EU launches “urgent” reforms after Trump election

Economic reforms in the European Union have become “even more urgent” with the election of Donald Trump in the United States, Mario Draghi warned on Friday as he presented his proposals to the leaders of the Twenty-Seven meeting at a summit in Budapest.

The former Italian Prime Minister published a report at the beginning of September to revive growth in a Europe that is falling behind the United States.

“The recommendations of this report were already urgent, given the economic situation in which we find ourselves today. They have become even more urgent after the American elections,” he declared on his arrival in the Hungarian capital.

“There is no doubt that Trump's presidency will make a big difference in US-European relations,” he added.

The American billionaire has promised to tackle the EU's trade surplus by taxing imports of European products.

If it does not make radical changes, the EU will experience “a slow death”, Mario Draghi had already warned in September.

Europe must revive its growth through massive investments in digital innovation, the green transition and defence industries, he believes in his 400-page document.

Competitiveness is at the heart of the second term of Ursula von der Leyen, the president of the European Commission reappointed this summer, which promised to draw inspiration from Mario Draghi's conclusions.

However, between divergent interests and ideological disagreements between member states, the success of the project is anything but guaranteed.

Largely inspired by French ideas supported by President Emmanuel Macron, the text has raised some reservations in Germany.

It contains “many improvements and innovations that (Europe) needs”, Chancellor Olaf Scholz said on Friday, without however evoking a sense of urgency.

“This is a moment of strategic awakening for Europeans with what is happening in the United States”, said French Minister for Europe Benjamin Haddad, referring to “a great convergence” of views between the Twenty-Seven.

– A wall of investments –

European Commission President Ursula von der Leyen arrives at the European Political Community summit in Budapest on November 7, 2024 © AFP – Ferenc ISZA

The picture painted by Mario Draghi is bleak: Europe is suffering an economic decline in relation to the United States and is dangerously increasing its dependence on China for certain strategic raw materials and technologies. Per capita income “has increased almost twice as much in the United States as in Europe since 2000,” he emphasizes.

The former president of the European Central Bank estimates the investments needed on the Old Continent at between 750 and 800 billion euros per year, more than the United States' Marshall Plan that supported the reconstruction of Europe after the Second World War.

This investment wall is an immense challenge for the 27 EU countries at a time when they are trying to reduce their debt and budget deficits.

“The Draghi report is an excellent basis” for work, said the President of the European Council, Charles Michel.

EU leaders recognise “the urgency of decisive action”, in a draft text that takes up the main avenues put forward by Mario Draghi: deepening the single market, capital markets union, implementation of a trade policy that defends European interests, regulatory simplification…

But they remain vague on budgetary issues.

The Twenty-Seven recognise that it will be necessary to mobilise “both public and private funding” and affirm their desire to “explore all instruments and tools”, a controversial mention that has given rise to lengthy talks.

Germany and other “frugal” countries have in fact ruled out any recourse to new common debt, despite the success of the historic €800 billion post-Covid recovery plan initiated in 2020.

They could, however, consider public financing via the European Union budget or increased recourse to the European Investment Bank.

The emphasis will be on private financing by mobilising European savings towards the needs of businesses and by breaking down the national barriers that prevent the creation of a true internal financial market.

Beyond the Budapest declaration of principle, member countries risk getting bogged down in endless debates. In addition to the problem of financing, their interests diverge on the capital markets union, a real red herring at European summits. The creation of a telecoms, energy or defence industries union has also been blocked for years.

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