Politico: Draghi prepares his economic ‘manifesto’ for Europe’s future – Economist Post

Mario Draghi is preparing for something big. In the coming weeks, the former Italian prime minister is expected to offer a vision on how to increase the EU’s productivity and maintain its competitiveness in an increasingly “difficult” global economy, Politico reported.

As he noted, citing a person familiar with the contents of Draghi’s report, the Italian will call for comprehensive policy tools to accelerate innovation.

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“Other regions no longer play by the rules and are actively designing policies to strengthen their competitive position,” Draghi said in a recent speech to his European colleagues.

He said the EU should pursue its own industrial policy, which could mean more subsidies, more tariffs, more mergers in some sectors to create larger and more globally competitive companies, and better policy coordination between the countries that make up the bloc.

Draghi report

Credited with saving the euro as head of the European Central Bank and then helping to revive the Italian economy as caretaker prime minister after the pandemic, “Super Mario” is an unusually highly respected figure in Europe and a rare leader who has largely managed to excel. Politico reports on the partisan politics of By not belonging to a party.

The reason is that such reforms must overcome a number of bureaucratic, political and financial obstacles to take place. Without a push from someone like Draghi, any comprehensive economic reforms may fail before they even begin.

“He will have to convince heads of state and government in Europe of the strength of his arguments,” said Sander Tordoir, chief economist at the Center for European Reform who previously worked at the European Central Bank during Draghi’s presidency. I think this is the main reason he was asked (i.e. writing the report).

The person familiar with the report cited by Politico said it would assess weaknesses in Europe’s competitiveness with the aim of improving coordination between EU member states, a trade policy that would reduce the bloc’s geopolitical risks and development of the defense industry, among other things. .

If Draghi’s efforts succeed, such policies could further diversify transatlantic relations at a time when the United States is trying to create safer supply chains, attract investment and combat climate change.

There is of course the China factor, with Beijing increasing its subsidies for all sorts of goods (perhaps in response to rising youth unemployment) and flooding global markets with the resulting output. The United States and European Union countries agreed last week in the Group of Seven to jointly confront China over this excess capacity.

What is the United States waiting for?

Biden administration officials told Politico that Draghi’s proposals could have significant benefits for Americans.

They portrayed EU efforts to boost European productivity and increase investment in green technology as positive for the United States and the planet. For example, supply chains built by allied nations can be useful when Washington seeks reliability and security.

“Every country deserves the opportunity to build a clean energy economy that protects its citizens and supports long-term growth,” John Podesta, a senior adviser to President Joe Biden, said in a speech the same day as Draghi.

Politico points out that the United States has reason to believe that Europe will not pose a significant threat to its economic situation. Each EU member state has its own tax and spending policies, making it more difficult to coordinate clean energy tax breaks and subsidies, such as those sought by the United States. The European Union also does not have the same ability to borrow money together as the United States.

However, it would be beneficial for the United States to think proactively about how to coordinate with the EU in a way that advances its domestic goals, Politico adds. This may mean following rules governing how subsidies are used. It may also mean that it will have to tailor trade policies to work more seamlessly with European policies, and take into account spillover effects on smaller, poorer countries.