Politics Across Europe: Looking back at the Draghi Report after a year

By Eren Filizler, Foreign Affairs

The European Union (EU) is turning to new strategies to boost its global competitiveness, which has declined in recent years. The European economy has been hit hard by rising public debts following the pandemic and rising energy costs due to sanctions imposed on Russia following the Russia-Ukraine war. However, when you look at the big picture, the crisis Europe was experiencing was not due to these two events but rather to structural problems. Following the slowdown in production, demographic challenges, and the need for serious investments in green and digital transformation, European Commission President Ursula Von der Leyen asked former European Central Bank President Mario Draghi to prepare a report on the future of Europe’s competitiveness in 2023 (European Commission 2024). It was hoped that this report would help safeguard the future prosperity of Europeans. Draghi’s report essentially served as a prescription for Europe.

The Draghi Report, published in September 2024, was a bitter pill to swallow for the European Union because it strongly emphasized that Europe’s old economic model was no longer sustainable. The report’s most significant point was that the EU’s growth strategy could no longer rely on the three key factors it had historically relied on: cheap Russian energy, unrestricted Chinese markets, and US security support (Steinberg and Bergman 2024). Europe must take precautions against geopolitical difficulties and bring about revisions to its structural problems. Draghi’s comprehensive 400-page report was presented more as a concrete action plan for the European Union than a report.

Details of the report:

The most striking point in Draghi’s report is that the European Union needs additional investment of around €750 billion to €800 billion to regain its competitiveness and halt its decline against the US and China. This corresponds to approximately 5% of EU GDP (European Commission 2024). This investment is almost twice the amount of Marshall Aid, which played a role in the development of European countries after the Second World War, in proportion to GDP (Harper 1998). This comparison clearly demonstrates how large the investment required is.

  According to Draghi, Europe had to take major steps to ensure the financing of this huge amount. Inspired by the Next Generation EU (NGEU) model, which was implemented as a temporary recovery fund during the pandemic period and has a budget of €750 billion, Draghi suggested using common debt instruments for regular and long-term strategic investments (especially digital and green transformation projects) (European Commission 2024). This point in the Draghi report drew the most criticism, as the issue of joint debt is one of the most frequently debated and polarizing issues in the history of the European Union. Northern European countries, like Germany and the Netherlands, which generally implement tight fiscal policies, have consistently stated their opposition to joint debt. They see joint debt as Southern European countries burdening them with the consequences of loose fiscal policies. They argue that joint debt will prevent other European countries from implementing tight fiscal programs, and that the burden of debt will fall on the shoulders of northern countries, which implement tight fiscal policies (Moller-Nielsen 2024). Southern countries argue that structural inequalities within the European Union, and the lack of a common fiscal policy (fiscal union) despite the use of a common currency, have increased inequalities and that these inequalities should be closed through joint borrowing, thus demonstrating not only economic but also political unity through solidarity.

The Draghi Report identifies three areas for strategically directing investment. The first is the innovation gap. Europe lags significantly behind the US and China in areas such as artificial intelligence, quantum computing, and advanced digitalization. The report recommends increasing R&D spending to boost innovation capacity and reducing the high regulatory costs, particularly for small and medium-sized enterprises (SMEs). It also emphasizes revising the EU’s competition policies to address future competition and innovation, thus enabling it to compete with the US and Chinese giants. The report states that in the last 50 years, no company in Europe has been established from scratch and exceeded €100 billion in revenue (European Commission 2024)

Another gap was energy and decarbonization. Following the rapid cessation of cheap hydrocarbon supplies from Russia, electricity prices for industrial use in Europe have reportedly risen to approximately two to three times those in the US, and natural gas prices to four to five times those in the US. This situation is profoundly damaging the competitiveness of European industry, particularly in energy-intensive sectors, leading to a “high cost = high risk” equation (European Commission 2024). The report’s recommendations include prioritizing competitive energy access for energy-intensive users, developing a collective gas supply, and expanding long-term power purchase agreements (PPAs). It also stated that Europe’s energy system should be redesigned around strategic dependencies (critical minerals, imported gas, etc.), rapidly increasing renewable capacity, and integrating the transition away from fossil fuels into industrial strategy (European Commission 2024).

