Thorsten Jelinek’s Post

How should Europe be reformed? Reflections to Draghi’s report. As we’re waiting for Finnish Government’s analysis of Mario Draghi’s report on European competitiveness, some reflections on the report are provided below. Draghi correctly states that Europe further falls behind China and America, lacking the scale and skills to compete with them. A new industrial strategy is needed to boost competitiveness. He suggests raising investment by €800bn a year. For R&D, €200 billion is suggested. An innovation agency modelled on the American Defense Advanced Research Projects Agency (Darpa) to be created. In terms of funding and innovation efforts, the Draghi strategy would mean a major leap for Europe. But some critics see it as weakening of competition policy to large industrial interests in Europe. One minister commented “An economy will grow if you reform . . . more money is not always the solution.”  More fundamental structural problems in competitiveness and innovation ecosystems need better to be addressed. The impact from efforts proposed by Draghi is affected by the level of activity (resources) and structure (e.g. innovation ecosystems, etc.). Simplifying, impact = activity x structure. E.g., with an outdated structure, but much money, the outcome would be ineffective. The first important action would be to reform EU innovation ecosystems - North Europe can serve here as an example. Unfortunately, technology & money alone are never enough for true productivity. Professor Erik Brynjolfsson from Stanford University (McKinsey September 2024) pointed out that real productivity happens only when companies rethink how they do business. Companies must update their business processes, reskill workforce, and sometimes even change their business models and organization in a big way. To put the strategy into practice, a lot more people is needed to fill the knowledge gap in Europe. Where would these millions of highly-skilled people come from? Most likely from the poor and middle-income countries. Such a brain drain would hamper productivity and economic growth in these countries (Nature, Vol 634, 10 October 2024), though helping Europe’s competitiveness, which is morally dubious. The policies following Draghi’s report should also promote social fairness and justice, and adhere to the fundamental European values which are important to ensure a successful socio-technical transformation of the society, also globally. Reference: Mario Draghi, The future of European competitiveness. September 2024. Svenska tekniska vetenskapsakademien i Finland Business Finland Suomalainen Tiedeakatemia – The Finnish Academy of Science and Letters European University Association Aalto University

Mario Draghi outlines today his plan to make Europe more competitive. The continent needs investment on a par with the Marshall Plan and a lot more innovation. The first is closing the innovation gap with America. Europe largely missed out on the digital revolution led by the internet and the productivity gains it brought: in fact, the productivity gap between the EU and America since 2000 is largely explained by the tech sector. The second area for action is combining decarbonisation with competitiveness. If Europe’s ambitious climate targets are matched by a coherent plan to achieve them, decarbonisation will be an opportunity. The third area is increasing security and reducing dependencies. As the era of geopolitical stability fades, the risk of rising insecurity becoming a threat to growth and freedom is increasing. Europe is particularly exposed. The EU relies on a handful of suppliers for critical raw materials and is heavily dependent on imports of digital technology. See more at https://lnkd.in/eBGqPitT

As we are used to, a very good analysis from Science|Business. Worth reading and reflecting upon. Especially for those who read the Draghi report only as “we need more money and more debt”. 👇

The long-awaited report by Mario Draghi sends a powerful message about the future of EU #innovation funding. The former Italian Prime Minister and ECB President calls for doubling the EU’s R&D budget to €200 billion and urging reforms to streamline bureaucracy, improve #competitiveness, and close the innovation gap with the US and China. The report identifies three critical areas for action: fostering disruptive innovation, enhancing #decarbonisation strategies, and reducing Europe’s #tech dependencies. As the EU gears up for significant policy changes, these recommendations, set the stage for a new era in the European #research and innovation landscape. 💡Read more: https://lnkd.in/eU2uvb_5

