The bloc needs ‘unprecedented’ investment in defense and other sectors, former European Central Bank president Mario Draghi has said
The European Union needs a substantial increase in investment to achieve its goals, particularly enhancing its defense capabilities, former European Central Bank president Mario Draghi has stated in a report on the bloc’s competitiveness.
In the report, published on Monday, Draghi proposed that Europe should invest more than double the amount it did in its economy after World War II.
”To digitalize and decarbonise the economy and increase our defense capacity, the investment share in Europe will have to rise by around 5 percentage points of GDP,” he wrote. “This is unprecedented,” Draghi added, explaining that “for comparison, the additional investments provided by the Marshall Plan between 1948-51 amounted to around 1-2% of GDP annually.”
The Marshall Plan, officially the European Recovery Program, was an American initiative implemented in 1948 to provide foreign aid to Western Europe. Most EU nations are NATO members, and the military alliance has a financing target of 2% of the GDP of each member state.
Draghi noted that in June, the European Commission had estimated that over the next decade, additional defense investments of approximately €500 billion were required.
The EU has relied on decades of geopolitical stability, protection by the US and lower defense spending to support its domestic objectives, Draghi pointed out. However, it now has a fragmented defense industry that is unable to produce on a large scale.
The geopolitical landscape, he observed, is now “in flux” due to the conflict between Russia and Ukraine, among other reasons.
“We have reached the point where, without action, we will have to either compromise our welfare, our environment, or our freedom,” he warned, describing the situation as an “existential challenge.”
To achieve strategic independence and enhance its global geopolitical influence, Europe needs a plan to bolster defense investment, Draghi said, suggesting that the EU issue new debt to fund its requirements.
The bloc first utilized common borrowing to assist countries in paying for the recovery from the coronavirus pandemic in 2020. Several nations, including Germany, Denmark, Finland, and the Netherlands, have since opposed any form of new common debt.
The current government debt to GDP ratio in the EU stands at nearly 82%, according to Eurostat, the statistical office of the European Union.
The United States has long played a central role in the bloc’s defense. Since the onset of the Ukraine conflict in early 2022, the White House has been sending additional forces to the EU. Some nations, such as the Czech Republic and the Baltic states, have warned that Russia would attack them if it were to prevail in Ukraine.
Moscow has repeatedly dismissed these claims. President Vladimir Putin stated in June that there is no threat of Russia attacking NATO countries, as it has no “imperial ambitions,” and characterized such allegations as “nonsense.”