The significant challenge stems from a “very brutal wake-up call from Trump.”
“We had to accept tariffs imposed by our largest trading partner and long-standing ally, the United States,” he commented on the policy change under the U.S. president. “We have been urged by the same ally to boost military spending, a move we might have had to take regardless — but in ways likely not aligned with Europe’s interests.”
Despite its economic strength, the EU takes only a “marginal” role in Trump’s peace efforts in Ukraine, was “an observer” of the Gaza massacre, and “China has clearly indicated that it does not view Europe as an equal partner.”
“Europe is unprepared in a world where geo-economics, security, and the stability of supply sources, rather than efficiency, drive international trade relations,” Draghi, also a former Italian prime minister, cautioned. “Our political structure must adjust to the needs of its time when they are existential.”
Returning to his well-known appeal to enhance Europe’s competitiveness, Draghi pointed out that the International Monetary Fund estimates that if EU internal barriers were lowered to the level existing in the U.S., the bloc’s labor productivity could rise by about 7 percent after seven years.
Those internal trade barriers are also reducing the efficiency of Europe’s defense buildup. Although EU countries plan to boost their military investment by €2 trillion by 2031, “We have internal barriers that impose a 64 percent tariff on equipment and 95 percent on metals,” Draghi stated.
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