Mario Draghi, former president of the Government of Italy and the European Central Bank, and recently awarded the Princess of Asturias Award, was a few weeks ago the protagonist of a special edition of Energy Prospectives, the energy reflection forum promoted by the Naturgy Foundation together with IESE Business School.
At the meeting, which is part of the first anniversary of the presentation of the Draghi Report, the achievement of the objectives was analyzed, whether the recommendations contained in the report have been implemented and where the European Union stands in relation to the rest of the world powers.
The Draghi Report set out an ambitious roadmap to strengthen Europe’s competitiveness and autonomy in sustainability and energy. Twelve months after its publication, the continent, in Draghi’s opinion, is in an even more fragile position than then, with only 11.2% of the 383 recommendations fully implemented.
Furthermore, “it is in a more complicated situation than a year ago, given its dependence on raw materials and technology”, to which we must add “the importance that the geopolitical situation, security and resilience of supply chains is currently gaining.”
Since the publication of the report, the international scenario has evolved significantly. The United States, China and even Japan are implementing a faster and more effective industrial policy than in Europe. Given this, Draghi has mentioned that after publishing the report, criticism was made of the protectionism of industrial policy, which is now losing strength as more and more powers adopt it. In this sense, he considers that both the US and China apply industrial policies, although with different models. In addition, he pointed out the need to reverse the weight of private investment in R&D in Europe, and equate it to the American model where public investment is minimal and the weight is in the private sector.
Faced with this reality, Draghi advanced that among the immediate priorities based on his most urgent recommendations are the necessary reforms to reduce costs and guarantee competitiveness, greater investment and addressing current regulation to be able to strengthen internally.
For Draghi, the role that public administrations must play in helping SMEs to be more competitive is crucial since they represent 70% of total employment and therefore the European industrial structure itself is at stake. And he recalled that when preparing the report it was clear that, although financing existed, the great obstacle for European small and medium-sized entrepreneurs was scalability, which shows that Europe is not creating the appropriate conditions for local companies to scale.
The great challenge of energy
In his opinion, energy continues to be one of Europe’s great challenges. European companies face higher gas and electricity prices than the United States, which directly impacts European industrial competitiveness. To address this situation, Draghi calls for urgent reform to make energy costs in Europe competitive. For the former president of the ECB, it is a priority for Europe to deepen the reform of the energy market, since the situation has changed and now both the origin of energy and its price matter.
Furthermore, in Europe, infrastructure permits take up to nine years to become available mainly due to highly fragmented governance. The report proposes linking prices to long-term contracts and renegotiating contracts for difference, streamlining permits and making common public financing the rule for projects of European interest, reducing bottlenecks and improving costs and security, and betting on technological neutrality.
Finally, and as he also mentions in his report, he has highlighted the urgency of greater European coordination in the management of public goods, such as network infrastructures. With this, he highlighted the work being carried out by the private sector, which is already moving forward and exploring how to achieve the objectives. However, he has focused on the fact that the greatest effort must come from the public sector, which must simplify regulations and legislation. He pointed out that a common framework is urgently needed and, to promote it, the private sector must help change public opinion, using its voice to make it heard and the rules to be reformed.
To conclude, Mario Draghi has reflected – in a 10-year scenario – on how Europe can achieve success. “The solution is to accelerate growth and decarbonize at the same time. The ultimate goal is an energy-independent, competitive and high-growth continent.” “That is, decarbonization and competitiveness, understanding decarbonization as the lever to strengthen competitiveness.”
Francisco Reynés, executive president of Naturgy, also participated in this special day, who valued “the solidity of the ideas and the precision of diagnosis, in addition to the Europeanism” of the former European commissioner. For this reason, “we are especially interested in knowing your proposals in energy and economy and how they can be translated into concrete solutions,” he concluded.
For his part, Franz Heukamp, general director of IESE, highlighted the essential role of energy in people’s lives, hence “we must guarantee its supply in a stable and affordable manner, with a predictable regulatory environment.”