Former Prime Minister of Italy Mario Draghi had barely finished presenting his long-awaited EU competitiveness report on Monday, when the German finance minister Christian Lindner replied that the approach proposed by Draghi does not solve the structural problems of the EU member states.
In Finland, the prime minister Petteri Orpo (kok) as the Minister of Finance Riikka Purra (ps) agreed with Lindner’s view.
The focal point of Lindner’s comment was Draghi’s presentation on the EU’s collective debt. The EU would need an additional 750–800 billion euros for its investments every year. Draghi suggests that the EU should finance projects significantly, also with joint debt, which would improve the Union’s competitiveness and security.
The program would be larger than the US Marshall Aid, which was used to rebuild Western Europe after World War II.
The German finance minister’s response to the proposal spoke volumes: “Germany should pay others. This cannot be the main plan.”
You can understand Lindner’s comment when you think about the result of the last state elections in Germany, i.e. Saxony and Thuringia. The social democrats, greens and liberals who rule the federal government experienced crushing defeats to the far-right and far-left.
Chancellor Olaf Scholzin the loss experienced by the government led by Draghi’s presentation to the big payers for Germany, but also for France, is a really big piece and probably too big to swallow.
Draghi’s arguments in the 400-page report for stopping Europe’s waning growth and economic recession may in themselves be correct.
Without significant growth, Europe is rapidly falling behind the United States and China when it comes to international trade, R&D investments or the green transition.
Of course, the core question is whether joint debt is the right way to make new investments decades from now. Even now in Finland, we can see concretely how the interest expenses of the indebted state have grown at an almost uncontrollable rate in a couple of years. Joint debt does not eliminate this problem.
Such projects do not need new common money, but a more reasonable use of the EU’s current money. That is, the development of the European capital market, deregulation and rationalization.
Europe’s biggest shortcoming is the weakness of developing and scaling cutting-edge technologies, according to an economist Vesa Vihriälä evaluated in his article last spring (KL 25.4.).
The most effective way to improve it would be to increase EU R&D funding targeted strictly on the basis of projects’ merits. And the orientation towards breakthrough technologies, such as the economic Nobel laureate Jean Tirole and his partners have presented.
Such projects do not need new common money, but a more reasonable use of the EU’s current money. That is, the development of the European capital market, deregulation and rationalization. Good proposals for strengthening risk financing, for example, have already been made.