“These events – Ukraine, customs duties, etc. – have put an end to any illusion that the economic dimension alone would be able to guarantee any form of geopolitical power.”
This terrible observation by Mario Draghi reflects two aspects
↪️ Europe’s economic power is no longer sufficient to guarantee its ability to exist.
↪️ Europeans’ skepticism about being able to influence world affairs.
The world has changed and Europe must transform itself and adapt its institutional framework to this new order.
Two major dimensions
↪️ The roles of markets and the state have been reversed. The state no longer stands aside for the market, since industrial policy has become the norm.
↪️ Compliance with the rules is no longer what it used to be, Europe is caught off guard. Military intervention and economic coercion are new weapons to defend a country’s interests.
Europe must reinvent itself. This collective and institutional shift must enable it to regain its ability to influence world affairs.
Three economic dimensions to this:
1️⃣ The internal market must become more efficient. Non-tariff barriers limit the ability to take full advantage of its very large size. This is also a way to create European champions.
The looming challenge of military spending (€2 trillion by 2031) will only be effective if calls for tender do not disadvantage European companies. Mario Draghi explains that these customs barriers on industrial equipment are equivalent to customs duties of 64%. It’s no surprise, then, that foreign companies benefit more than European companies.
2️⃣ The second dimension is technological. Draghi makes the same diagnosis as a year ago in his famous report, but emphasizes the collective dimension. Semiconductors are at the heart of the technological revolution and must be the subject of massive European spending. The scale must be that of Europe to have assets comparable to those of China and the United States. A single state does not have sufficient means.
3️⃣ Financing must be collective. Defense, energy, disruptive technologies, and the climate are European common goods. They must be able to be financed collectively with a common debt. We must rethink collective financing, which today focuses too much on fungible expenses and not on investment. Defense and technology will create room for maneuver and productivity capable of both paying the cost of debt without impoverishing ourselves and improving collective income dynamics.
Draghi calls for a collective transformation of Europe. From Macron to Georgia Meloni, including Pierre Dupont and Karl Schmidt, all Europeans must work together to achieve this.