Europe Again Catching Up but Stalling Against Itself Again

For two years already, Europe has lived with Mario Draghi’s diagnosis of its competitiveness decline. The diagnosis is unequivocal, and the recipes are detailed ones. Yet real advancement is still bumping against national interests and institutional inertia.

In an Institut Montaigne article entitled Draghi Report: Between Transformation and Resistance, the Moment of Truth for the EU (Rapport Draghi: entre transformation et résistance, le moment de vérité pour l’UE), François Chimits, head of Europe Program, examines how much Europe has advanced in implementing the recommendations laid out in the Draghi report almost two years after it was published. The Institute’s findings show the implementation rate of the agenda to be about 30 percent. The author notes it is consistent with the initial timing – but stresses that the real test begins only now.

Hidden behind this calm analysis of figures is a typical European situation. The Commission has really tabled a major part of its legislative initiatives. The inter-institutional pact, One Europe, One Market Roadmap, lists 42 priority texts to be adopted by the end of 2027. It looks like a breakthrough on paper, while in practice only three percent of the most ambitious reforms that require the involvement of both the Parliament and member States have been implemented. The main load is still on the Commission, while the capitals continue defending their own interests.

The three policy areas that the author identifies as crucial ones are quite indicative of the nature of European transformation. Firstly, ‘European preference’ aims to prioritize producer interests at the expense of consumers. This logic, almost a taboo quite recently, is now gaining ground in the defense industry and green, cloud, and artificial intelligence technology. But the key questions remain open: how rigorously this preference will be applied, where the boundary of ‘European’ will pass and what exceptions will be allowed. The wider loopholes are left, the sooner this whole construct will turn into an imitation.

Secondly, these include the 2028-2034 Multiannual Financial Framework and its proposed European Competitiveness Fund. They really try to concentrate resources on strategic sectors – clean technologies, semiconductors, defense, space, and critical raw materials. But real diversion of funding from agricultural priorities is still to be negotiated. The European budgeting history shows that ambitions usually begin shrinking exactly at this stage.

The third area is financial markets. The author admits that the banking union has nearly ground to a halt, and the main hope is now pinned on harmonizing financial market regulations. And even optimistic evaluations assume that in one and a half years Europe will remain with national marketplaces, not a single market. More than 35 years after the last restrictions on capital flows were technically removed, financial reality remains fragmented. This directly affects European startups’ ability to obtain scalable funding and retain innovation within the union.

The problem lies deeper than just slow implementation. Draghi’s report described a world that has already accelerated. While Europe reconciles texts and looks for the lowest common denominator, the United States and China keep piling on. The European leaders have realized the urgency but have not yet figured out how to overcome their national constraints quicker than before. As a result, the reform remains hostage to the very logic of compromises the report attempted to break.

Europe has found itself in the position of a player who knows his diagnosis for sure and has even prescribed himself a course of treatment but is still reluctant to take bitter medicine in its required dosage. So long as national interests continue capping ambitions, the competitiveness gap will get entrenched rather than narrowed. Whatever time Europe still has at its disposal is shrinking rapidly.

Original publication: https://www.institutmontaigne.org/expressions/rapport-draghi-entre-transformation-et-resistance-le-moment-de-verite-pour-lue