News
08 Oct 2024

The Draghi Report Unpacked

In September, former European Central Bank President Mario Draghi presented his long-awaited report on the future of European competitiveness, commonly referred to as the Draghi Report. The report, which was commissioned by European Commission’s President Ursula von der Leyen in her State of the Union address a year ago, has the potential to shape European policymaking during this new political cycle if we want to reverse the industrial decline that our continent is facing. 

Draghi has rang a major alarm bell as to the future of the European economy and prosperity indicating that Europe is confronted with the choice between a slow agony or radical change. His recipe to implement radical change is a New Industrial Strategy for Europe, which rests in three pillars: 

  1. Closing the innovation gap to maintain Europe’s manufacturing leadership and develop new breakthrough technologies and, in turn, raise productivity growth.
  2. Developing a joint plan for decarbonisation and competitiveness to bring down high energy prices and continue the circular economy transition.
  3. Increasing security and reducing dependencies to achieve genuine strategic independence and increase global geopolitical influence.  

To manage this transformation, Mario Draghi recommends that the New EU Industrial Strategy rests on four main building blocks: 

  1. Full implementation of the Single Market 
  2. A coordinated strategy aligning industrial, competition and trade policies 
  3. A massive investment plan to finance the main areas of action 
  4. Reforming EU governance and reducing the regulatory burden 

When it comes specifically to the Single Market, Draghi considers that it is critical for all aspects of the New EU Industrial Strategy. The figures are dramatic: according to him, the EU is currently loosing 10% of GDP potential because of the fragmentation of the Single Market! Harmonised rules and removal of barriers are, in fact, one of the key obstacles to scaling up investments and supporting decarbonization and circular economy goals.  

With regards to reducing external dependencies, circularity is considered one of the key tools to be leveraged by the EU. Draghi therefore recommends to establish a true Single Market for waste and circularity. While he puts a special focus on critical raw materials, he also underlines that the effective enforcement of existing legislation on waste collection and shipment will be key to build-up scale and deliver a Single Market for secondary raw materials. He also stresses the importance of boosting R&I for alternative materials or processes. 

It is worth noting that EU waste and packaging legislation is one of the three regulatory examples referred to by Draghi in making the case for the need of rules simplification. In particular, he cites the burden put on companies due to heavy and complex regulations and extra burden due to additional national measures and Member States ‘gold-plating’ EU legislation, as well as diverging implementing requirements and standards in different Member States. 

The messages and recommendations to relaunch growth and competitiveness are clear. The next steps will be to see to what extent they will be reflected in the Clean Industrial Deal to be presented by the European Commission. This was initially announced for publication within the first 100 days of the election of President Von der Leyen back in July. As that mark has now been hit, it is expected that it should soon be unveiled.