The first step to solving a problem is to admit you have a problem. This is how I see the European competitiveness report recently put out by Mario Draghi. The report singles out a confluence of four factors that have now come together to make it clear that Europe must undertake a radical course correction, and do so quickly. - Digitalisation: This factor alone, per the report, largely explains Europe's productivity gap with the United States. Look no further than the recent report that the market capitalization of the entire stock market of Germany was overtaken by that of one US tech company (Nvidia) founded in 1993. - Decarbonisation: Decarbonisation is a must for the sake of the planet. It is also an economic imperative in a continent with few natural resources of our own to remove the shackles that high energy prices (multiples higher than in the US) place on the potential for growth. - Dependency: Whatever happens in this year's presidential election, the days of being able to count on the US security umbrella, freeing up resources for other things, may be numbered. At the same time, we saw the effect that dependency on Russian energy had on European economies, particularly Germany's, when that energy stopped flowing. And let's not forget the still greater threat of our dependency on chips and semiconductors from East Asia. All these factors will require investments greater as a share of GDP than the Marshall Plan. These investments will not be possible without robust growth, which brings us to... - Demographics: Most European countries have had sub-replacement fertility since 1980. As a result, per the report, by 2040, the European workforce will diminish by 2 million people every year. The great successes achieved by European founders in the US make clear that we do not lack the brainpower and imagination to innovate and grow our way out the situation. The obstacles we face are largely institutional and self-inflicted. The report points the finger at the regulatory and administrative burdens faced by European companies, as well as fragmentation of the common European market. In other words, the situation is critical. So what can be done? The report proposes a new industrial strategy, resting on a few pillars: - Reducing frictions in the common market - Reducing regulatory burdens - Increasing both public and private investment - Implementing a more competition-friendly industrial policy If we take this report as a wake-up call, we can get Europe back on track to achieving our ambitions for our posterity. But it will require coordinated and at times uncomfortable actions. Will we rise to the occasion, or dwindle into quaintness? Let me know in the comments what you think, and stay tuned. #europe #growth #investment

Well worth a read and shows the genuine challenges that Europe faces in being competitive in tech. The EU has formed a task force to act on Mario Draghi's report highlighting Europe's declining growth and competitiveness, which poses an "existential crisis." European Commission President Ursula von der Leyen has proposed a "competitiveness compass" as the key initiative for the next five years to close the innovation gap with the U.S., decarbonize the EU economy, and enhance economic independence. Draghi's report reveals Europe's significant lag in venture capital funding and the absence of "from-scratch" companies worth over €100 billion in the last 50 years, compared to six such U.S. companies worth over €1 trillion. A deeper analysis shows only 14 EU companies founded from scratch with a market cap above $10 billion, collectively worth $430 billion—less than half of Tesla's value and far behind the $30 trillion combined value of comparable U.S. companies. Key issues include the EU's fragmented market (languages and regulations) and restrictive legal environment, which stifle innovation and growth. While language barriers are less problematic with modern tools, inconsistent and restrictive regulations remain a major obstacle for scaling innovative companies in Europe.

🚀 Bridging the Innovation Gap: A Call for Strategic Policy in the EU! (Source: FT) The recent productivity report by Mario Draghi has sparked a crucial discussion about innovation dynamics between the EU and the US. With concerns that Europe might lag behind the US without massive public subsidies, it’s essential to delve deeper into this challenge. 🔍 Key Findings: - The EU and the US invest equally in public R&D—each at 0.7% of GDP. - The gap? Private R&D spending is notably higher in the US (2.3% vs. 1.2% of GDP in the EU). - The US leads in high-tech sectors like pharma, biotech, software, and aerospace, fuelling a cycle of innovation. 📈 What’s Driving the US Advantage? The dynamic shift from traditional giants like Ford and Pfizer to digital pioneers like Alphabet and Microsoft signifies the accelerating pace of sectoral innovation in the US. Meanwhile, the EU remains anchored to automotive sector leaders. 🔧 Strategies for the EU: 1. 🖥️ **Digital Leadership**: Emulate Estonia’s digital government sophistication EU-wide. Bolster EU software with digital platforms and integration. 2. 🤝 **Coordinated Policy**: Implement smarter, unified procurement policies and digital infrastructure such as transforming logistics with a digital euro. 3. 🌟 **Support Start-ups**: Simplify regulatory frameworks to enable start-ups to thrive. An “EU Inc” model can create a fertile ground for scaling innovations. NOTABLY. The EU doesn’t need more subsidies; it needs smarter strategies to cultivate a thriving ecosystem. #EUDigitalTransformation

Mario Draghi’s recent report 'EU Competitiveness: Looking ahead' calls for significant reforms and a €200 billion investment in the EU’s research and innovation sector. Recognising the need for simpler processes and greater alignment, the report highlights key priorities that include reducing dependencies, advancing decarbonisation and closing the tech innovation gap with the US and China. The report has been welcomed by the R&I community and represents a critical opportunity to strengthen Europe’s global competitiveness: https://buff.ly/3OqInb8 #Innovation #EUTech #MarioDraghi #FutureTech #ResearchAndDevelopment #TechLeadership