Mario Draghi’s report emphasizes that the Eurozone’s external dependencies now pose a serious security risk to growth, competitiveness, and freedom. For example, European Union countries are dependent on specific countries for critical raw materials. They are 100% dependent on China for heavy rare earth elements, 99% on Türkiye for boron, and 71% on South Africa for platinum (Mas 2025). Furthermore, 75-90% of wafer production in chip production originates from Asia—meaning a large portion of Europe has outsourced its chip fabrication (European Commission 2024). Draghi points out that these dependencies are not only economic but also strategic: external disruptions or supply constraints can seriously undermine growth and security in energy and industry, as well as in defense and critical technologies. It emphasizes that dependence on a single country, particularly for critical materials, is strategically dangerous and that dependence should be limited to a maximum of 65% (Mas 2025). The report notes that the defense industry across the EU is fragmented, with member states largely outsourcing their weapons systems, weakening collective defense capacity. For example, 75% of public procurement orders received in recent years came from non-European manufacturers (Soler and Genovese 2024).

Also, Draghi criticized the EU for being crushed by its own self-made bureaucracy, arguing that bureaucracy should be relaxed and bureaucratic costs reduced. He argued that Europe, like its rivals, needs dynamic bureaucracies and “better regulations.” He advocates not only for reducing regulations but also for using them effectively and efficiently (Berg et al. 2025).

After the report:

In January 2025, the Commission presented its “Competitiveness Compass,” a roadmap inspired by the Draghi Report and spanning the next five years. The Commission claimed that approximately 90% of the flagship initiatives in this Compass were directly based on Draghi’s recommendations. In just six months, 33 flagship initiatives and 14 legislative initiatives were adopted (European Commission 2025).

Regarding the innovation gap, the first of the three main axes highlighted in the report, the EU’s moves towards artificial intelligence were among the most highlighted topics at the conference. The Commission announced that it has invested €200 billion in this area to date and established five AI gigafactories (European Commission 2025). The increase in European supercomputer capacity, the success of pioneering AI startups like Lovable, and the rise of Mistral in the French AI market offer hope for the EU. However, the limited adoption of AI, particularly among SMEs, and the fact that the EU still produces a low number of core AI models compared to the US and China demonstrate that the process remains sensitive (Usta 2025). Also, over €100 billion mobilized through the Clean Industrial Deal on decarbonization, and €150 billion in financing has been secured through the SAFE (Security Action for Europe) initiative.

While these figures still don’t fully reflect the €750-800 billion investment recommended by the report, they do show that the report is being taken seriously. However, the gaps in implementation are relatively more striking. According to data from the think tank European Policy Innovation Council (EPIC), of the 383 articles in the report, only 43 (11.2%) have been fully implemented. A further 77 (20.1%) have been partially implemented, 176 (46%) are “in progress,” and 87 (22.7%) have yet to see any tangible action (Bulski 2025). Progress is uneven across sectors; there are relatively more implementations in areas of transportation and critical raw material supply, but key areas such as energy and digitalization are almost at zero full implementation level (Bulski 2025).

To sum up, the Draghi Report is among the most comprehensive evaluations of the European Union’s strategic and economic standing in recent years. The European Union has acted according to the report’s recommendations, implementing some of them into effect in the last 12 months. But at this crucial moment, when the Union’s economic and strategic independence are on the line, political disputes and conflicting interests within the Union have weakened the Union’s claim to unity and provoked controversy. The contradictions within the Union are made apparent by the fact that only about 11% of the recommendations have been fully implemented.

The Draghi Report was successful in redefining Europe’s problems as a structural and strategic crisis rather than as a series of short-term economic fluctuations. However, the institutional and political barriers to swift change are readily apparent in the continuation of fiscal fragmentation, the northern member states’ opposition to joint borrowing mechanisms, and Europe’s enduring reliance on outside energy and technology.

