European Union|Mario Draghi, the former director general of the European Central Bank, estimates that the EU needs investments in defense, climate action and the development of new technology that will overshadow the post-war Marshall aid.
Brussels
If If the EU wants to strengthen its defense, achieve its climate goals and keep up with the technological competition with the United States and China, it must massively increase investments in these areas. Roughly speaking, this means an increase in annual investment by around 800 billion euros, which even eclipses the post-World War II Marshall aid with which the United States financed the reconstruction of Europe.
Although a significant part of the money needed for investments can still come from the private sector, considerable public investments are also needed. It would make sense to finance them jointly, with the EU’s common debt.
This is from the former President of the European Central Bank Mario Draghi key messages of the competitiveness report published on Monday.
Draghi according to the EU can, with the right measures, attract private money for necessary investments. The problem is that, from the point of view of private financiers, public funding is scattered in member states or in numerous different programs of the EU budget, which are governed by complex, bureaucratic rules. In addition, for example, financing the next steps in the development of artificial intelligence and defense requires such large financial efforts that no member country can finance them alone.
According to him, jointly financed investments can speed up productivity development and develop technology that broadly benefits the European economy.
Although historically, investments in Europe have mainly been financed privately, the investment needs ahead are so great that it alone will not be enough, Draghi estimates. In addition, he believes that the creation of Eurobonds would significantly help to develop the European capital market, which in turn would facilitate the spread of private financing in Europe.
“In order to enable the joint investment projects of the member states and to speed up the integration of the capital markets, the EU should move towards the regular issuance of common safe bonds,” Draghi writes in his report.
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Joint debt or Eurobonds are a politically sensitive issue.
Draghi emphasizes that the joint debt is not an end in itself for him, and member states can decide to finance the investments in other ways if they wish. However, he does not believe that the countries are, for example, ready to significantly increase membership fees to the common budget.
Joint debt or Eurobonds are a politically sensitive issue. However, in the middle of the corona pandemic, the EU countries decided to finance the 800 billion euro recovery package with a common debt.
According to Draghi, the situation is not as dramatic now as in the midst of the corona pandemic, but he considers the weakening of Europe’s competitiveness alarming.
“Otherwise we become poorer every year. Isn’t that a good reason to act?”
In the report, Draghi suggests that the concerns related to collective debt could be balanced by stricter debt rules, which would compel member countries to curb indebtedness at the national level.
Draghi the chairman of the commission prepared his report Ursula von der Leyen order, and is expected to have a direct impact on the work program of the next Commission, which von der Leyen is currently preparing.
“Much [raportista] flows and has already flowed into the mandates of the commissioners,” von der Leyen said at the report’s launch event.
According to him, the decision on the joint debt is in the hands of the member states. According to him, the member states must first have a discussion about common priorities and then think about whether they want to finance them from national budgets or by creating new sources of funding for the EU.
Joint debt is just one of the recommendations of Draghi’s report. The report gives a large number of recommendations to restore Europe’s competitiveness. They include, for example, easing regulation, removing obstacles to the internal market and speeding up licensing.
According to Draghi, strategically important sectors must also be defended more strictly against unfair foreign competition.
Draghi would reform the EU budget in such a way that various programs are reduced, money is directed to joint large-scale projects and strengthening competitiveness. Agricultural and regional subsidies still take up two thirds of the EU budget.
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