European Economic Policy

€800 billion a year. That's the price tag Mario Draghi says Europe must meet to stay competitive with the US and China. As an investor and sustainability entrepreneur, reading the Future of European Competitiveness report was eye-opening. It's clear that Europe has to close the innovation gap and invest boldly in clean energy and digitalisation, but this is only part of the challenge. Draghi emphasises that radical change is necessary to prevent the EU from becoming less competitive on the global stage. Here are a few key points from the report that resonate with me, both positively and with concerns: 👉🏻Scaling EU Companies: Draghi highlights that Europe is failing to scale its companies, which limits our global competitiveness. We have incredible innovation happening here, but the lack of support to take these companies to the next level is a major issue. 👉🏻Investment in R&D: The report points to underinvestment in research and development. If we want to remain at the forefront of sectors like clean tech and mobility, we need much more capital flowing into R&D, especially in emerging technologies like AI and renewables. 👉🏻Venture Capital: Draghi's report underscores the urgent need for more venture capital across Europe, a core message I strongly support. We need greater acceptance of venture capital as an asset class, especially in Germany, where the market remains risk-averse. This lack of funding pushes our most innovative companies to scale up elsewhere, particularly in the US. Europe needs to step up to provide the environment needed for startups to thrive and grow right here at home. 👉🏻Common Debt: The idea of joint EU borrowing for green and digital projects is essential to remain competitive, especially in areas like clean tech and mobility. This is a necessary step to unleash the full potential of the sector. 👉🏻The China Challenge: Europe's reliance on China, particularly in clean tech, needs to be rethought. I've seen firsthand how fierce the competition is in the electric vehicle space. While Draghi stresses reducing dependencies, I do think we must be cautious of the economic disruptions a rapid decoupling could cause. 👉🏻Streamlining Policy: Entrepreneurs are struggling with the slow pace of European decision-making, especially in green tech. We risk losing our competitive edge if we don't accelerate policy change. Europe has an incredible opportunity, but it requires bold action. Do you think Europe is ready to rise to the challenge, or will bureaucracy stand in the way? Let's discuss in the comments... #Draghi #Innovation #Sustainability #CleanEnergy #VentureCapital #Investment

This week, Mario Draghi submitted his seminal report on European competitiveness to the EU's political leaders. I hope its findings will shape the agenda of the next European Commission and across European capitals because its core message is one that I believe is essential: Europe needs to boost private and public investment in security and the digital and green transition to ensure future competitiveness. The report confirms that the EU was late to #digitalization and is still not reaping the enormous benefits it offers in terms of #innovation, productivity, and growth. But it also clearly shows that Europe can quickly catch up by adopting proven, state-of-the-art solutions – and that's where Europe should be heading now. Thoroughly adopting cloud solutions in the private and public sector would go a long way already to #modernizing our companies, societies, and governments. We'll get there much faster when we unify fragmented digital markets (across the EU27, as well as inside key countries such as Germany) and by putting digitalization at the top of the political agenda. This will lay an important foundation for our ambitions to catch the next big opportunity for Europe and become a world leader in #AI for industrial applications.   The Draghi Report offers a blueprint for the future – now it’s up to us to take its findings seriously and implement the best recommendations at speed and at scale.  https://lnkd.in/epJaDJQk

