It will take more than Draghi to boost EU growth

Playing to win. European Union wants to up its game in global economy. With bloc’s growth stagnating and China and United States doling out technology subsidies, 27-country bloc is looking to boost growth. Brussels picked Mario Draghi, who has form in “whatever-it-takes” stakes, to explore matter. But EU will need money and cooperation, not just reassuring words of a respected veteran, to get job done.

Draghi’s upcoming report on European competitiveness is more likely to reflect EU’s internal conflicts than resolve m. bloc is split between wanting to protect its national champions and reaping full benefits of global supply chains. When former Italian prime minister unveils his findings mid-year, he’s unlikely to pick a clear winner.

Meanwhile, Europe is treing water as global economy hes into what World Bank in January predicted will be its slowest period since 1990s. euro area itself is looking at a scant 0.7% increase in GDP this year, rising to 1.6% year after, World Bank reckons. That’s much slower than United States, which is projected to expand by 1.6% in 2024 and 1.7% in 2025, and well behind China, which should grow at 4.5% in 2024 and 4.3% in 2025.

Open markets would seem to offer fastest path to growth. European stalwarts like Airbus and Stellantis, as well as younger startups, need access to world’s top components, produced as cost-effectively as possible. Putting up barriers will have opposite effect: International Monetary Fund estimated in October that increased tre restrictions could shrink global economic output by 7% in long term, or about $7 trillion in today’s dollars. That’s size of France and Germany combined.

But Brussels is torn among opening up its markets, protecting itself from state-supported Chinese imports and trying to compete with $370 billion of subsidies dangled by Washington in Inflation Reduction Act.

France and Germany have championed a more activist approach toward supporting industry. Yet European business leers on Jan. 10 told Draghi that Brussels should ease off on regulation. Europe will benefit from expanding its own capabilities, such as through a 500 million euro fund to develop an electric battery supply chain. But it also needs access to best technology at best price.

former European Central Bank chief has long called for a more integrated Europe as way out of financial crises and economic stagnation. If he decides to nudge Brussels furr into an integrated world economy, he just might open doors to success.