"Europe has reached a point where inaction will be painful!"

On September 9th, Mario Draghi, the former President of the European Central Bank and former Prime Minister of Italy, issued the above call and warning in a report submitted to the European Commission.

Draghi called for the formulation of a "New European Industrial Strategy," arguing that the EU should increase additional investment by 750 to 800 billion euros annually to fund thorough and rapid reforms, in order to address the issue of the EU's lagging competitiveness.

This level of investment is equivalent to 4.4% to 4.7% of the EU's GDP, reaching the highest proportion since the 1970s. In comparison, from 1948 to 1951, the Marshall Plan, which was the United States' assistance for the reconstruction of Western European countries after World War II, provided additional investment that accounted for only 1-2% of GDP annually.

In Draghi's view, the EU must embark on a spending spree, otherwise it will face a "slow pain":

We have reached a point where, if we do not take action, we will have to sacrifice our welfare, our environment, or our freedom.

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Draghi called for European countries to unite and act together:

Compared to the challenges we face, the size of our countries has never seemed so small and insufficient. The rationale for a unified response has never been so compelling — in our unity, we will find the strength for reform.

However, as soon as Draghi's words were spoken, he had already faced opposition from Germany. Analysts believe that the plan proposed by Draghi would provoke resistance from "frugal" governments of countries like the Netherlands and Germany.

Draghi called for a comprehensive reform.Draghi earned the accolade of "Super Mario" for his role in averting disaster during the Eurozone debt crisis in 2012.

Commissioned by the European Union to write this report, its release coincides with the European Commission preparing for a new five-year term, facing numerous challenges such as economic stagnation, geopolitical conflicts at the borders, and the rise of far-right political parties.

Draghi's report points out that over the past two decades, the EU's economic growth has consistently lagged behind that of the United States due to smaller advancements in productivity. Germany has become a particularly weak link, as its industrial sector continues to grapple with high energy costs and declining competitiveness. The gross domestic product of the largest economy in the Eurozone is only slightly above pre-pandemic levels.

Draghi also warns that the EU's economic growth is "persistently below" that of the United States, casting doubt on the EU's ability to rapidly achieve economic digitalization and decarbonization.

The report proposes a comprehensive reform of the EU's methods of raising investment funds, including "new common funds and common assets," while also calling for significant adjustments in economic policy.

Key recommendations include relaxing competition rules to achieve market consolidation in industries such as telecommunications; achieving capital market integration through centralized market regulation; and a new trade agenda aimed at increasing the EU's economic independence.

In the highly fragmented defense sector, the report calls for the establishment of common security assets and EU joint funding to support "European public goods," including common energy infrastructure and joint defense procurement.

The report suggests joint funding for defense research and development in areas such as drones, hypersonic missiles, directed-energy weapons, defense artificial intelligence, seabed and space warfare, as well as in the space domain.

Draghi also advocates for a comprehensive reform of the energy market, stating that high energy costs have become a significant factor hindering the EU's economic recovery. As fossil fuels will continue to play an important role in the energy structure for some time, how to maintain economic vitality while reducing emissions has become a key issue that the EU must address.

Germany is the first to oppose.This ambitious report has sparked much discussion, particularly the proposal to increase joint debt, which has clearly touched a nerve with the "frugality faction" of countries, with Germany leading the opposition.

German Finance Minister Christian Lindner stated that EU joint borrowing will not solve structural problems, and the concentration of risks and responsibilities "would lead to democratic and fiscal issues, and Germany will not agree to do so."

Countries including Germany and the Netherlands have consistently opposed deeper fiscal integration, arguing that it would mean the less developed "southern" European countries would once again deplete the hard work and resources of "northern" Europe.

Analysis points out that any initiative to contribute more taxpayers' money or to increase new EU joint debt would provoke resistance from governments of countries like the Netherlands and Germany, which are against increasing EU financing.

An EU diplomat told the Financial Times: "Proposing EU joint borrowing under the current political climate in the EU is absolutely unworkable."