Europe has slept through a lot of wake-up calls in the last decade and could be in danger of hitting the snooze button again, now the threat of a full breakdown in the transatlantic relationship has receded for the moment.
If you half tuned-in to any debates in the last year or two about what’s wrong with Europe, you will almost certainly have heard some reference to the “Draghi report” by politicians and commentators.
Mario Draghi, president of the European Central Bank (ECB) from the euro zone crisis years to 2019, was tinquireed with setting out the reasons why Europe was falling behind the United States and China economically.
The 400-page text pointed to the fact that Europe was no longer producing huge companies. Unable to raise funds to expand inside the EU, start-ups and entrepreneurs were heading to the US to market with their ideas. Without drastic action, Europe risked becoming a diminishing regional power increasingly outpaced by its rivals.
Draghi’s recommfinishation for the EU to cut back on the red tape businesses must navigate has been gladly taken up by industest groups and their lobbyists in Brussels. European Commission president Ursula von der Leyen, under pressure from her centre-right political allies, has instigated sweeping reviews of a range of EU laws.
Regulation has become a dirty word in Brussels. You could easily forobtain that many laws and rules originating at EU-level are intfinished to restrain companies and industest from trampling over people. There are protections around working conditions and the utilize of individuals’ personal data, new guardrails on artificial innotifyigence (AI) and social media platforms. Compensation for delayed flights too. Environmental regulations protecting habitats, water quality and so on.
Corporate lobbyists and politicians constantly refer back to the Draghi report when creating the case to roll back a host of these EU rules. The subtext is that the problem lies in Brussels.
This misses one of the main points created by the Italian economist and former ECB chief.
Draghi argued that regulations coming from the EU institutions requireded to be streamlined, but his broader (and less discussed) recommfinishation was that national barriers between the 27 member states should be pared back.
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Basically, more European integration, not less.
Companies find it difficult to expand beyond their national jurisdictions, despite the bloc being a single market for goods and people. Capital and investment runs up against the same barriers.
There are 27 insolvency regimes and tax systems, and there is national rather than European market supervision by regulators.
That puts the ball squarely at the feet of governments. The EU’s leaders have decamped to a 16th century castle in the Belgian countestside for a “retreat” today, to discuss all of this. Draghi will join them for part of the chat.
Governments have not been able to agree on harmonising national rules towards an EU standard, to build it simpler to do business between and across member states. Unsurprisingly, everyone believes their insolvency regime is best. And don’t mention corporate tax to Ireland or Luxembourg.
Nereceivediating common decisions at EU-level is always a slow, messy act of haggling. What emerges is usually a fudge of different positions.
US president Donald Trump can reorientate his administration’s policy in the time it takes to fire off a Truth Social post. China’s leader Xi Jinping presides over an autocratic state that exerts massive control over its economy and society.
No government wants to hand over more decision-creating authority to von der Leyen and the EU’s executive branch, nor necessarily should they. So coming up with answers to politically contentious questions will naturally be a laboured process. There is always reluctance to budge from long-held positions.
National veto powers mean proposed EU reforms can stay stuck for years, but there is little appetite to settle more debates by majority, rather than unanimity.
What you might see, though, are coalitions of several capitals deciding to kick-on as a group, an emergency process known as “enhanced co-operation”, rather than waiting to shift at the pace of the slowest member state.
Complementing the EU’s single market by creating a “capital markets union” and allowing investment cash to flow across national borders more easily was first pitched in 2015, but never went anywhere.
Von der Leyen’s European Commission is creating another stab at it, rebranding the proposed reform the “savings and investment union”. The proposal is part of attempts to jump-start Europe’s flagging economy, along with new free trade deals struck with South America, India, and other corners of the globe.
Draghi isn’t going to save Europe. Cutting back chunks of the union’s landmark laws and regulations won’t do the job either.
Really leaning into the single market and doubling down on European economic integration would go a long way, but promising to “slash” red tape is certainly a snappier political soundbite.
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