Report calls €200 billion budget in EU innovation

A long-awaited report by Mario Draghi, former Italian Prime Minister and European Central Bank President, calls for doubling the EU’s research and innovation (R&I) budget to €200 billion.

Last year, EU Commission President Ursula von der Leyen tasked former Italian prime minister and European Central Bank chief, Mario Draghi, with assessing how the European Union can boost its competitiveness amid global instability and economic hurdles. 

Mario Draghi presented his report on Monday calling for €750 billion EU investment

Draghi’s report, published Monday, September 9, calls for an unprecedented yearly investment of at least €750 billion; nearly 5 per cent of the EU‘s GDP. 

Mario Draghi compared the challenge to the post-WWII Marshall Plan, stating, “For the first time since the Cold War, we must genuinely fear for our self-preservation.”

The report presents a blueprint for radical change with 170 proposals, focusing on closing the EU’s “innovation gap” with the United States and China. Draghi advocates for “massive” investments in Europe’s defence sector and green tech initiatives, reducing reliance on Chinese technologies. 

Mario Draghi emphasised Europe must come together to compete globally in tech

Draghi highlighted that only four European companies rank among the world’s top 50 tech firms and criticised Europe’s lack of focus on key priorities. “We lack focus… We don’t combine our resources to generate scale,” he said, emphasising that Europe is “punching under our power.”

“Europe must become a place where innovation flourishes, especially for digital tech,” Draghi said, emphasising the importance of AI and digital advancements.

One proposal involves reducing fragmentation in EU industries, including its production of 12 types of tanks, compared to just one in the U.S. 

Draghi believes better harmonisation between EU member states would strengthen Europe’s competitive edge.

Draghi proposes “common debt instruments” to finance investments

To finance these investments, Draghi suggested issuing new “common debt instruments,” similar to the EU’s joint borrowing during the pandemic to create an €800 billion recovery fund.

Varying responses to Mario Draghi’s EU report

While France supports this approach, countries like Germany and the Netherlands remain wary, fearing disproportionate financial burdens. 

German Finance Minister Christian Lindner swiftly opposed the idea, stating, “Joint borrowing by the EU will not solve the structural problems.”

Von der Leyen, who recently secured a second five-year term, aims to use the 400-page report to guide her new cabinet’s priorities. Although she sidestepped the topic of joint borrowing, she mentioned national contributions as a potential funding source.

The report warns that without increased productivity, Europe may need to compromise on its ambitions to lead in technology, climate action, and global independence.

 “This is an existential challenge,” Draghi stressed, noting that China is catching up rapidly.