Economic growth in Europe has gradually become a challenge that requires urgent attention. While over the last several years, average living standards across Europe have improved, especially in the countries that joined the Union in 2004 and since then, the difference between the gross domestic product of the US and the EU has increased from 15% to 30%.
Three-fourths of this change is being attributed to the fact that the member states of the EU have lost productivity and are not innovating at a fast-enough pace. The EU must take urgent action to preserve itself as it faces a slow decline.
These conclusions were presented by the former president of the European Central Bank, Maro Draghi, in a report which included 170 recommendations. He called for additional investment to regain economic growth and maintain social cohesion, both mainstays of the European ideal.
Draghi’s report was not written in a vacuum. His brief was to write a report on how the EU could boost growth while moving towards a greener and digital economy. The invasion of Ukraine by Russia and the renewed conflict in the Middle East, coupled with increased geopolitical tensions in other parts of the world, do not serve the European economy well. The European economy has always thrived on peace and, what one would call, a level playing field.
As both China and the US, as well as other countries, adopt policies which are changing the rules of international trade and which may inhibit the free trade among countries, the European economy suffers, given its high dependence on exports.
We need to embrace innovation and new technologies and apply them in a strategic way
As such, moving towards a greener and digital economy in such times requires a new assessment.
This new assessment should not be meant to reverse the trend but to ensure that businesses in the EU remain competitive and the EU boosts its economic growth.
The key recommendation in the Draghi report is to have an investment boost of €800 billion a year to build a more resilient economy and regain previously high rates of productivity growth.
In this regard, the Draghi report is very clear. We need to innovate to grow and to protect our well-being and our inclusive society. He described the challenge to regain competitiveness as an “existentialist” one, because the European way of life is under threat. Suffice it to say that for the first time in 80 years (79 years to be exact), Europe will need to increase its defence spending.
In my opinion, Malta has a great deal to learn from this report. We also need to boost productivity by moving up the value chain and to regain competitiveness. Changing our economic model is a must and not an option as has been stated so many times by different people and organisations.
We need to embrace innovation and new technologies and apply them in a strategic way. Moreover, the move to a green economy is also a must for Malta to protect our environment and our well-being.
Like the rest of the EU, there needs to be a huge injection of funds to achieve such an objective. Even in this regard, we require innovative approaches to make use of the significant financial resources available in our country. I believe that even in our case, the challenge is an “existentialist” one to preserve our country and its future generations.