By Konstantinos M. Kokkinoplitis

High-level strategic plans, such as Mario Draghi's recent report on the future of European competitiveness, offer an ambitious vision to tackle economic and technological challenges. While these reports provide valuable information and often propose bold solutions to major issues such as decarbonisation, innovation and competitiveness, there is always a significant gap. This is the gap between these ambitious projects and the absence of the guaranteed sources of funding needed to implement the proposed interventions.

President Draghi's report, for example, requires huge investments of EUR 800 billion. annually, in order for Europe to catch up with competitors such as the US and China. Its proposals focus on areas crucial for Europe's future such as green energy, digital transformation, innovation and defence. However, the enthusiasm generated by these proposals is tempered by a crucial question: Is there money?

As with many other high-level strategy reports, President Draghi's grand vision is met with political and, above all, economic scepticism. While President Draghi argues that the necessary investments will boost productivity and reduce public budget pressures in the long run, some EU leaders have already raised objections. German Finance Minister Christian Lindner has already rejected the idea of relaxing fiscal rules or issuing common EU bonds. Germany, along with other countries with tight fiscal policy such as the Netherlands, remain wary of borrowing such large sums.

So the question remains. What is the practical value of this and other similar strategic projects if the political and, above all, budgetary means are not available to support them?

The issue addressed by the Draghi report is not new. Many similar strategic plans have failed to be implemented in the past for similar reasons.

Enrico Letta's report 'Much more than a Market (2024), which aims for a future strategy for the EU's single market, proposes adding a "fifth freedom", with a focus on innovation, education and knowledge. Despite acknowledging the need for investment, it lacks a clear plan for how it will be financed. Moreover, the proposal for a 'savings and investment coalition' to mobilise private capital, while important, is not accompanied by a functioning financing mechanism, making the implementation of the proposals a difficult task.

The Greece 10 Years Ahead (2012) study, conducted by McKinsey & Company for Greece, aimed to define a long-term growth model for the country. Despite the ambitious reforms it proposed, such as public-private partnerships and sector-specific development, the absence of secured sources of funding significantly undermined their implementation. References to EU funds and private funding could have been more specific, while the economic crisis of the time worsened the feasibility of the proposals.

The Development Plan for the Greek Economy (2020), led by Nobel laureate Christoforos Pissarides, proposed a wide range of investments in infrastructure, innovation and human capital. Despite its ambitious proposals, the absence of concrete funding commitments limited the effectiveness of the plan.

Instead, it only mentioned the possibility of using resources from the Recovery and Resilience Fund. In addition, the challenges caused by the COVID-19 pandemic have increased the difficulties in implementing the programme proposals.

The problem haunting strategic plans of this kind is the gap between visionary proposals and the political will and financial means to implement them. In the case of President Draghi, the emphasis is on the EU's common debt and massive public investment, to which countries with advanced fiscal policy have responded. The crux of the matter is how willing the Member States are to harmonise their fiscal policies and whether they are prepared to take on the collective debt.

President Draghi's report also assumes a level of intra-European cooperation that is not always politically feasible. As previous initiatives have shown, countries have been reluctant to cede economic sovereignty or agree on a common fiscal framework, resulting in partial and incomplete implementation.

Despite these challenges, high-level strategy reports continue to play an important role in shaping the policy dialogue and act as a catalyst for debate. With decarbonisation, digital transformation and competitiveness at the forefront, this report has already sparked an important debate on economic transformation across Europe, with business leaders, think tanks and governments responding positively to the need for institutional reforms. However, the initial enthusiasm and expectations aroused by the Draghi report must be accompanied by a realistic plan to secure the necessary financial resources for investment. Without clear and secure financial mechanisms and strong political will, there is a risk that it will suffer the same fate as previous reports - an ambitious but ultimately unrealistic vision for the future of Europe.

Mr. Konstantinos Kokkinoplitis is a Director of Seven Sigma P.C. and RISE and former Secretary General of Research and Technology.

This article was first published in capital.gr on 2024/10/03.