August 2025
We publish the full text of the address by Mario Draghi, former Prime Minister of Italy, delivered at the meeting “What Horizon for Europe?” on Friday, August 22, at 5:00 p.m. in Auditorium isybank D3.
For years the European Union believed that its economic dimension, with 450 million consumers, would itself bring geopolitical power and leverage in international trade relations. This year will be remembered as the year in which that illusion evaporated.
We had to resign ourselves to the tariffs imposed by our largest trading partner and long-standing ally, the United States. We were also pushed by that same ally to increase military spending—a decision we perhaps should have made anyway, though in forms and ways that would likely have reflected Europe’s own interest more faithfully. Despite having provided the greatest financial contribution to the war in Ukraine, and despite having the greatest stake in a just peace, the European Union has so far played only a fairly marginal role in peace negotiations.
Meanwhile, China has openly supported Russia’s war effort while expanding its industrial capacity in order to flood Europe with excess production, now that access to the U.S. market is constrained by new barriers imposed by Washington. European protests have had little effect: China has made it clear that it does not view Europe as an equal partner and uses its control over rare earths to make our dependency increasingly binding.
Europe also stood by as Iran’s nuclear sites were bombed and the massacre in Gaza intensified. These events swept away any illusion that economics alone could ensure geopolitical power. It is therefore not surprising that skepticism about Europe has reached new heights. But it is important to ask: what is this skepticism really directed at?
In my view, it is not skepticism about the values on which the European Union was founded—democracy, peace, freedom, independence, sovereignty, prosperity, fairness. Even those who argue that Ukraine should surrender to Russia’s demands would never accept the same fate for their own country; they too attach value to freedom, independence, and peace, even if only for themselves.
Rather, I believe the skepticism concerns the Union’s ability to defend those values. This is partly understandable. Models of political organization, especially supranational ones, emerge at least in part to solve the problems of their own time. When those problems change to the point of making existing structures fragile and vulnerable, those structures must themselves change.
The EU was created because in the first half of the 20th century the previous models of political organization—the nation states—had in many countries utterly failed to defend those values. Many democracies had abandoned every rule in favor of brute force, and Europe plunged into the Second World War. It was therefore almost natural for Europeans to develop a form of collective defense for democracy and peace. The European Union was an evolution that addressed the most urgent problem of that time: Europe’s tendency to slide into conflict. And it is untenable to argue that we would be better off without it.
The Union then evolved again in the postwar years, gradually adapting to the neoliberal phase between the 1980s and early 2000s. That period was characterized by faith in free trade and open markets, by a shared commitment to multilateral rules, and by a conscious reduction of state power, as states assigned tasks and autonomy to independent agencies. Europe prospered in that world: it transformed its common market into the single market, became a key player in the World Trade Organization, and created independent authorities for competition and monetary policy. But that world has ended, and many of its features have been erased.
Where once markets were relied upon to guide the economy, today there are sweeping industrial policies. Where once there was respect for rules, now there is the use of military force and economic power to protect national interests. Where once the state saw its powers shrink, today every instrument is employed in the name of state authority.
Europe is ill-equipped in a world where geo-economics, security, and the stability of supply sources, rather than efficiency, shape international trade relations. Our political organization must adapt to the existential demands of its time: we Europeans must reach a consensus on what this requires.
It is clear that dismantling European integration in order to return to national sovereignty would only expose us further to the will of the great powers. But it is equally true that, to defend Europe against growing skepticism, we must not try to project past achievements into the future we are about to enter. The successes we achieved in previous decades were responses to the specific challenges of their own time, and they tell us little about our ability to face the challenges before us now. Recognizing that economic strength is a necessary but not sufficient condition for geopolitical strength can finally trigger a genuine political reflection on the Union’s future.
We can take some comfort in the fact that the European Union has been able to change in the past. But adapting to the neoliberal order was, by comparison, a relatively easy task. The main goal then was to open markets and limit state intervention. The EU could act primarily as a regulator and arbiter, avoiding the harder question of political integration.
To face today’s challenges, the European Union must transform itself from a spectator—or at best a supporting actor—into a protagonist. Its political organization must also change, inseparable as it is from its ability to achieve its economic and strategic objectives. Economic reforms remain a necessary condition on this path of awareness. Nearly eighty years after the end of World War II, collective defense of democracy is taken for granted by generations with no memory of that time. Their commitment to European political construction depends in no small part on the Union’s ability to offer its citizens prospects for the future—including economic growth, which in Europe has been far lower than in the rest of the world over the last thirty years.
The European Competitiveness Report has identified many areas in which Europe is losing ground and where reforms are most urgent. But one theme runs through all of its recommendations: the need to make full use of the European dimension in two directions.
