Draghi competitiveness plan: one year on, 11 percent delivered

One year after Mario Draghi presented his competitiveness report to the European Commission, the verdict from Brussels policy circles is blunt: ambition has not been matched by delivery. The European Policy Innovation Council, a Brussels-based think tank, tracks progress through its Draghi Observatory and rates just 11 percent of the report's proposals as fully implemented. The Commission has responded with a flurry of initiatives, the Competitiveness Compass, the Clean Industrial Deal, a savings and investments union, but in almost every area the decisive steps require agreement from national capitals that have so far refused to move.

Budget ambition constrained by national red lines

The centrepiece of the Commission's response is a €409 billion envelope for industrial revival within the EU's seven-year budget, presented as a direct answer to Draghi's call for massive investment. President Ursula von der Leyen argued the fund would let European firms scale up quickly and cut red tape in accessing EU money. Yet the overall budget stays at 1.26 percent of the Union's gross national income, including repayment of post-Covid debt, a level Draghi explicitly said was insufficient for the challenges he outlined.

Von der Leyen's original proposal sought to shift money away from agricultural subsidies and cohesion funding, the two largest budget lines, which are spent nationally. That reformist zeal was blocked by member states and by some of her own commissioners. The result is a budget that carries the right labels but not the financial weight. As one Commission official put it privately, the numbers were negotiated before the Draghi report landed; the report changed the rhetoric, not the arithmetic.

Joint borrowing taboo holds despite defence precedent

Draghi has consistently argued that EU-level borrowing, of the kind used for the post-pandemic recovery fund, is essential to finance large infrastructure projects and create a European safe asset, a deep, liquid pool of tradable debt that would support the euro's international role and provide a benchmark for lending across the bloc. That remains a political taboo for the so-called frugal countries. German Chancellor Friedrich Merz has ruled out further EU forays into the bond market, and the Netherlands maintains its long-standing opposition.

There is a crack in the dam. The €150 billion defence lending programme announced this year was financed by EU borrowing, the first such issuance since the recovery fund. It is a modest sum compared with the tens of trillions of dollars in the US Treasury market, but it establishes a precedent. The new budget proposal also contains avenues for joint borrowing. The unanswered question is whether the EU can issue debt regularly and predictably, as national governments do, or will continue to dip into markets sporadically. So far, it is the latter.

Capital markets union rebranded, barriers intact

Draghi's call for a genuine single market for investment has been adopted as a political priority by the new Commission, rebadged as the savings and investments union and bolted onto the decade-old capital markets union project. The ambition looks decent on paper: integrating capital markets supervision, breaking down national barriers for stock exchanges and clearing houses, harmonising insolvency and tax rules. But the key legislative proposals are still to come, and each touches sensitivities that governments guard jealously. Diplomats expect national and industry opposition to stall or water down the most consequential measures, just as they have for the past ten years.

Sector plans: automotive optimism, energy vagueness, telecoms resistance

On paper, the automotive sector is the one area where the Commission appears to have delivered. Draghi asked for an industrial action plan and a technology-neutral review of fleet emissions; both were produced. The strategic dialogue launched after the new year and the subsequent automotive action plan promised a stronger charging network, a regulatory framework for autonomous driving, and technological neutrality in the 2035 emissions law. Yet implementation is lagging. Apart from granting leniency on this year's emissions targets and bringing forward the 2035 review, few concrete actions have followed the March publication. Meanwhile, Chinese manufacturers have shifted from battery-electric to hybrid imports after the Commission imposed duties on the former.

Energy tells a similar story. Draghi identified high energy costs as a core drag on European industry and prescribed as much as half a trillion euros in grid investment this decade. The Commission's affordable energy action plan sets out measures to cut bills, including a controversial proposal to invest in American fossil fuel infrastructure to secure better gas deals, a move that angered green groups. Von der Leyen has also pledged $750 billion of European spending on US energy as part of a trade deal with Washington. It remains unclear how either commitment translates into lower industrial power prices, or how the financing would work. For energy, the record so far is big promises and little action.

