Mario Draghi has a message for EU leaders: I’ve done my part, now it’s your turn.
Member states praised his proposals for reviving the bloc’s struggling economy when he first put them forward. A year later, they are still dragging their feet on actually implementing them – and Draghi is now taking on the role of instigator.
Europe has implemented only a small part of the recommendations in his plan, which was supported by the European Commission, and which envisages continental investment in infrastructure, a renovated energy grid that would provide affordable electricity for industry, coordinated military procurement to reduce dependence on American weapons, and a single financial sector capable of channeling capital into European technology startups.
Last month, Draghi warned that governments must make the “huge investments that are needed for the future” and that they “must do so not when circumstances become unsustainable, but now, while we still have the power to shape our future.”
Procrastination
It is not the first time the former head of the European Central Bank has issued grim warnings about Europe’s deteriorating prospects. When he first presented his report in Brussels, Draghi spoke of the “slow agony” of decline.
photo: REUTERS
At the time, EU leaders, across the political spectrum, praised the MIT-educated economist’s reform vision.
French President Emmanuel Macron said Europe must “hurry up” in implementing Draghi’s agenda. Spanish Prime Minister Pedro Sanchez backed reforms to avoid what he called the risk of falling behind in the most advanced technological sectors.
Even German Friedrich Merz, who disagrees with Draghi on the key issue of common EU debt, echoed the economist’s words, saying that Germany would “do whatever it takes” to strengthen its defense sector – a reference to Draghi’s now-famous statement from the time of the eurozone crisis.
However, while leaders publicly emphasize that they agree on the need for a more cohesive European Union, behind the scenes the reform agenda is stalling.
“The Draghi report has become the EU’s economic doctrine and everything we have proposed since then is aligned with it,” Stefan Séjourne, the Commission’s executive vice-president in charge of industrial strategy, told Politiko. However, he acknowledged that the “Dragi effect” too often fades once member states start discussing legislative texts.
A report by the European Council for Policy Innovation showed that only 11 percent of Draghi’s plan has been implemented. In the area of energy, not a single measure has been implemented.
“National interests, national policies, sometimes party motives,” said MEP Ana Stirgk, who recently authored a parliamentary study on the energy grid. Speaking at an event marking the anniversary of the Draghi report, the Austrian MEP from the Renewal of Europe group explained that it often comes down to individual countries not wanting to share cheap energy with their neighbours.
“If they connect to countries that have higher energy prices, their prices will go up,” she said. “That’s a fact,” she added.
“The problem is not with the Commission that there is no banking union,” said Spanish economist and former MEP Luis Garricano at the same event, referring to attempts to break up national rules and interests that keep the banking sector fragmented and tied to individual countries. “The problem is with governments that don’t really want to allow capital to flow freely from one country to another.”
This same principle is resurfacing again and again – from joint debt, vetoed by so-called frugal countries like Germany and the Netherlands, to issues of defense or financial sector integration. The situation is not helped by the fact that countries are tightening their belts after the Covid-19 spending surge, leaving little room for strategic goals.
The power speaker
Draghi is a man accustomed to wielding power directly, having injected hundreds of billions of euros into the eurozone economy during his tenure as ECB president. Earlier this decade, he spent more than a year and a half as Italy’s prime minister.
In his latest role as Europe’s “cricket advisor” – a neglected moral admonisher – Draghi has only persuasion at his disposal.
If on the one hand the rapid pace of events diverted attention and bureaucratic resources from the reform agenda, on the other hand it strongly confirmed his thesis. Draghi has long been an advocate of collective sovereignty – meaning that EU member states are more powerful when they act as a bloc, even if they lose some freedom at the national level. The problem is that governments themselves decide whether to act.
Already in February, Draghi, during an appearance before the European Parliament, criticized governments for holding back fundamental changes.
“You say no to public debt, you say no to the single market, you say no to the creation of a capital markets union. You can’t say no to everyone and everything,” he said at the time.
Now, as an intransigent United States once again puts Europe in an awkward position on the world stage, Draghi warns that the window for change may be closing.
The way President Donald Trump outplayed EU negotiators, who were under pressure from national capitals to reach an agreement, was an illustrative example.
It was a “very rude awakening,” Draghi warned at a meeting last month in the Italian coastal town of Rimini.
“We had to come to terms with tariffs imposed by our largest trading partner and long-time ally, the United States,” he said. “The same ally pushed us to increase military spending, a decision we might have had to make anyway – but in a way that probably doesn’t reflect European interests.”
Eyes on Brussels
If Draghi is the brains behind the EU’s economic reform agenda, then the Commission’s bureaucrats are the hands in charge of its implementation.
The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit for this work. It is headed by Heinz Janssen, a German official who previously worked in the Directorate for Economic Affairs, and has a total of eight employees.
Critics argue that this is too small a number for the task force and that the EU executive could have set up a separate directorate. “The President attaches great importance to the implementation of the Competitiveness Compass,” a Commission spokesperson told Politiko, referring to the EU’s plan to implement Draghi’s recommendations.
According to officials who spoke to Politiko, the working group is mainly concerned with achieving concrete results on the ground, pooling resources and directing them towards a few key projects that could give Europe a chance to technologically rival the US and China.
The Commission has merged several programmes into a new €410 billion fund to finance common industrial objectives as part of the budget proposal and will issue a recommendation to governments this autumn to coordinate their investments.
However, this will inevitably cause tensions.
“Can you really imagine a major EU country financing an industrial plant in Slovenia with its taxpayers’ money?” asked one EU official. “There is a lack of ambition… the EU executive has become hostage to some major countries.”
“For years, the European Union believed that its economic strength, with 450 million consumers, brought it geopolitical power and influence in international trade relations,” Draghi said. “This year will be remembered as the year in which that illusion disappeared.”
Translation: NB
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