Il discorso di Mario Draghi per il Premio Europeo Carlo V in Spagna | EUROtoday

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An industrial technique for Europe
Address by Mario Draghi on the event of receiving the Carlos V European Award
Monastery of San Jerónimo de Yuste, 14 June 2024

Your Majesty.
President of the Regional Government of Extremadura.
President of the Assembly of Extremadura.
President of the Board of Trustees of the European and Ibero-American Academy of Yuste Foundation.
Minister of Foreign Affairs, European Union, and Cooperation.
Minister of Economy, Trade, and Business.
High Representative of the European Union for Foreign Affairs and Security Policy and Vice-President of the European Commission.
Vice President of the European Central Bank.
Bishop of Plasencia and friars of the Monastery Community.
Honoured friends and mates.
I want to start by thanking His Majesty King Felipe VI for his exceptionally type phrases. It is a good honour for me to obtain the Carlos V European Award – and in such a historic setting.
This monastery, as the ultimate resting place of the Carlos V, harks again to the lengthy and wealthy historical past of Europe, in addition to the centuries lengthy technique of constructing European unity.
Over the years, our continent has grown older, wealthier and nearer, with a single market of 445 million customers. But immediately we face elementary questions over our future.
As our societies age, calls for on our social mannequin are rising. At the identical time, for Europeans sustaining excessive ranges of social safety and redistribution is non-negotiable.
We are additionally dealing with new wants: adjusting to fast technological change, rising defence functionality and finishing up the inexperienced transition.
And all of the whereas, the earlier paradigm which sustained our shared goals is disappearing. The period of imported gasoline from Russia and open world commerce is fading.
So, if we’re to deal with all these adjustments, we might want to develop sooner and higher. And the primary approach to obtain sooner development is to extend our productiveness.
Europe’s productiveness development has been slowing for a while. Since the early 2000s, per capita GDP at PPP (i.e. adjusted for inner costs) has been about one third decrease than the US – and round 70% of this hole is defined by decrease productiveness.
The distinction in productiveness development between the 2 economies is predominantly right down to the tech sector and digitalisation extra typically. If we had been to exclude the tech sector, EU productiveness development over the previous twenty years can be at par with that of the US.
But the hole might widen additional with the fast improvement and diffusion of synthetic intelligence. Around 70% of foundational AI fashions are being developed within the US and simply three US firms account for 65% of the worldwide cloud computing market.
A sequence of coverage actions are essential to start out closing this hole.
First of all, we have to scale back the worth of vitality. Industrial customers of vitality in Europe at present face a significant aggressive drawback in contrast with their US friends, with costs which might be 2-3 instances increased for electrical energy.
This worth differential is primarily pushed by our delay in putting in new clear vitality capability and lack of pure assets, in addition to our restricted collective bargaining energy regardless of being the world’s largest purchaser of pure gasoline. But it additionally brought on by elementary points with our inner vitality market.
We endure from sluggish and suboptimal infrastructure funding, each for renewables and grids. Underdeveloped grids suggest that we can not match vitality demand even when there are surpluses in some elements of the EU.
We have market guidelines that don’t totally decouple the worth of renewable and nuclear vitality from increased and extra unstable fossil gas costs, stopping industries and households from capturing the complete advantages of unpolluted vitality of their payments. And over time vitality taxation has grow to be an essential supply of finances revenues, contributing to increased retail costs.
These excessive costs are resulting in decrease funding in Europe: final 12 months, round 60% of European firms stated vitality costs had been a significant obstacle to funding – greater than 20 share factors increased than the response of US firms.
And additionally they stand in the best way of creating manufacturing extra digital, as AI is very vitality intensive. The International Energy Agency forecasts that electrical energy consumed by information centres will double globally by 2026, a rise roughly equal to the entire electrical energy demand of Germany.
So, increased productiveness hinges on constructing a real European vitality market.
Next, we have to re-think the innovation setting in Europe. As a share of GDP, European corporations spend about half as a lot as their US friends on analysis and innovation (R&I), resulting in an funding hole of round €270 billion yearly.
The pipeline from elementary analysis into commercialisation of concepts can be a lot weaker. There aren’t any European innovation clusters within the high 10 globally and our universities wrestle to retain high expertise.
