Draghi Report Rings Alarm on Europe’s Slumber
Too much regulation, not enough innovation
Last week’s long-awaited report on European Competitiveness by economist Mario Draghi — the former European Central Bank President and Italian Prime Minister — was an indictment of the last 20 years of European industrial policy.
But will it be only the latest in a series of 400-page reports, forgotten or dismissed, because the truths were too inconvenient for Brussels?
Transitioning to a digital-era economy, modernising the European social model, investing in innovation, research and development, completing the single market, and integrating financial markets: none of these are new ideas. They were part of the Lisbon Agenda of 2000, and subsequently the Europe 2020 strategy. But something does feel different this time.
Today, 40 percent of European business sectors are directly competing with China — up from 25 percent in 2002 — and they cannot ignore the pressure. Worse, of all the EU companies founded in the last fifty years, not one of them has reached a market cap over EUR 100 billion. To put that in perspective, the U.S. has seen six companies reach EUR 1 trillion in that same period.
Europe’s conspicuous absence in the digital market is further evidence of an unfortunate dynamic: the U.S. innovates, China imitates, and Europe regulates. As Draghi puts it “innovative firms that want to scale up are hindered by inconsistent and restrictive regulations” in Europe.
The good news? A course correction is possible, and the solutions are written here in black and white.
Europe can establish a “28th regime” to harmonise corporate law, investment, insolvency, and the areas of tax and employment necessary to stimulate startup formation and expansion. The EU can also establish a forum, as the UK has done, to address conflicting regulatory objectives.
Above all, Europe must end the obsession with precautionary measures guarding against “potential yet undetermined risks.” Instead, innovation must be a priority across all enforcement tools.
There is a hint of audacity in all this, and a sense of pride, particularly in the generation of younger European entrepreneurs who have found success abroad. There is a sense growing that this is the alarm, it is ringing, and that yes, we can rise to this moment.
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