MNI: Draghi Report To Call For Joint EU Borrowing - Sources

Former European Central Bank President Mario Draghi will call for a far-reaching federalist revamp of the European Union, including making joint borrowing a permanent financing instrument rather than a one-off crisis tool, when he presents his report on the bloc’s competitiveness later this year, sources told MNI.

Draghi aims to present the report to EU leaders sometime in late June, after European parliamentary elections, so that its conclusions can avoid stirring controversy in the election campaign but still play a role in shaping the EU’s policy agenda, said sources close to Draghi and others who had met with him.

The period immediately following the parliamentary elections is traditionally one of high-level political bargaining to decide which of the political blocs, the Commission, Parliament of the European Council presidencies, get the big prizes and which sets political priorities for the next five years.

The former Italian prime minister has been provided with a secretariat by the Commission in Brussels, chaired by senior Commission official Pauline Rouch, and has surrounded himself with experts on energy and new technologies, including artificial intelligence, two topics expected to play a large part in his analysis of Europe’s competitiveness gap with the U.S. and China. (See MNI INTERVIEW: Germany Faces Permanent Loss of Competitiveness)

GERMAN RESISTENCE

The Commission, as well as big business leaders and organisations, have already met with Draghi on several occasions to provide input on what they see as the main challenges for European industry, but he has made it clear that the report will be a work of independent analysis and will not be vetted by EU officials ahead of publication.

The former ECB president and Italian prime minister feels that Europe now faces a different kind of crisis to the sovereign debt troubles of a decade ago. New threats include Russia’s invasion of Ukraine and the end of German industry’s cheap energy model, the U.S. Inflation Reduction Act and the disruption of global supply chains.

Business organisations have impressed upon Draghi how the rise in energy costs in particular has hurt the competitiveness of European industry. He is expected to propose streamlining procedures around green energy projects and for expanding grid capacity.

Draghi is prepared to run the risk that emphasing the need for a permanent central EU fiscal capacity, something which he has long supported, could alienate Germany and some other states, and potentially undermine support for other key recommendations, the sources said. German opposition meant such a fiscal capacity did not figure in recent proposals to reform the EU’s fiscal rules, though French President Emmanuel Macron called for joint European borrowing in a speech in Davos earlier in January.