As Mario Draghi’s report released today demonstrates, the EU is falling behind global rivals because of limited innovation. Since 2019, the EU has created over 100 pieces of digital regulation. Whether you’re a technology startup or a small retailer, regulatory complexity is a minefield. Developing, launching or just using technology is harder in Europe than elsewhere in the world. Of course, “anything goes” is not an option and rules are required - but the EU is holding itself back at a time where it could be thriving. Our research with Public First shows that generative AI alone could add €1.2 trillion to the European economy. Much of Google’s innovation is led from Europe. We work with talented European entrepreneurs, businesses and innovators every day and see first-hand the benefits that the single market could yield for them. But a new approach is needed if Europe is not to miss the moment. Here’s what needs to change: 1️⃣ Shift from regulatory growth to economic growth: Europe doesn’t just create a huge number of regulations related to digital society - the regulations they create are often conflicting, untested and inconsistently implemented. The explosion of rules makes it almost impossible for Europe to create and nurture the next tech unicorns. Draghi is right that the EU now needs to focus on enabling innovation: promoting the use of digital technologies to innovate and drive through breakthrough advances. 2️⃣ Invest in R&D: To compete in AI, the EU needs to prioritise research and development, working with the private sector to incentivise it and make funding more accessible. The EU currently lags behind the US, Israel, South Korea, Japan, the UK and China on R&D investment. Without the right incentives to develop and roll out new technology, Europe is stifling its talent. 3️⃣ Build the right infrastructure: AI breakthroughs are only possible with the right computing technologies and data centres - plus the renewable energy to run them. So the EU needs to allocate more funding towards financing such infrastructure, as well as incentivising and enabling the private sector to do the same. 4️⃣ Prioritise skills & education: People will need support to seize the benefits of AI in their work and life. A revitalised European Skills Agenda should put skills and education at the centre, while AI should be added to school curriculums. Google wants to help Europe seize the benefits of innovation. Over the last decade, we’ve worked hand in hand with Governments to build new technology responsibly; train over 13 million Europeans in digital skills; and support over €179 billion in economic activity across the EU. As a European, I’m proud of this work, but I know there’s much more to do. Read Draghi’s report here: https://lnkd.in/epBxtymw

The headline that caught my eye this week was “Why the Draghi Report on EU Markets Matters.” Here's my take:   European productivity growth has lagged that in the United States over the past 15 years, and higher energy prices (following Russia's invasion of Ukraine) and complexities involving China as an export market have exacerbated Europe's economic challenges. On my recent trip to Europe, these issues (along with the U.S. election) were top of mind for business leaders. I have long admired Mario Draghi, whose career has spanned government, business, and academia, and who approaches complex issues with rigor and pragmatism. Draghi recently authored a lengthy report on how to boost productivity in Europe. His diagnosis: the EU is falling behind in the digital revolution, missing the AI wave, and struggling with fragmented capital markets that push promising startups toward US venture capital. The proposed solution — €800 billion in public investment, a stronger, centralized securities regulator, and a shift in attitudes on anti-trust policy — makes eminent sense and represents the type of boldness required. But implementing these reforms would require significant treaty changes and convincing member states to cede control of their financial markets to a European authority.   The reality is that while Europe needs this "radical change," the political appetite for such substantial reform is currently limited. But Europe can't escape its critical choice: maintain the status quo, with subdued growth prospects, or overcome political hurdles to forge a more competitive future. 

Revitalizing productivity growth is an “existential challenge” for Europe, as highlighted by Mario Draghi in his recent report. 📈   And he's absolutely right. Productivity in the USA has risen almost twice as much as in the major European economies over the last three decades. Most recently, the value added per hour was USD 60 in the Eurozone versus USD 74 in the USA. This productivity gap largely stems from Europe's failure to fully embrace the digital revolution. In fact, out of the 50 largest technology companies today, only four are European, while the USA and China continue to extend their lead in emerging technologies like AI.   Given the worsening demographics, boosting productivity should be a top priority for Europe’s competitiveness. Productivity gains are not only crucial for driving technology leadership and environmental stewardship, but also play a vital role in ensuring Europe's strategic sovereignty on the global stage.   Draghi calls for the EU to invest €750 to €800 billion annually – around five percent of its GDP – by using common bonds as a funding mechanism, similar to the pandemic recovery fund (NGEU). And how can European companies take action? Our latest study breaks it down into four levers:   ➡️ Strategically managing the workforce ➡️ Embracing AI adoption ➡️ Optimizing capital efficiency ➡️ Evaluating and potentially reconfiguring sources of capital   Check out the full analysis here: https://lnkd.in/ekEQknzF   #RolandBerger

