Former ECB chief Draghi calls for mega investments to make Europe competitive

Former President of the European Central Bank (ECB), Mario Draghi, is calling for immense investments to get the European economy back on track. According to a report by Bloomberg, Draghi sees the current economic challenges as an “existential threat.”

Draghi then stressed the need for advanced technologies, climate protection measures and better safeguarding of critical raw materials such as scarce rare earths.

EU must massively increase investments to stand up to USA

Draghi points out that the EU's economic growth is “permanently slower” than that of the US. Bloomberg reports that Draghi is calling for investments of around five percent of the EU's GDP to transform the economy. He warns that Europe cannot achieve its ambitious goals without increasing productivity.

The EU is the second largest region in the world in terms of economic output. According to Statista, its GDP (gross domestic product) reached around 16.97 billion euros in 2023. The USA is ahead of the EU with 27.4 billion dollars (24.7 billion euros).

According to the news agency dpa, many in the EU fear that these companies could be left behind. Another report this year noted: “While per capita GDP in the US rose by almost 60 percent between 1993 and 2022, the increase in Europe was less than 30 percent.”

Need for action in telecommunications and government support

According to Draghi, consolidation of the telecommunications industry is necessary to enable higher investment. Bloomberg quoted Draghi as saying that EU competition policy must be adjusted to promote innovation. In addition, he is calling for a relaxation of state aid rules in strategically important sectors.

According to the report, Draghi underlines that European industry, especially the automotive sector, is lagging behind China. According to Bloomberg, the EU's four largest emissions-intensive industries alone will need 500 billion euros to decarbonize over the next 15 years.

USA moves forward with “Inflation Reduction Act”

Draghi's demands are also a reaction to US President Joe Biden's subsidy program called the “Inflation Reduction Act” (IRA). According to the DIHK, it has a volume of 738 billion dollars (665 billion euros).

With high subsidies, the USA is blocking important industries in its country, such as chip production and the construction of electric cars. The tax incentives alone amount to around 270 billion dollars. The prerequisite for receiving the state funds is the development of production in the United States. This provoked massive criticism in the euro and the EU.