10/10/2024
DOES THIS MEAN I HAVE TO GIVE UP ALL MY FAVOURITE FOODS?
The leads of the EU want to avoid falling behind, but are they are prepared to make changes?
https://the-herald-newsletter.beehiiv.com/
We all know the type. A man in late middle-age, beset with lifestyle diseases caused by overeating, smoking, heavy drinking and a sedentary life. Worried about the parlous state of his health, he consults his doctor who advises him to quit smoking, drink less, adopt a sensible diet and get more exercise. Deep down, our wheezing old duffer knows that the doctor’s advice is sound but, even so, that’s not what he wanted to hear. What he wanted was a ‘magic pill’ that he could take to absolve himself of his self-inflicted sins so that he can go forth and sin much more. A reality check was the last thing he wanted.
The European Union is also worried about its health – its financial and political health, that is. It’s stagnating. So, they commissioned Mario Draghi, former EU commissioner and Goldman Sachs Alum, to look into the matter and make some recommendations. He did, and his report was published in September just gone. If you have the constitution to wade through the 400-page report, you can download it from here. But you can also read on for a potted version.
According to Draghi, the issues, in no particular order, are as follows:
A. The Productivity Gap. The EU countries are struggling to match America’s raw economic dynamism and China’s soaring ambition. Hence, there is a growing productivity gap, hampering competitiveness.
B. Geopolitical Instability. In a nutshell, Russia and the reliance of EU countries on energy sources from Russia.
C. Technological Lag. In many ways, a restatement of the point made in A. above. The EU is much weaker than either the USA or East Asia when it comes to emerging technologies.
D. Demographic Changes. An aging population means a shrinking workforce and intolerable pension pressures. Furthermore, the EU’s preferred method of solving this problem – mass immigration – is not working and never will.
E. Regulatory and Market Barriers: America innovates, China imitates, the EU regulates. For example, the EU’s Artificial Intelligence Act, which came into force on 1st August 2024, seeking to prohibit any AI application which may lead to ‘discrimination’ or ‘harm’ (whatever that means).
F. Energy Costs. The EU countries grapple with significantly higher energy costs than either the USA or China. No kidding! Perhaps it wasn’t a good idea to shut down nuclear energy, blow up Nord Stream and cut themselves off from Russia?
The report’s proposed solutions?
1. Investing in digital infrastructure and technologies to close the ‘productivity gap’ with the USA.
2. Policy co-ordination between member states and simplifying regulatory frameworks to create a more cohesive industrial strategy.
3. Investing in innovation by stimulating private finance and closing funding gaps by means of targeted policies.
4. Addressing the demographic challenges by investing in education and training to ensure a skilled workforce.
5. Promoting policies that include social inclusion and equity.
6. Implementing lower and more uniform taxation to reduce energy costs and foster innovation in renewable energy, as well as creating a governance framework for a ‘true Energy Union’.
Some of Mr. Draghi’s proposals have merit, others less so. For starters, where is all this investment going to come from? And No. 5 above simply means important yet more American racial and identity politics, which is the last thing Europeans need.
But it hardly matters, because these proposals are already dead in the water.
European Central Bank President Christine Lagarde strongly endorsed her predecessor Mario Draghi’s multibillion-euro plan to fix Europe’s stagnant economy, but said that governments would have to figure out how to afford it on their own.
“Structural reforms are not the responsibility of the central bank — they are the responsibility of governments,” Lagarde told a press conference in Frankfurt….
Draghi’s recommendations have already caused fierce debates in Brussels over where the necessary financing — around triple the sum deployed in the postwar Marshall Plan — might come from, especially as interest rates remain high after a two-year sequence of hikes.
Getting the governments of all 27 member countries of the EU -– each with their own national priorities, vested interests and political and bureaucratic fiefdoms -– to agree on a unified plan of action is like trying to herd cats. Add to that the strains in the relationships between the Members States, over the Russia-Ukraine war for example, or immigration, means that goodwill may be fraying.
Prognosis: the patient can’t give up the foods they love, and smoking reduces their stress, and they don’t have time to exercise, and a million other excuses. No change, then. Maybe the first heart attack will force the changes. But, then again, maybe not.
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