🔍 Three Key Aspects of the Draghi Report on European Competitiveness Professor Mario Draghi's recent report on European competitiveness has sparked significant debate within the EU, especially in Germany. Here are the three aspects of the report that stand out: Germany's Role in the EU's Industrial Future A pressing point in the report concerns the challenges facing Germany, Europe's industrial powerhouse. With stagnating productivity, an aging population, and lagging digital innovation, Germany is at a crossroads. Draghi urges the country to rethink its growth model and actively engage in a coherent EU-wide industrial policy. Many in Germany fear that an EU industrial strategy would be a burden. However, the report argues that this concern is unfounded. Countries like Germany can benefit significantly from such a strategy by investing in digitalization, infrastructure, and sustainable energy. By realigning its economic strategy, Germany can secure its own competitiveness and act as a catalyst for a more resilient European economy. Competition as a Catalyst for Innovation A compelling aspect of the report is its emphasis on the relationship between competition and innovation. While some argue that strict competition policy could stifle innovation, the report demonstrates that competition actually acts as a catalyst for innovation. One proposal is to allow merging firms that are not dominant to justify their merger by proving it will enhance innovation. This approach strengthens the role of innovation in competition assessments while preventing potential abuse. Finding this balance between fostering innovation and ensuring fair competition is crucial for the future of the European economy. Strategic Use of Resilience and State Aid The report also advocates for integrating resilience into competition policy more strategically. In sectors like medicine and semiconductors, where supply shortages pose a risk, resilience must be a key consideration. The proposal to establish a separate agency to assist competition authorities in matters of security and defense is an innovative way to manage these complexities. Equally significant is the push for European-level subsidies instead of national state aid. This approach aims to minimize market distortions and strengthen the single market by using EU funds to support research and development and tackle coordination problems. By adopting a more strategic use of state aid, Europe can enhance its competitiveness while avoiding market distortions. 🚀 Conclusion: The Draghi report is both a wake-up call and a roadmap. For Germany and other member states, it is time to view current challenges as opportunities and work together toward a competitive and future-ready EU. Fiona Scott Morton Giorgio Monti Jacques Cremer Rupprecht Podszun Daniela Schwarzer Lucas Guttenberg Sander Tordoir Nils Redeker Tom Nuttall Hans von der Burchard

As anyone following EU affairs could not avoid notice, Mario Draghi unveiled his long-awaited report today. He touched upon various issues, but digital technologies in general and AI in particular stand out as a make-it-or-break-it matter. Here is what you need to know. The report's focus is on Europe's competitiveness. For Draghi, the origin of the productivity gap between the EU and the US that started to widen in the mid-1990s is explained mainly by Europe's failure to capitalize on the first digital revolution driven by the internet. Several structural problems are pointed out, particularly those related to access to capital and fragmentation of the single market. However, the most daunting criticism for Brussels is "inconsistent and restrictive regulations" that burden SMEs and innovators. Draghi notes that "while the ambitions of the EU's GDPR and AI Act are commendable, their complexity and risk of overlaps and inconsistencies can undermine developments in the field of AI by EU industry actors." A slap in the face for EU policymakers who boast the 'Brussels effect.' Very harsh words at the press conference as well. "With this legislation, we are killing our companies," Draghi said, pointing out that regulation favors large players since SMEs have fewer resources for compliance. To mitigate this regulatory burden, Draghi suggests harmonizing national AI sandbox regimes, simplifying the implementation of the GDPR, and avoiding contradictions between the two landmark laws. Potential regulatory hindrances should also be regularly assessed. The report recommends the adoption of an EU Cloud and AI Development Act to enhance computing infrastructure and AI capabilities and launch plans to integrate AI models in strategic sectors vertically. Draghi details how he thinks these verticals should be developed, as he sees them as vital for Europe's industrial players to stay competitive. The overall coordination is assigned to a 'CERN-like' AI incubator, an idea that emerged from the EU chief scientific advisors. The report goes one step further and proposes the launch of 'quasi-pilot lines' to bring together the relevant market actors to develop sector-specific AI models. Grand challenges are also envisaged to fast-track translating scientific findings into industrial applications. To sum up, for Draghi, Europe needs to get back into the tech race with the US and China, and the 'AI revolution' is a key opportunity that should not be missed. "A window has opened for Europe to redress its failings in innovation and productivity and to restore its manufacturing potential."

