EUROPEAN MEMBER STATES will need to “sacrifice” their relationships and reliances on multinational companies in order to boost productivity and scale in the European single market, former Italian Prime Minister Mario Draghi has said.
Draghi, an economist and former President of the European Central Bank, said individual European countries are “too small” to be able to cope with the current economic challenges and have to ditch “uncoordinated” markets to survive.
These recommendations are just a few the Italian picked out in his address to the Bruegel economic think tank in Brussels today, where he was discussing his recently published European Commission report.
The report, published earlier this month, proposed a vision for the future economic strategy of the EU – that is likely to be used as a playbook for the next European Commission – in which he called for more unity in the EU single market.
Speaking today, the economist reiterated that more needs to be done by individual member states if the EU wants to continue to deliver on its values and keep up with competitors such as the US and China.
He added that changes in the political climate have impacted efforts to increase productivity in the EU single market – meaning doing so was more important than before.
There has been some hesitancy to accept the report, notably from politicians in France, as some member states’ governments believe integrating their individual markets with European peers would not benefit citizens in the short term.
Meanwhile in Ireland, the multinational sector is a major driver in the local economy.
Draghi, however, put to the European Commission that his plan would secure the EU’s role as a major economic super power and reduce the reliance on foreign investment and multinationals.
He said the key to doing this was to integrate the single market so individual economies – like Ireland – embraced its small and medium businesses more. He also suggested that red tape and regulations are constricting local businesses’ growth.
“We save a lot. We have tons of money,” Draghi said. “What we don’t have is scale and that is hampered by cross-national boundaries and cross-national regulation.”
In his long-awaited report this month, Draghi set out that an €800 billion cash boost was needed for the European market to compete alongside competitors such as the United States and China.
Core to his report was productivity and integration, which he outlined again in Brussels today. This included recommendations to have fewer restrictions on sectors such as technology and medicine and to fund projects through common borrowing schemes.
Today Draghi added that this would have to include “trade offs” for individual markets and allow for small and medium businesses to expand into the EU.
Some plans have already been tabelled for this, such as the Capital Markets Union – which would create a more level-playing field for small businesses in Europe to avail of investment from elsewhere within the EU.
Complementing this, Draghi reasoned today that individual countries are too small to compete with larger markets by themselves.
He added that the “uncoordinated” nature of the European economic playing field, where member states have their own individual economies that trade freely between other member states, creates “fertile ground” for protectionism.
He said that countries need to focus on including their European partners instead of creating “national champions” and sacrifice local competition for state aid between indigenous businesses and multinationals for a European model instead.
Draghi added: “We must be ambitious, we want to strive for innovation.”
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