Focus on a common capital market.

On the occasion of the first anniversary of the publication of the Draghi Report on the future of European competitiveness, a conference on the subject was held on 16 September. Former Italian Prime Minister and former President of the European Central Bank (ECB), Mario Draghi, expressed disappointment at the limited progress achieved so far, though he praised the individual steps taken by the European Commission in the meantime. He particularly criticised the pace of reform and the lack of willingness to pursue it. The EU must deliver results in months, not years, and be prepared to make radical changes. Competitiveness, the removal of barriers to investment and the internal market as a key sales market for European products must be at the top of the European agenda.

Common capital market

While European Commission President Ursula von der Leyen pointed to the progress made, Draghi criticised the continuing weakness of investment in Europe. Every year, hundreds of billions of euros are lacking for digitalisation, decarbonisation, defence and innovation. He particularly criticised the continuing fragmentation of capital markets, which hampers the creation of venture capital. He also pointed to political blockages against joint financing instruments, as well as sluggish reforms in insolvency and tax law. He warned that without decisive integration, clear financing and the removal of national barriers, Europe risks falling permanently behind in global competition.

Member States in focus

One year after the publication of his report, Draghi criticised the slow implementation and the unwillingness to tackle radical changes. As an example, he referred to the process of introducing a uniform European company form. This would allow businesses to grow and raise capital under the same rules across all member states. Implementation is on the EU agenda. In her speech on the state of the Union, President von der Leyen announced that a roadmap for the single market up to 2028 would be presented in the autumn. However, according to Draghi, the lack of political will in many member states risks the project’s failure. All that would remain then would be a digital corporate identity.

Priority: European AI ecosystem

Draghi also emphasised that Europe must act quickly and decisively and enable economies of scale in order to be competitive in key technologies such as artificial intelligence (AI). Barriers to investment must be removed. In particular, he called for deep cuts to the EU General Data Protection Regulation (GDPR) and for a pause in the implementation of parts of the AI Act – especially the provisions for high-risk applications. This, he argued, would provide European companies with access to data and legal certainty. Both are necessary for AI technologies to be developed competitively in the EU. The Commission is currently examining how the EU AI Act can be simplified. Draghi's demands are likely to bring supporters of a ‘suspension’ of the AI Act in industry and the Member States back into the picture.

Joint debt

Draghi also returned to the issue of joint European debt. According to ECB estimates, the annual investment required has risen from €800 billion to €1.2 trillion since last year. Due to higher defence spending, the public share must also grow more strongly. While joint debt instruments do not automatically expand fiscal space, they do facilitate investment in large projects that are necessary for the EU's competitiveness.

Still no focus on social investment

In his speech, Draghi also mentioned in one sentence the importance of investing in people for Europe's productivity growth and innovative strength. However, his focus remained clearly on a single capital market and the promotion of investment. His approach thus continues to differ significantly from that of the Letta Report, presented in April 2024. The latter emphasises the central role of an effective social protection system and considers social investment to be just as important as investment in research, development and infrastructure.