Former ECB president and prime minister of Italy, Mario Draghi, has written a report containing the obvious yet completely unnecessary conclusion that Europe has completely missed the boat on innovation and competitiveness. Duh!
Fortunately, Mr Draghi has found a series of perfect solutions to that, with a tsunami of Eurobonds. I’d say grab the popcorn ahead of time, this is going to be ‘fun’.
Nonsense!
The main conclusion Draghi draws in his 66-page report, written at the behest of Miss Van der Leyen, literally hurts your eyes: “Never in the past has the scale of our countries appeared so small and inadequate relative to the size of the challenges.”
Europe has become void; we simply no longer count in the global game of trade and power. “This is an existential challenge,” Draghi said. And the worst part is that “we” owe this largely to ourselves. We got our priorities totally wrong, obviously at the expense of taxpaying citizens, with this result.
That I didn’t come up with that myself.
At the bleak conclusions, my tangents with the Draghi report end. After all, besides many of his solutions being open doors, they are mostly inconsistent. And that means that the chances of Europe regaining its place on the world stage are, unfortunately, extremely slim.
Draghi’s first ‘solution’ is that Europe should make a concerted effort to close the innovation gap with the United States and China. With what? Whereas the US and China constantly bicker over intellectual property, patents and technology in general, we barely manage to keep our only tech giant, ASML, on board. At ASML, more people are busy ensuring compliance with millions of regulations than developing superior technologies.
For those who have read Elon Musk’s book: question any kind of restrictive regulations on the product until proven otherwise. That’s innovation. Try that here.
But it gets much worse. Draghi’s second great idea is ‘a joint plan for decarbonisation and competitiveness’. It seems obvious that the sustainability aspect had to be cycled back in regardless. But the hard data prove that too much focus on climate, or any other facet, actually puts pressure on innovation and competitiveness.
Has Mr Draghi seen China and Germany’s market shares of electric cars, a form of transport that surely features in every decarbonisation plan? BMW, Mercedes and Volkswagen are being wiped out even on their own continent. Is that really just because those Germans are resting too much on their laurels? I don’t think so. There is zero policy balance in Europe, leaving European companies not one, but ten-zero behind.
Draghi’s last ‘obvious’ recommendation does make sense: reducing dependence on commodities and energy in particular. But then again, it was really those same Germans who decided to shut down all their nuclear power plants only to be hypocritically at the back of the queue not much later at that somewhat creepy WEF club that just promised to do more with nuclear power.
Did you know that in France the amount of CO2 emitted per capita is more than 40 per cent lower than in Germany? How could that be anyway? Again, what policymakers totally forget is that the path to a given goal has to be carefully chosen. And sometimes that means taking a diversion.
Eureka
But the best part, of course, remains Draghi’s answer to how we are going to pay for all this. Per year, we need some 800 billion euro, or just under 5 percent of Europe’s GDP, to make up that huge amount of catching up.
Draghi is quickly coming to the conclusion that, after all the obligations imposed from Brussels with very moderate success - remember the energy bills of recent years - you cannot make European citizens pay for this again, too. Fortunately, there is a wonderful cost-sharing tool: Eurobonds.
Draghi’s proposal - incredible but true, after his time as ECB boss in which Italy and the Eurozone almost went under - is to issue common bonds. Whether the Netherlands, with a debt ratio of 43.9 per cent, would like to share for a while with a country with a ratio of 140 per cent. Incidentally, the Germans have already made it pretty clear that this is not a good idea.
So.
Now I have learned that you can’t just complain, and yet that is what this column does a bit. I would like to see policies that are more balanced. Where innovation and competitiveness are not necessarily overshadowed by arbitrary and unrealistic climate targets and other regulations.
And in addition, a bit more work instead of less. How does that saying of top athletes go again? Staying at the top is much harder than getting there. Would that be different in Europe?
Source: European Commission document
Jeroen Blokland analyses eye-catching, up-to-date charts on financial markets and macroeconomics in his newsletter The Market Routine. He is also a manager of the Blokland Smart Multi-Asset Fund.