There has been a mixed reaction to the Mario Draghi report on improving European competitiveness. The former Italian prime minister and president of the European Central Bank made a number of recommendations in the report published last September.
Much of the political focus has been on Draghi’s recommendation to increase investment across the union by ¤700 billion each year. While there is support for this measure, the proposed means of raising the funding through joint issuance of sovereign debt has split member states.
But another key recommendation in the Draghi Report, which has so far received little attention – cross-border mergers – could have significant implications for Ireland. The report says that if the EU wants to compete with the US and China, then its companies need to grow in scale.
His plan for rejigging the corporate landscape runs against prevailing EU orthodoxy. The view in Brussels has been that smaller national companies foster innovation, which ultimately benefits the consumer through lower prices. Draghi is urging EU policymakers to reassess this approach and wants anti-trust law to be reformed to allow the emergence of a few big EU companies in key sectors like telecommunications.
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Even though there will be opposition to Draghi’s recommendations from member states that favour protectionist policies, the incoming Trump administration could change that political calculation. President Trump is pursuing an economic nationalist agenda and seems intent on pitting US companies against EU policymakers. Mark Zuckerberg’s latest broadside against regulation in the EU is a case in point.
As well as seeking to maintain its attractiveness to US investment, the focus of the incoming Government must also be to develop the indigenous corporate sector, in line with the thrust of the Draghi report. It has also sparked a new debate about loosening rules which govern national support for industry in the EU, which could also have an impact on Ireland, as big states move more aggressively to attract investment in key sectors.