The Draghi Report
Previously, CI reported that Mario Draghi, formerly the European Central Bank (ECB) president, had hammered the EU on its lack of support for innovation, declaring that Europe is falling behind. The full report, published on the ECB website, states that European “innovation is blocked at the next stage: we are failing to translate innovation into commercialisation, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations.”
Due to this systemic shortcoming, European entrepreneurs focus their efforts on the US capital markets to finance their firms, as private capital is simply not accessible to the same degree in the EU, which has a larger population than the US.
The report states:
“Between 2008 and 2021, close to 30% of the “unicorns” founded in Europe – startups that went on the be valued over USD 1 billion – relocated their headquarters abroad, with the vast majority moving to the US.”
The Draghi Report explains that Europe is “stuck in a static industrial structure” and too few new companies are emerging in the EU. Innovation is sparse, and disruption is challenged.
Europe’s “lacks focus,” and “dynamism” is described as “self-fulfilling.”
Draghi hammers the current state of affairs:
“We should abandon the illusion that only procrastination can preserve consensus. In fact, procrastination has only produced slower growth, and it has certainly achieved no more consensus. We have reached the point where, without action, we will have to either compromise our welfare, our environment or our freedom.”
The bureaucratic morass, inefficient capital allocation, and overtaxation may be too much for Europeans to handle. Change is hard, and entitlements become birth rights—it does not matter whether the end game is rather dire.
So, will Europe right the ship and refocus on innovation and entrepreneurship? Will it embrace the benefits of a market economy and capitalism? Will it allow risk takers to reap the rewards of a successful venture? You tell me.
The report is available below.