The first is the internal market. The Single Market Act was passed almost forty years ago, and yet significant obstacles to trade within Europe remain. Removing them would have a substantial impact on Europe’s growth. The IMF calculates that if our internal barriers were reduced to U.S. levels, labor productivity in the EU could be about 7% higher after seven years. Consider that in the last seven years our total productivity growth was just 2%.
The cost of these barriers is already visible. European states are embarking on a massive military enterprise, with €2 trillion—one quarter of it in Germany—in additional defense spending planned between now and 2031. Yet we have internal barriers equivalent to a 64% tariff on machinery and a 95% tariff on metals. The result is slower procurement, higher costs, and more purchases from non-EU suppliers, which means not even stimulating our own economies—all due to obstacles we impose on ourselves.
The second dimension is technology. One lesson is now clear from the way the global economy is evolving: no country that aspires to prosperity and sovereignty can afford to be excluded from critical technologies. The United States and China openly use their control over strategic resources and technologies to extract concessions in other areas. Excessive dependence has become incompatible with sovereignty over our own future.
No European country alone has the resources to build the industrial capacity required to develop these technologies. The semiconductor industry illustrates this challenge well. Chips are essential for today’s digital transformation, but plants to produce them require massive investments.
In the United States, public and private investment is concentrated in a small number of large factories, with projects ranging from $30 to $65 billion. In Europe, by contrast, most spending occurs at the national level, essentially through state aid. Projects are far smaller—typically between €2 and €3 billion—and scattered across our countries with diverging priorities. The European Court of Auditors has already warned that there is little likelihood the EU will meet its goal of increasing its global market share in this sector to 20% by 2030, up from less than 10% today.
Thus, whether in the internal market or in technology, we return to the fundamental point: to reach these objectives, the EU must move toward new forms of integration. We have ways to do so—for example, with the “28th regime” operating above the national level, or with agreements on projects of common European interest and their joint financing, an essential condition for achieving the scale required both technologically and economically.
Years ago, here at your Meeting, I spoke about the difference between good debt and bad debt. Bad debt finances current consumption, leaving the burden to future generations. Good debt finances investments in strategic priorities and in raising productivity. It generates the growth needed to repay it. Today, in some sectors, good debt is no longer possible at the national level, because investments made in isolation cannot reach the scale necessary to boost productivity and justify the debt. Only forms of common debt can support large European projects that fragmented national efforts could never achieve. This applies to defense—especially research and development—to energy, with the investments required in European networks and infrastructure, and to disruptive technologies, an area where risks are very high but potential successes are crucial for transforming our economies.
Skepticism helps us see through the fog of rhetoric, but we also need hope for change and confidence in our ability to achieve it.
All of you have grown up in a Europe where nation states have lost relative importance. You have grown up as Europeans in a world where it is natural to travel, work, and study in other countries. Many of you accept being both Italian and European; many of you recognize that Europe enables small countries to achieve together goals they could never reach alone, especially in a world dominated by superpowers like the United States and China. It is therefore natural that you should hope for Europe’s renewal.
We have also seen, over the years, that the EU has been capable of adapting in emergencies, sometimes beyond all expectations. We managed to break historical taboos such as common debt within the Next Generation EU program and to help one another during the pandemic. We carried out, in record time, a vast vaccination campaign. We showed unprecedented unity and participation in responding to Russia’s invasion of Ukraine.
But these were responses to emergencies. The challenge now is to act with the same decisiveness in ordinary times, as we confront the new contours of the world we are entering. It is a world that does not look at us kindly, that does not wait for the length of our community rituals before imposing its force. It is a world that demands discontinuity in our objectives, our timelines, and our ways of working. The presence of five European heads of state and the Presidents of the European Commission and Council at the last White House meeting was a manifestation of unity that means more to citizens than countless Brussels gatherings.
So far, much of the adaptation has come from the private sector, which has shown resilience despite the instability of new trade relations. European companies are adopting next-generation digital technologies, including artificial intelligence, at a pace comparable to the United States. And Europe’s strong manufacturing base can meet rising demand for greater domestic production.
What has lagged behind is the public sector, where decisive change is most needed. Governments must define which sectors to prioritize for industrial policy. They must remove unnecessary barriers and review permitting structures in the energy sector. They must agree on how to finance the massive investments needed in the future—estimated at about €1.2 trillion per year. And they must design a trade policy suited to a world that is abandoning multilateral rules.
In short, they must recover unity of action—and they must do it not when circumstances have become unsustainable, but now, when we still have the power to shape our future.
We can change the trajectory of our continent. Turn your skepticism into action, make your voices heard. The European Union is above all a mechanism to achieve the goals shared by its citizens. It is our best chance for a future of peace, security, and independence. It is a democracy—and it is us, you, its citizens, the Europeans, who decide its priorities.
