On 11 September, former Italian Prime Minister Mario Draghi presented his long-awaited report on the future of EU competitiveness. While little information had been leaked beforehand, the report's contents came as no surprise, following in the footsteps of the recent Letta report on the Single Market and Ursula von der Leyen’s Political Guidelines for the 2024-2029 mandate.

A key focus of the report is the widening productivity gap between the European Union and the United States, complemented by several mentions of China’s shift from once being a cooperation partner to now a systemic rival. Draghi emphasised the urgent need to unlock sustainable growth, embrace digital technologies, decarbonise the economy, and enhance the Union’s autonomy, particularly by reducing dependence on crucial imports such as microchips and critical raw materials. Research and innovation were highlighted as essential components for achieving these ambitious goals.

Among the main obstacles identified were regulatory burdens, excessive bureaucracy, a lack of strategic focus, and significant fragmentation across the Union. These factors, Draghi argued, lead to a waste of common resources at a time when the EU faces growing global competition, geopolitical tensions, and weakening demand. To address these challenges, the report proposed unlocking €800 billion in new investments through joint debt—a bold initiative that many of the Northern European ‘frugal’ states are unlikely to support. Additionally, he called for reforms to EU governance, improved implementation of the Single Market, and significant changes to the EU’s competition rules in order to allow more mergers and facilitate the emergence of European “champions.”

Regarding research and innovation, Draghi underscored the lack of industrial dynamism and a wide gap in private R&I spending, with EU firms investing only about half as much, as a share of GDP, compared to their US counterparts in 2021. While the report recognised universities and research organisations’ role in driving early-stage innovation and breakthrough discoveries—which the research community saluted—the publication raised concerns about the weak pipeline from innovation to commercialisation and the absence of robust innovation clusters across the EU. The report also warned of an impending skills shortage, which could further hinder innovation efforts.

To counter these issues, Draghi advocated for increased public investment in R&I, with a particular focus on breakthrough innovations. He also aligned with research organisations’ calls to double the budget of the EU's next research Framework Programme (FP10). Other recommendations included narrowing priorities, funding more high-risk projects, improving EU-level coordination, and reforming intellectual property rules.

By addressing the critical role of research and innovation, the Draghi report aspires to position the EU at the forefront of cleantech and artificial intelligence innovation, the latter being an area in which Europe is currently lagging behind. Decarbonisation, in particular, is seen as a pivotal opportunity for Europe to lead in global innovation. However, the report also cautioned against several challenges, including high energy costs for both industry and consumers, volatile markets, lengthy permitting processes for renewables, strong competition from China, and insufficient support for sectors that are hard to decarbonise. Since 2020, the report notes, the EU has lost some of its competitive edge in certain industries such as hydrogen and fuel cells, and patenting in low-carbon innovation has slowed.

To address these challenges, Draghi recommended maintaining a technology-neutral approach to decarbonisation, leveraging all available solutions in a cost-efficient manner. He also emphasised the need to prioritise grid development as a crucial component of this strategy. Additionally, to capitalise on the decarbonisation push, Europe should refocus its support on clean tech manufacturing, concentrating on technologies where it either already has a competitive advantage or where there is a strategic case for developing domestic capacity. He also suggested cutting red tape and developing simpler, more unified financing instruments. On the critical issues of raw materials and microchips—both essential for the clean energy transition—the report stressed the need to prevent dependencies and ensure security through collective European action and a foreign policy agenda aligned with these goals. The role of research and innovation in chip design, manufacturing, and the processing and recycling of critical minerals was also highlighted.

One week after its publication, the Draghi report has sparked significant debate and reactions. Although generally well received, it has not been without criticism, particularly from environmental organisations, which have highlighted its lack of emphasis on environmental, social, and climate-related issues. The report aligns with several policy points previously outlined by European Commission President Ursula von der Leyen in her Political Guidelines, published in July, and is expected to shape her approach to competitiveness over the next five years while also influencing the ongoing negotiations surrounding the selection of the new College of Commissioners, set to be announced tomorrow. However, how the proposals—especially those concerning common EU funding and deeper European integration—will fare remains uncertain, given the current political landscape at the Member State level, which has seen, over the last few months, a general shift to the right of the political spectrum and, consequently, increased wariness regarding these aspects.