The Draghi & Letta reports: Surgeons without a scalpel

Giles Merritt looks at the two X-rays of the EU’s ailing industrial base and urges a next step that would open debate on the drastic surgery needed.

It’s either too soon or too late to speculate on the fates of the Letta and Draghi reports. Too soon because their ideas for fixing Europe’s productivity malaise and completing the single market are decades-long projects that cannot yet be judged. Too late as both reports are already in danger of becoming post-mortem death certificates instead of policy roadmaps.

When released earlier in the autumn, the in-depth reports by Mario Draghi and Enrico Letta were greeted in Brussels as joyously as Moses’ tablets from the mountain. That’s unsurprising because they were commissioned by the EU. Reaction from national capitals has been more muted, raising questions about how much groundwork Brussels had laid in advance. Concrete plans involving the member states are essential if the recommendations are to be implemented, but apparently these are inexistent.

The two highly respected former Italian prime ministers describe all-too-familiar economic ailments, and in the main advocate equally familiar prescriptions. These were ignored in years past and run the same risk again.

Forty years ago, France’s prominent political guru Raymond Aron reached a similar conclusion. “The European economy has been suffering the twin evils of inflation and slow growth,” he wrote. “Each nation has come to more or less unsatisfactory terms with rising oil prices, stagnation, or declining buying power. However, most Europeans have continued to live as before in the manner of affluent countries.”

So what’s to be done with these two incisive X-rays of Europe’s political economy at a time when the performance gap separating the EU from the US and China is widening so fast? Both detail structural weaknesses and underline Europe’s quandaries about how world-beating digital champions can be created without sacrificing consumer protection. There’s also the challenge of the huge sums to be raised – Draghi says €800 bn yearly for investment in green and digital projects. Increased debt is a taboo for many, and there’s little agreement on where so much money should be spent.

The Draghi and Letta reports have been widely reported as being about industrial policy and the need for EU member states to abandon economic nationalism. Less notice has been given to the underlying message that the EU is itself part of the problem. Institutional wrangling and time-consuming procedures have increasingly made it a brake on actions and consensus-seeking.

These are among the unintended consequences of enlargement and more regulation in a digital age; the EU has become the victim of its own success. Rightly admired around the world for welding unruly Europeans together, it is nevertheless a 20th-century mechanism that must adapt to today’s needs and tomorrow’s threats.

Changes of culture are the most difficult of all, as EU officialdom’s culture demonstrates. Radical shake-ups are needed to address a myriad of problems that range from staffing to interinstitutional rivalries, and from the EU’s decision-making to its lack of public support. Sadly, a reopening of the EU treaties that might fix these difficulties isn’t on the cards.

Hopes for streamlining the EU’s most self-defeating practices therefore  centre on reforming key aspects of governance. The Letta and Draghi reports could be a good starting point because they set out many of Europe’s problems along with the contradictions that block the way to resolving them. The next step could be a joint proposal by the two authors and the European Commission for a practical policy agenda. The two economic policy surgeons could then show how the EU should wield its scalpel.

The 40-year-old history of the single market should be a signpost to a brighter future. Jacques Delors was successful where his predecessors were not because he had a clearcut plan for implementing his 300 proposals. It is a lesson for EU member governments and Ursula von der Leyen’s second commission to take to heart.

The views expressed in this Frankly Speaking op-ed reflect those of the author and not of Friends of Europe.