The EU subsequently must set R&I as a collective precedence. A standard agenda might embrace strengthened assist for elementary analysis, centred on tutorial excellence, an elevated give attention to disruptive innovation, and a better capability to assist start-ups and assist them develop.
We additionally have to create the situations for innovation to diffuse sooner by way of the economic system. The key elements listed here are enabling European corporations to succeed in optimum scale, in order that they’ve the capability to spend money on new expertise, and reskilling European employees, in order that they will grasp this expertise.
Achieving scale requires eradicating the remaining limitations to cross-border exercise throughout the Single Market, particularly people who stand in the best way of digital diffusion. As an instance, cloud computing in public administration must be framed by a single algorithm.
And competitors coverage must facilitate scale by weighting innovation and resiliency standards in tune with the evolving market and geopolitical contexts – whereas avoiding extreme market focus that raises client costs and lowers high quality of service.
At the identical time, reskilling our workforce would require strengthening training and coaching methods, encouraging grownup studying and facilitating the entry of extremely expert employees from outdoors the EU.
The instance of Sweden – which has a tech sector that’s greater than twice as productive because the EU common – exhibits {that a} robust social mannequin and technological progress should not solely suitable, but additionally self-reinforcing when centered on retraining and abilities.
Financing these varied funding wants will likely be a big problem, and it’ll require us to rethink how we deploy each private and non-private capital.
Compared with the US, not having a federal finances places us at a drawback. For instance, publicly funded R&I is the same share of GDP in each areas, round 0.7-0.8%, however within the US the overwhelming majority of spending takes place on the federal stage, making certain that public funds circulate effectively in direction of nationwide priorities.
In Europe, against this, financing devices are break up between the EU and nationwide ranges – only one tenth of R&I spending is European – with little prioritisation or coordination. And decision-making on frequent tasks sometimes requires a drawn-out legislative course of with a number of veto gamers alongside the best way.
At the identical time, successive layers of regulation have created a burden on long-term funding, as reported by 61% of EU firms final 12 months.
So, there’s important scope for enchancment merely by way of setting clearer priorities, streamlining regulation and higher coordinating completely different financing devices.
That stated, even making public spending simpler is not going to be sufficient. The financing wants for the inexperienced and digital transitions are huge and, with restricted fiscal area in Europe each on the nationwide and, a minimum of to this point, EU ranges, they should be largely offered by the personal sector.
So, we may also have to mobilise personal financial savings on unprecedented scale, and much past what the banking sector can present. The foremost approach to marshal the mandatory funds will likely be by deepening our markets for danger capital, fairness and bonds.
And in areas the place public funding has giant multipliers, akin to spending on grids or R&I, issuing extra public debt is prone to finance itself. Simplifying the European tasks of frequent curiosity and increasing their scope would make them a profitable instrument for rising funding in essential areas.
The paradigm which introduced us prosperity previously was designed for a world of geopolitical stability, which meant that nationwide safety concerns performed little position in financial selections. But geopolitical relations are actually deteriorating.
This shift requires Europe to take a basically completely different method to its industrial capability in strategic sectors like defence, area, essential minerals and elements of prescription drugs. It additionally requires us to scale back our dependencies on nations we will now not belief.
The very first thing we want, subsequently, is a typical evaluation of the geopolitical dangers we face that’s shared throughout member states and might information our response.
Then, we might want to develop a real “foreign economic policy” – a so-called statecraft – that coordinates preferential commerce agreements and direct funding with resource-rich nations, the build up of stockpiles in chosen essential areas, and the creation of business partnerships to safe the availability chain of key applied sciences.
For strategic sectors, the identical measures I’ve already described associated to innovation, scale and abilities will significantly assist. But as a few of these sectors are ranging from years of underinvestment, they may also require a coordinated method in direction of demand.
For corporations to ramp up funding and enhance capability, Europe will needn’t solely to extend the extent of demand by way of increased spending, but additionally to make sure that it’s concentrated inside our borders and that it’s aggregated on the EU stage.
The most effective approach to generate this demand can be by way of rising frequent European spending. But within the absence of such a centralised method, we will obtain lots by coordinating public procurement insurance policies extra carefully and making use of extra express native content material necessities for EU-produced merchandise and elements.
This demand focus and aggregation may also enhance the efficacy of public spending by lowering duplication and rising interoperability, particularly for army tools. And it’s going to match the insurance policies that our geopolitical rivals apply.
