Europe's Competitiveness Problem: The Draghi Report

What Mario Draghi's 2024 report said about why Europe is falling behind the United States and China, and the investment it called for.

In September 2024, former European Central Bank President and Italian Prime Minister Mario Draghi published a major report for the European Commission on the future of European competitiveness. It warned that Europe faced “slow agony” unless it changed course.

The diagnosis

The report highlighted several problems:

An innovation gap: Europe has few large technology companies. Most of the world’s leading tech firms are American or Chinese.
Slow productivity growth, the main reason Europe’s income per person has fallen further behind the United States.
High energy prices, much higher than in the United States, hurting industry.
Fragmented markets: the EU’s single market remains incomplete in services, telecoms, finance and defence.
Regulation that can burden start-ups and growing firms.
Security dependence on others for critical materials and defence.

The prescription

Draghi called for:

Additional investment of around 750 to 800 billion euros a year, roughly 4.4 to 4.7 percent of EU GDP, a scale he compared to the post-war Marshall Plan.
Focusing on innovation, especially in digital technologies and artificial intelligence.
A joint plan for decarbonisation and competitiveness.
Completing the capital markets union, so savings can flow more easily to European companies.
Some common EU borrowing for shared priorities.

Responses

The European Commission drew on the report in its plans, including efforts to simplify regulations. But agreeing on joint borrowing and funding remains politically difficult, and member states differ on priorities.

Why start-ups move to America

A promising European start-up needs large amounts of money to grow. European venture capital markets are smaller and split across countries with different rules. The company may raise money from American investors, move its headquarters, or be bought by a U.S. company. The Draghi report argued that deeper European capital markets could keep more such firms growing at home.

Thinking Europe's problem is simply regulation

Regulation is one factor, but the report stressed a wider set of issues: underinvestment, fragmented markets, high energy costs and weak links between research and business. No single fix would close the gap.

Key takeaways

Mario Draghi's September 2024 report warned Europe was falling behind in competitiveness.
It highlighted an innovation gap, slow productivity, high energy prices and fragmented markets.
It called for around 750 to 800 billion euros of extra investment a year.
Completing the capital markets union and simplifying rules were key recommendations.