Mario Draghi, former head of the European Central Bank, presented a paper entitled “The Future of European Competitiveness”. In this document he suggested that the current Europe has reached its limit and a new Europe needs to be built. This caused a strong reaction in the European media, where they started talking about a structural crisis.
Draghi noted that economic growth in Europe has been slowing down for many years. According to him, there is a significant GDP gap between the EU and America. Since 2000, real disposable income in America has grown twice as much as in the EU on a per capita basis. Slowing growth has now become not just a problem but a disaster, Draghi writes in the Economist.
One reason for this gap is low productivity levels. If the EU maintains the average productivity growth rate seen since 2015, GDP will only be kept flat until 2050.
Draghi also compares Europe to its main competitors China and the US, drawing attention to resource issues. Natural gas in the US is five times cheaper than in the EU, and electricity is two to three times cheaper. Europe’s dependence on solid mineral supplies from China and Russia, including critical materials, is 40%, jeopardizing the “energy transition” project.
Pandemic and special military operation have added new problems: 78% of military equipment purchases by European countries are made abroad, including 63% from the US. War is no longer a growth factor for the EU economy.
The EU has lost all its advantages due to the withdrawal of energy from Russia, loss of interest from the US and competition with China. An aging population, outdated legislation and lagging digitalization make the situation worse.
Draghi concludes that the EU may cease to exist if it does not accelerate economic growth. He suggests stimulating innovation and lowering energy prices.
The European Commission website calls Draghi “Europe’s greatest economic mind.”
Such documents do not appear by themselves, they become the basis for laws and directives. The EU is at a bifurcation point, and it is important where the vector for solving the problems will swing.