Telecoms is where Draghi's prescription has hit the hardest political wall. His blueprint, fewer operators, deregulation, EU oversight of spectrum, landed as the Commission was preparing its own Digital Networks Act. But capitals, regulators and smaller operators have rejected most of it. Merger rules are under review and some ideas may seep into the December proposal, but the comprehensive overhaul Draghi wanted will not survive.

Competition policy tweaked, not transformed

Competition Commissioner Teresa Ribera moved fastest on Draghi's demand to modernise competition policy for productivity and growth. In the first months of von der Leyen's second term she completed a review of the Clean Industrial Deal State Aid Framework, retargeting subsidies toward productivity and decarbonisation, and launched a wide-ranging review of merger guidelines to allow efficiency and innovation arguments. The downside is timing: new merger guidelines will not arrive until end-2027, and they remain guidelines, not regulation, so their practical impact on case assessments is expected to be limited. The state aid framework does not dramatically expand member states' room to subsidise industry, and even ambitious elements such as electricity bill discounts for energy-intensive firms come with heavy conditions. Those hoping for a fundamental overhaul of the EU's conservative competition stance will be disappointed.

Trade defence holds, but offensive tools unused

On trade, the Commission applied duties on Chinese electric vehicles less than two months after Draghi's report and has resisted Chinese pressure for a price-floor agreement. That aligns with Draghi's call for robust trade defence. But he also urged the Commission to launch investigations on its own initiative, not only in response to industry complaints. The EV case remains the only such self-initiated investigation to date. A broader European foreign economic policy, made more urgent by Donald Trump's tariff threats, has seen little concrete progress, hampered by the time-consuming response to US measures and the EU's traditional caution around World Trade Organization rules.

Defence: commissioner appointed, coordination resisted

Draghi asked for a Defence Industry Commissioner with appropriate structure and funding. That post exists now, but it was the easy part, the role was already in the European People's Party manifesto for the June 2024 election. The harder demand, empowering the Commission to coordinate defence industrial policy, remains unmet. Defence is a national responsibility and governments have little appetite for Brussels coordination. Draghi highlighted the cost of that fragmentation last month: EU countries plan to increase military investment by €2 trillion by 2031, yet internal barriers impose a 64 percent tariff equivalent on equipment and 95 percent on metals. Diplomats say Draghi often pushes ideas that are not in line with national governments; his call last September to federalise some investment spending used a word that has become taboo in European councils. Defence bonds remain a distant prospect.

Health and biotech: funding gap persists despite new act

Few commissioners have embraced the Draghi messaging as enthusiastically as health chief Olivér Várhelyi. He is racing to deliver a Biotech Act by year-end, intended to carry the weight of the life sciences strategy published in July. Draghi identified underinvestment and red tape as the main reasons Europe lags the US and China in pharma innovation and clinical trials. The industry welcomed the July budget proposal's standalone research framework programme with an increased budget of €175 billion, but says ring-fenced funding for health research is still missing. The last Horizon Europe programme allocated €8.2 billion to health, dwarfed by the $47 billion the US spent in 2023. The new proposal allocates €22.6 billion for health, biotech and the bioeconomy, a sizeable increase but still a long way from parity.

On regulation, Draghi's most urgent short-term asks were to maximise the European Health Data Space and fully implement the Health Technology Assessment Regulation. The data space exists, but national assessors struggle to secure the resources they need. The idea of EU-backed world-class innovation hubs, modeled on California centres, made it into the life sciences strategy, but the industry's hopes for a game-changing legislative vehicle still rest on the Biotech Act.

Simplification: business wins, green groups worry

The Commission's first major legislative proposal of the new term was plucked straight from the Draghi playbook: an omnibus simplification bill cutting a range of environmental reporting obligations for businesses. Fewer companies will be subject to reporting rules, and those that remain face reduced duties. The scope of the carbon border adjustment mechanism has also been narrowed. Business groups are delighted; environmental organisations warn the cuts undermine the credibility of the Green Deal. The bill is now working through the legislative process, and its final shape will be a test of whether the Draghi-inspired push for competitiveness can coexist with the EU's climate commitments.