Europe needs to invest €750-800 billion per year, not far from 5% of the bloc's total gross domestic product, or else face "a slow agony" of losing more economic ground to the US and China, according to a European Commission report from Mario Draghi.
The 400-page competitiveness report, commissioned a year ago from the former European Central Bank president and Italian prime minister, calls for a coordinated industrial policy as well as a massive increase in investment that far eclipses the Marshall Plan post WW2, which amounted to just 1-2% of GDP.
Draghi's report proposes a "new industrial strategy for Europe", he said, with 170 different topline proposals, including closer coordination between European countries and faster decision making.
He said there were three main areas of action to "reignite growth":
- Europe must focus on closing the innovation gap with the US and China by fostering technological advancements and scaling companies.
- Decarbonisation can drive European growth, but only with coordinated policies that balance competitiveness and reliance on external markets.
- Europe needs to enhance security, reduce dependencies on foreign suppliers, and develop a unified foreign economic and defence strategy.
Europe’s fragmented regulatory landscape has also hindered innovation, he said, which he blamed for significantly hampering the scaling of young tech companies.
Burdensome procedures and inconsistent national regulations deter innovation, placing European firms at a disadvantage compared to their US and Chinese counterparts.
"Regulatory barriers constrain growth in several ways... complex and costly procedures across fragmented national systems discourage inventors from filing Intellectual Property Rights (IPRs), hindering young companies from leveraging the single market," he said.
"The net effect of this burden of regulation is that only larger companies – which are often non-EU based – have the financial capacity and incentive to bear the costs of complying."
And, as we have seen in recent months, the EU has been working hard to protect consumers from larger non-EU companies, such as Apple and TikTok.