Draghi’s plan to restart the EU: “Europe invests in a dysfunctional way, a common public policy is needed”
Mario Draghi doesn’t give discounts: urgency and concreteness. This is his recipe for Europe. The 400-page report on competitivenesspresented yesterday in Brussels, sounds like an ultimatum: either we act now, or we sink. Enough with sterile compromises. The former president of the ECB talks about investments “double compared to the Marshall Plan”, 800 billion a year, which must be channeled into three key sectors: innovation, decarbonisation and safety.
The Old Continent is at a standstill, bogged down, while The United States and China are advancing without mercy. Without a “radical change” and a “federal European budget” we risk losing the founding values of the Union. Draghi’s report thus accompanies that on the single market by Enrico Lettaforming a tandem destined to redesign the European future. Yet there are already those who are getting in the way, such as the Germanywhich, despite being at risk of recession, is opposing tooth and nail the former minister’s plan to issue new common debt.
Draghi’s spirit is to act in unison, ambitions that collide with a wall of austerity, which therefore risks further dividing the European Union, rather than relaunching it. Affaritaliani.it he talked about it with Carlo Alberto Carnival Maffèprofessor of strategy at the Bocconi University School of Business Administration.
Professor, is Mario Draghi’s 800 billion per year plan realistic? How feasible is such a massive increase in productivity and investment in the midst of a budget crisis?
First of all, the plan cannot be “Marshall” because there is no United States to finance a Europe to rebuild. If anything, a self-financed plan, with the ability to attract foreign investment. This is the theme that, in my opinion, is missing from Draghi’s report.
Europe can become attractive for investments if it creates the conditions to do soand it is not so much a question of money, but of rules and federation, unification of the market. The report does not tell us anything new, we already knew the numbers. But the three strands highlighted in the report (innovation, defense and security ed.), Draghi classified them in terms of public goodsor European public goods, and this is the issue. The former ECB president says: “It is not possible to build a European public good in a fragmented way”.
It is not true that Europe does not invest in research and development, but if we do it in 27 different countries, the ‘critical mass’ effect does not produce a digital platform, a defense system, or a venture capital capable of generating a unicorn. What Draghi did was not so much the debt analysis, but having made a European synthesis saying that these three goods are public. From here comes the fact that a public policy is needed to finance them, and regulate them.
So what is preventing European governments from creating the conditions necessary to attract these 800 billion in investments?
Draghi reiterates an important point: there is no possibility of finding the money for this thing without an institutional basis that supports this project. You can’t finance 800 billion for five years without becoming a Federation: unique conditions are needed for private spending to come into play. Draghi did not say let’s make 800 billion of public debt, but 800 billion of public and private commitment. And it’s not that there is a lack of private capital in Europe.
So he is not saying that Europe is short of financial resources or that we need to create debt, but to create an institutional framework that allows for the market allocation of this capital. Draghi’s document seems like a proposal, but in reality it is a political project: either we clean up the markets and create the conditions for investment, or we take the slow decline. I don’t want another Next Generation EU that would replicate the fragmentation again, and Draghi has been very clear on this..
Draghi talks about a radical and immediate change. But how can Europe improve its approach to investments for fast and sustainable growth?
Europe should not incur more national debt; it has sufficient fiscal flows. Or it should create a single antitrust authority instead of having 27 different national communications authorities. And this fragmentation is also repeated at the local level. Furthermore, Europe has not been quick to produce regulations, often used not to create markets, but to slow down and limit them.
However, in other areas it has performed well, such as in Green Deal or in the automotive sectorwhere we created the conditions for the European automotive industry to effectively disappear, because it is no longer competitive. Making batteries in Europe costs more than in China. We chose not to invest in innovative technological cycles and it was not just a question of private companies. Our investors, even today, are the automotive industry, such as Volkswagen, which is in deep crisis, but is the largest European investor. A paradox. So it’s not that there is a lack of investment, but the way Europeans invest is dysfunctional.
Germany has been a wall against Draghi’s proposal. What do you think of this position? And how does Italy position itself in the European context?
Germany is the epitome of this European naivety. It has invested in traditional technologies such as mechanics and automobiles, thus missing many opportunities in the field of advanced technology. Germany is not very digitalized, like Italy. It has not invested, for example, in energy autonomy, trusting in Russian gas, and now it is paying dearly for the lack of investment in renewable energy. Furthermore, it has irresponsibly shut down its nuclear reactors. It is harming itself.
Italy follows suit: it has always abhorred nuclear power and now, 40 years later, it is rethinking it with serious delay. You can’t have innovation without energy, and if you pay double or triple the price of others for energy, you will never be competitive. The same goes for exports to China. Volkswagen, which once earned 40% of its margins from Chinese exports, now barely reaches 12%, as China has become a net exporter.
Italy is much less dependent on China and is a more diversified economy, although slower and more disaggregated. The two great evils of Europe are these: Germany and Italy. It is useless for our country to celebrate an increase of 0.1% of GDP, when our income has lost 30% compared to Germany and 50% compared to the United States in 20 years. We didn’t make the right choices and the country system was unable to react correctly.
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