Whether or not European leaders will put aside their current national interests and demonstrate the unity, shared vision, and willingness to invest on the scale the report calls for will ultimately determine the Draghi Report’s long-term effects. In the face of the economic dynamism and strategic strength of its global rivals, the European Union runs the risk of continuing to be a “middle-tier” power, satisfied with only superficial and insufficient reforms. The failure of the post-Angela Merkel union to produce a strong leader and the “leaderlessness” it has found itself in will also make it difficult for the European Union to establish a strong will.

References

Berg, Aslak; Cornago, Elisabetta; Meyers, Zach; Scazzieri, Luigi; and Tordoir, Sander. 2024. Draghi’s Plan to Rescue the European Economy: Will EU Leaders Do Whatever It Takes? Policy Brief. Brussels: Centre for European Reform. https://www.cer.eu/publications/archive/policy-brief/2024/draghis-plan-rescue-european-economy.

Bulski, Krzysztof. 2025. “One Year After the Draghi Report: Europe Delivers Only 1 in 10 Promises.” EU Insider, September 8. https://www.euinsider.eu/news/one-year-after-the-draghi-report-europe-delivers-only-1-in-10-promises.

European Commission. 2024. The Draghi Report on EU Competitiveness: The Future of European Competitiveness – Report by Mario Draghi. Brussels: European Commission, 9 September 2024. https://commission.europa.eu/topics/eu-competitiveness/draghi-report_en.

European Commission. 2025. “The Draghi Report: One Year On.” European Commission (16 Sept). Accessed Oct 25 2025. https://commission.europa.eu/topics/eu-competitiveness/draghi-report/one-year-after_en.

Harper, John L. 1998. “Lessons of the Marshall Plan for Eastern Europe.” The International Spectator 33(2) (April–June): 201-226. Accessed Oct 25 2025 https://ciaotest.cc.columbia.edu/olj/iai/iai_98haj01.html.

Mas, Nuria. 2025. “The Draghi Report Highlights That Productivity Must Be the Goal for Europe.” IESE Insight, January 10, 2025. IESE Business School. https://www.iese.edu/insight/articles/mario-draghi-report-europe-productivity/?utm_source=.

Moller-Nielsen, Thomas. 2024. “Draghi Report Splits German Government, Receives Pushback from the Netherlands.” Euractiv, September 10, 2024. https://www.euractiv.com/news/draghi-report-splits-german-government-receives-pushback-from-netherlands/.

Soler, Paula and Vincenzo Genovese. 2024. “Europe’s Fragmented Defence Industry Needs Coordination to Avoid Supply Crisis – Draghi Report.” Euronews, September 11, 2024. https://www.euronews.com/my-europe/2024/09/11/europes-fragmented-defence-industry-needs-coordination-to-avoid-supply-crisis-draghi-repor.

Steinberg, Federico and Max Bergmann. 2024. “The Draghi Report: A Strategy to Reform the European Economic Model.” Center for Strategic and International Studies Commentary, October 2, 2024. https://www.csis.org/analysis/draghi-report-strategy-reform-european-economic-model.

ThinkEPIC. 2025. “Draghi Observatory Implementation Index: Only 1 in 10 Measures Implemented.” ThinkEPIC, April 25. https://thinkepic.eu/draghi-observatory-implementation-index-only-1-in-10-measures-implemented/.Usta, Ahmet Emre. 2025. “Draghi Raporu’ndan ( ‘Avrupa’nın Rekabet Gücünün Geleceği’ Raporu) Bir Yıl Sonra: Stratejiden Uygulamaya Geçişte AB.” TÜDER (Tüketicinin Ve Rekabetin Korunması Derneği), 24 Eylül. https://www.turder.org/draghi-raporundan-avrupanin-rekabet-gucunun-gelecegi-raporu-bir-yil-sonra-stratejiden-uygulamaya-geciste-ab/