450 million consumers, would itself bring geopolitical power and influence in international trade relations. This year will be remembered as the year in which this illusion was shattered.”
• Dependence and lack of influence: Europe had to “surrender to the tariffs of our biggest trading partner and long-time ally, the United States.” Despite the largest financial contribution to the war in Ukraine and the greatest interest in a just peace, the EU “has so far only played a fairly marginal role in peace negotiations.”
• China’s stance: China “has openly supported Russia’s war effort while expanding its industrial capacity to flood Europe with surplus production.” China does not see Europe as an equal partner and is using its control over rare earths to increase Europe’s dependence.
• “Brutal wake-up call”: Trump’s policy is described as a “brutal wake-up call” and Steven Chu warns: “The EU cannot rely on US protection in the long term.”

3. obstacles to innovation and growth in Europe

• Fragmentation: Draghi identifies the “strong fragmentation within the EU, for example in the allocation of research funds” as the main cause. The motto “We give everyone a little” is the wrong way to go about disruptive innovation.
• Lack of collaboration: There is a lack of “more collaboration between universities and industry, as is the case in the USA.” This also requires more private investment in research.
• Over-regulation: European regulation of new technologies is problematic. The EU’s approach is to “cover all possible risks.” However, this is impossible with disruptive innovation, as regulation quickly becomes “obsolete or even counterproductive”, especially for small and medium-sized companies.
• Prioritizing the protection of the individual: The biggest obstacle is that politicians prioritize the protection of the individual. Data protection, environmental protection, employee rights – “that is everything but conducive to innovation.”

4. need for far-reaching adaptation and integration

• Change in the global order: The world has changed fundamentally: “Where markets once governed the economy, there are now comprehensive industrial policies. Where once there was respect for rules, there is now the use of military force and economic power to protect national interests.”
  • Adaptation of the political organization: The EU must adapt its political organization to the “existential demands of its time” in order to become a “spectator – or at best a supporting actor – to a protagonist”.
  • Fully exploiting the European dimension: Single Market: Despite the Single Market Act almost 40 years ago, there are “significant barriers to trade within Europe.” Removing these barriers could increase labor productivity in the EU by around 7% after seven years. These barriers are “the equivalent of a 64% tariff on machinery and a 95% tariff on metals”, leading to higher costs and increased purchases from non-EU suppliers.
• Technology: “No country that aspires to prosperity and sovereignty can afford to be excluded from critical technologies.” The US and China use their control over strategic resources and technologies to force concessions.
• New forms of integration: In order to achieve these goals, the EU must strive for “new forms of integration”, such as a “28th regime” above the national level or joint financing for projects of European interest.
• “Good debt”: Draghi advocates “good debt”, investing in strategic priorities and increasing productivity. Such investments are often no longer possible to a sufficient extent at national level. “Only forms of common debt can support major European projects that fragmented national efforts could never achieve.” This applies to defense, energy and disruptive technologies.

5. transforming skepticism into action and unity of action

• Skepticism about the ability to act: The skepticism about Europe does not stem from the values on which the EU was founded, but from the “ability of the Union to defend these values.”
• Lessons from the past: The EU has adapted to new circumstances in the past, most recently to the neoliberal order. However, the task at that time of opening up markets and limiting state intervention was “a relatively simple task in comparison.”
• Urgency and determination: The challenge now is to “act with the same determination in normal times” as was the case in emergencies such as the pandemic or the war in Ukraine.
• Role of the public sector: While the private sector is already adapting, the public sector is lagging behind. Governments need to “define which sectors should be prioritized for industrial policy”, remove unnecessary barriers, review approval procedures in the energy sector and agree on the financing of massive investments.
• Restoring unity of action: The EU must “restore unity of action – and it must do it now, not when circumstances have become untenable, but now, when we still have the power to shape our future.”
• Call to action: “Turn your skepticism into action, make your voices heard.” The EU is “the best way for a future of peace, security and independence.”

Conclusion

Mario Draghi paints a bleak picture of Europe’s current situation, but at the same time emphasizes the EU’s ability to adapt and renew itself. The main message is an urgent call to abandon the illusions of the past, recognize the realities of a multipolar, geo-economic world and resolutely pursue new forms of integration and a proactive innovation and industrial policy. Without these fundamental changes, Europe risks losing not only its economic competitiveness, but also its geopolitical power and its ability to defend the values on which the Union was founded. The time for procrastination is over; it is time for

“Discontinuity in our goals, our schedules and the way we work.”