Draghi urges reform, investment drive to revive lagging EU

STORY: The European Union needs to make big changes if it wants to keep pace with the U.S. and China.

That's according to former European Central Bank head Mario Draghi on Monday (September 9).

He argued the EU needs a far more coordinated industrial policy, quicker decisions and massive investment.

Draghi made his case in a report commissioned by EU leaders last year seeking ways to keep the bloc's economy competitive.

"We have said many times that growth has been slowing down for a long time in Europe, but we've ignored it. I would say until two years ago we would never have such a conversation as the one we're having today, because things were sort of going well. We were doing well out of globalization, unemployment was steadily falling, and now we cannot ignore it any longer."

Draghi said the bloc needed additional investment of up to $884 billion per year, or up to 5% of GDP.

That's far higher than the 1-2% in the Marshall Plan for rebuilding Europe after World War Two.

Draghi's report said EU countries had responded to the new realities, but those efforts were hurt by a lack of coordination.

He also said differences between EU members limited the bloc's ability to compete on a global level, and criticized the EU's decision-making process as complex and sluggish.

Draghi said the bloc needed to boost innovation and bring down energy prices while continuing to decarbonize.

Current President of the European Commission Ursula Von der Leyen.

"The only way to ensure our long-term competitiveness is to shift away from fossil fuels and towards a clean, competitive and circular economy. The second principle, our efforts on competitiveness must go hand in hand with increased prosperity for everyone in Europe."

EU growth has been persistently slower than that of the U.S. in the past two decades and China was rapidly catching up.

Analysts said the EU may well drag its feet on Draghi's suggestions.