The paradigm which introduced us prosperity previously was additionally one through which world commerce was ruled by multilateral guidelines. But now these guidelines have gotten much less and fewer binding, and the most important economies are more and more working unilaterally.
We don’t wish to grow to be protectionist in Europe, however we can’t be passive if the actions of others are threatening our prosperity. Even latest US selections to impose tariffs on China have implications for our economic system by way of the re-direction of exports.
The problem we face is that, in contrast with the US, we’re extra weak each to inaction on commerce and to retaliation. The manufacturing sector in Europe employs two and half instances as many individuals as within the US. And greater than a 3rd of our manufacturing GDP is absorbed outdoors the EU, in contrast with round a fifth for the US.
However, we are actually dealing with a wave of cheaper and typically extra technologically superior Chinese imports.
By 2030 on the newest, China’s annual manufacturing capability for photo voltaic PV is predicted to be double the extent of world demand and for battery cells it’s going to a minimum of equal the extent of world demand.
To the extent that this outstanding provide development is the end result of real productiveness enhancements and innovation, it’s good for Europe. But there’s additionally ample proof that a part of China’s progress owes to sizeable price subsidies, commerce safety and demand suppression, and that half will result in decrease employment for our economic system.
According to a conservative estimate, in 2019 China spent round 3 times as a lot on industrial coverage as Germany or France as a share of GDP, and in greenback phrases at PPP, it spent round ten instances as a lot as each nations mixed.
And as a part of this basic industrial technique, Chinese wage development has not saved up with productiveness development over time whereas saving charges stay excessive, leaving family consumption at simply 44% of GDP.
The first European response to the modified world commerce guidelines must be to try to restore the harm to the multilateral buying and selling order as a lot as attainable, encouraging all prepared companions to re-commit to rules-based commerce.
The second response must be to encourage inward FDI, in order that manufacturing jobs stay in Europe.
The third response must be utilizing subsidies and tariffs to offset unfair benefits created by industrial insurance policies and actual trade charge devaluations overseas. But if we embark down this path, it should be as a part of a basic method that’s pragmatic, cautious and constant.
The use of tariffs and subsidies must be principle-based and in step with maximising our productiveness development. That means distinguishing real innovation and productiveness enhancements overseas from unfair competitors and demand suppression.
It ought to keep away from creating perverse incentives that undermine European trade. Tariffs subsequently have to be assessed persistently throughout all phases of manufacturing and be incentive suitable, particularly in order to not induce de-localisation of our industries.
And tariffs should be balanced by client pursuits. There could also be some industries the place home producers have fallen too far behind already, and so making imports dearer will solely impose deadweight prices on the economic system.
The report back to the President of the European Commission will define a European industrial coverage that delivers on the core goals of European residents.
This industrial coverage will goal above all at elevating productiveness, preserving the competitiveness of our industries on the planet and competitors inside Europe.
It will goal at persevering with the decarbonisation of our economic system, in a approach that results in decrease vitality costs and better vitality safety.
It will goal at re-orienting our economic system in a much less steady world, particularly by creating a defence industrial capability and commerce coverage that may match our geopolitical wants, whereas lowering geopolitical dependencies on nations that we will now not depend on.
I stated at first of my remarks that sustaining excessive ranges of social safety and redistribution is non-negotiable. In my conclusion, I wish to restate that preventing social exclusion will likely be be elementary not just for preserving the social fairness values of our Union, but additionally to make our journey in direction of a extra technological society profitable.
The most important supply of revenue inequality is unemployment. Historically, macroeconomic insurance policies, when nicely designed, have been the reply.
At the current time, and extra typically, labour market insurance policies along with an accurate response to unfair competitors from overseas are equally important. And this industrial coverage may also complement our social safety system as the inspiration for social inclusion in instances of profound technological change.
The selections that these insurance policies would require will likely be pressing as a result of the tempo of technological and local weather change is accelerating and we’re more and more uncovered to worsening worldwide relations. These selections may also be politically and financially important. And they might additionally require a but unseen diploma of cooperation and coordination between the member states of the European Union.
Today, this step seems daunting. Yet I’m assured that we’ve got the dedication, the accountability and the solidarity to take it – to defend our employment, our local weather, our values of social fairness and inclusion, and our independence.

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