🇪🇺 🌍 As a committed European, I am happy to see that the European Union is putting some serious analysis and thinking into the question how it can strengthen European competitiveness. This week’s Draghi Report is a milestone, outlining a forward-looking approach to this question.   Highlighting the importance of #digitalization and #cloud solutions to modernize the private and public sector, the report resonates with SAP’s vision for Europe’s digital future and presents clear recommendations for implementation:   ➡️ Innovation Gap: The report proposes an overhaul of the innovation lifecycle to eliminate barriers and scale up European innovation. ➡️ Regulation: A reassessment of EU regulatory frameworks is suggested to foster a vibrant tech environment. ➡️ AI and Cloud: The report emphasizes the importance of sovereign cloud and #AI and underscores the potential to secure European leadership in critical tech domains. ➡️ Investment Capacity: The report calls for increased EU funding, national resources, co-financing instruments and common safe assets to facilitate joint investment projects among Member States.   Eager to see how the findings will contribute to a robust roadmap for Europe’s economic resilience and growth. 💡   https://lnkd.in/eupUhEjN

How can Europe become more competitive in an increasingly fragmented global economy? How can we drive strong innovation in a region with many mature economies and stagnating population growth to win market share? How can we work with Europe’s policymakers to achieve scale across the EU and meet our shared objections like the ongoing net zero transition? These are questions I hear clients in Europe are asking.   As the new European Commission begins its five-year term, this week saw the publication of Mario Draghi’s long-awaited report on European competitiveness. “A future of European Competitiveness” proposes a new and bold strategy and should serve as an important starting point for enhanced dialogue and action with business leaders across the continent.    Draghi’s report has a heavy focus on two of the areas that we at BCG see as the most pressing for businesses globally: AI and decarbonisation. From developing EU-based AI systems to accelerating the energy transition through increased financial resource, there are plenty of recommendations which should be of interest for EU business leaders.   I (and likely many of our clients) are looking forward to seeing how the report’s recommendations get translated into action as the new European Commission starts to build its next five-year policy roadmap. A must read for anyone interested in Europe’s competitiveness at a micro and or macro level.   It is easy to play into the narrative of Europe falling behind economically and technologically. But I see a continent full of opportunity. Now it’s time to seize it.     https://lnkd.in/eh65txgX

Hope or illusion for the EU? 🌍 After many months of waiting, the #EU has finally announced the publication of Mario #Draghi's report on the future of EU #competitiveness (https://lnkd.in/d4VZCWqi) 📉 Draghi #warned of the EU's #declining role in the global ecosystem and the urgent need to act swiftly and effectively to secure the Union's future. "Never in the past has the scale of our countries appeared so small and inadequate relative to the size of the challenges," Draghi wrote in the #report. 💶 In a historic piece of analysis, he highlights the need for €750bn-€800bn in additional #annual #investments, equivalent to 4.4-4.7% of the EU's #GDP, financed not only through #private #investments but, more importantly, through new #public #debt. 🌟 I see in Draghi's report the very vision I #dream for the EU—a remarkable creation, one of the most incredible achievements of all time, and a place I proudly call #home after having visited many of its diverse countries. 🚧 At the same time, I feel Draghi's recommendations may quickly hit the wall of #populist and #fragmented #politics: - 🇩🇪 #Germany and other fiscally #conservative EU countries will likely reject additional public debt, still clinging to the belief that austerity and discipline drive progress (ironically, Germany is currently the worst-performing major EU economy in post-COVID growth). - 🇫🇷 While #Macron admires Draghi, adopting the report's recommendations may further exacerbate internal tensions and increase support for Le Pen, fueling the rise of the far-right in #France. - 🇮🇹 In #Italy, #Meloni, a staunch critic of Draghi's ideas, would struggle to explain to her allies and citizens why Italy should cede more power to the EU—an institution viewed unfavorably by many Italians. I sincerely hope I am wrong. In the meantime, I must express how proud I am that the two most pivotal reports shaping the EU's future in the past year have come from two brilliant #Italian #leaders: Enrico Letta and Mario Draghi 🇮🇹 --- I am Carlo Giannone, and I discuss geopolitics and economics every week on my podcast Finanza, pizza e mandolino as well as on my LinkedIn page. Follow us for more insights!