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Writer's pictureEthan Harvey

Draghi's miserable myopia



In its quest to integrate countries across Europe, the European Union has reached a critical juncture. Its future as a regional powerhouse is in peril. 


Not only does the EU face emerging rivalries such as with BRICS, but the rise of European nationalism and the Ukraine war have also impeded the EU’s capacity to prosper and compete internationally. A new 400-page report published by Mario Draghi - EU technocrat and ex-president of the European Central Bank - outlines the dire state of the EU’s finances. Blunt and sincere in its evaluation, the report scathingly reviews the EU’s competitiveness in recent years and later surveys the defects accountable for its performance. Draghi’s melancholy prognosis meticulously encapsulates the bleak future that awaits the EU without serious rehabilitation. The EU's future is at stake, however Draghi’s proposals look likelier to inflame than cure.


Before delving into Draghi’s proposition, which he contends can cure the disease blighting the EU’s economy, it is imperative to consider the historical context that led to its stalemate. Before 1990, when the EU comprised a common market, a robust trading bloc that was far smaller in scope but maintained a quarter of world GDP, the EU’s prospects appeared strong. Its uniquely resolute economic federation provided states with the monetary stability to engage in free trade under the shelter of the customs union, which robustly protected EU jobs and businesses. This arrangement, which respected the integrity of nation-states, still enabled them a degree of control over fiscal and political decisions, which was, in the 1990s, quashed by the calamitous monster that is the Maastricht Treaty. The treaty desecrated the self-determination and sovereignty of states, including their ability to manage frontiers, laws, and currency. For instance, the formation of the economic and monetary union, which converged European economies, meddled with the fiscal autonomy of nation-states thereby stripping them of the ability to respond to shocks and crises in manners suiting their unique situations. Moreover, the expansion of the European Union in 2004, which saw the entrance of countries from Central and Eastern Europe, further diversified the EU, introducing countries with disparate economic outcomes. This created a further rupture being the conflicting economic demands of less developed Eastern states with wealthier counterparts in the West.


The Maastricht Treaty was also highly political. It led to the trading bloc being redefined and restructured into a proto-state that concentrated power in the centre, where an unelected pseudo-government called the European Commission, along with a central bank and parliament, severely strictured the sovereignty of states. The political, legal, and economic instruments that consolidate the EU super-state shifted the focal point away from competition, innovation, and prosperity towards a power-motivated quest to transgress member states' national identity, independence, and cultural taboos. The embryonic evolution that the politicised cosmopolitan empire has endured is culpable for its malaise in 2024. It is the displacement of one functioning and stable trading bloc, built on a genuine impulse to compete, with a supranational, invasive bureaucracy that has contributed to its current predicament of economic distress.


Draghi’s report scrupulously reverberates this summation of the EU in decline. Still, he fails to proffer an adequate formula for politically and economically revitalising the European Union. Draghi's diagnosis is correct when he recognises the organisation’s lack of innovation, competition, and growth. For instance, out of the world’s fifty leading tech firms, only four are European. Moreover, compared with the US, the Eurozone’s GDP has only grown by 0.8 trillion since 2008, whilst the US has risen by c. $13 trillion. It is no coincidence that this economic malaise was augmented after the central accumulation of power in the EU's substratum, preventing member states from addressing issues such as unsustainable levels of mass migration and the economic instability reified by the Economic and Monetary Union that purport to foster fiscal harmony.


However, Draghi’s recognition of the ‘nightmares’ and ‘slow agony’ that the EU will encounter if it continues its current trajectory fails to provide a credible antidote. Whilst it invokes the failures that plague the EU, such as its fertility crisis, intensified inflation, and energy crises provoked by cutting cheap Russian energy, Draghi perfidiously connects its underperformance with the fallacious hypothesis that the organisation is deficient in centralisation. Draghi unveils a plan in the report predicated on the false pretence that a more powerful EU is a prerequisite to sustaining its future legacy. He indicates that the reason the EU failed to assemble a single noteworthy social media platform and trails behind in the advancement of artificial intelligence and digital technologies is not because its bureaucratic structure has stifled innovation. Instead, he inadvertently directed responsibility towards the President of the EU Commission, Ursula von der Leyen, who commissioned the report.


Specifically, Draghi postulates an antidote for the EU’s malaise that involves the introduction of Eurobonds and an eight hundred billion euro spending programme to fortify industrial innovation. However, implementing Eurobonds would require administering vast sums of money, which a new treasury department and finance ministry would have to oversee. This may entail the creation of a central planning agency and even foster a rationale for centralised taxation. These propositions perpetuate the discourse about centralisation, which catalysed the decline of the EU. Draghi’s tone-deaf assessment illustrates how the EU failed to compete with the US and China. It insists on pursuing its romantic vision of a fully integrated regional organisation where sovereignty and borders are obsolete and all is coordinated from the centre. However, this vision is what led to its fiscal contraction. The history behind the EU’s conversion from a trading bloc to a supranational organisation suggests divesting states of their political vitality causes their subsequent subordination. This is because economic enterprise is most fruitful when states have the autonomy to make their own decisions, as demonstrated after 1900 when an autonomous Germany industrialised to become later the largest economy in continental Europe and the third largest in the world after the US and the British Empire.


In conclusion, Draghi’s report correctly renders the European Union a busted flush. Its economic collapse and stagnation are visible in the data that displays the comparatively meagre growth rates and GDP with the United States and China. But whilst one should laud the report’s precision, its therapy for easing its infirmities is based on an ahistorical adjudication that centralisation is an antidote for regress. Paradoxically, the EU’s centralisation is responsible for stagnating living standards and declining industry and innovation. The politicisation of the EU in 1990 hastened its deterioration when it metamorphosed from a trading bloc to a proto-state. This occurred again after its 2004 enlargement, in which economic discrepancy scuppered the harmony of states sine qua non for a functioning single market and Eurozone. These factors worsened the EU’s unstable and sluggish climate, where burdensome directives and the pooling of sovereignty averted attention from advancing the technological innovations needed to compete with old and emerging powers. Therefore, whilst Draghi correctly discerns the EU’s malaise, his panacea is flawed because it presupposes that centralising more power to the EU is good for growth. The report should not be a plausible intellectual source from which one can make authoritative decisions. If it proceeds with centralisation, it will merely exasperate its existing ailment and engender its inevitable demise. A more convincing recipe for EU prosperity entails reducing the influence of the parasitic class by returning decision-making powers to the individual member states to remodel the organisation into an apolitical, trade-centred market.


Image: Flickr/European Parliament

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