WSJ on Mario Draghi's plan to save Europe's economy
It will be short and bittersweet. The WSJ editorial board fails to address the issue at its core.
How to save Europe's economy
The Wall Street Journal says Mario Draghi has a plan to save Europe's economy, if anyone actually reads it.
Mario Draghi is trying again, to save Europe's economy and people would do well to actually read his plan. Instead the buzz surrounding Mr Draghi's new report on boosting European competition helps explain why he needed to write it in the first place.
The former European Central Bank president and Italian prime minister released a nearly 400-page document on Monday heart cry Urging politicians to stop Europe's growing recession compared to America. The US economy is now 30% larger than that of the European Union; It was 17% larger in 2002. By one measure, output per capita in Europe is 34% lower than in the United States
Alas, Europe's politicians and their media enablers are reading only the parts of Mr. Draghi's writings that they want. That's why you've probably read that he proposes to spend up to €800 billion annually on research and development, digitalisation, climate goals and defence, among other things. This is already being interpreted as a call for more government “investment”, although Mr Draghi is clear that the number must include taxpayer money as well as private capital.
This selective reading also explains why commentators are trumpeting Mr Draghi's support for decarbonising Europe's economy and issuing new eurozone bonds. The latter is the kind of institutional tinkering Brussels likes to debate, even though, or perhaps because of, it is unlikely to ever come. Neither is the main issue in Mr Draghi's case.
The point is that Europe needs to revise its approach to the private economy in order to keep up with the US, spend more on defense and maintain its influence in world affairs. The continent needs a growth strategy.
Entrepreneurs face a lot of red tape as they try to start a business and bring new products and services to market. Tech companies must navigate about 100 technology-focused laws, Mr. Draghi notes, administered by the EU's headquarters and 270 regulators across 27 national governments.
Yet even before Mr Draghi published his report, Europe's political class proved it valued punishing America's success more than emulating it. Witness Tuesday's ruling by the European Court of Justice blessing Brussels' move to impose €13 billion in additional taxes on Apple and €2.42 billion in antitrust fines on Google.
The unfortunate truth for Europe is that little of Mr Draghi's report is a surprise, even if he performs a valuable public service by putting everything together. Some of his advice will pay off until Europe's politicians – and its voters – decide that gradual economic decline is unacceptable.
Five things the WSJ got right
- The US economy is now 30% larger than that of the European Union; It was 17% larger in 2002. By one measure, output per capita in Europe is 34% lower than in the United States
- Draghi has proposed spending up to €800 billion annually on research and development, digitalisation, climate goals and defence, among other things.
- Entrepreneurs face a lot of red tape as they try to start a business and bring new products and services to market. Tech companies must navigate nearly 100 tech-focused pieces of legislation, administered by 270 regulators headquartered in the EU and spread across 27 national governments.
- As soon as Mr Draghi released his report, Europe's political class proved it was more concerned with punishing America than emulating America's success.
- The unfortunate truth for Europe is that little of Mr Draghi's report is surprising.
For starters, I read the whole thing.
Second, I discuss the glaring flaws of the EU and EMU (Eurozone Monetary Union) over the decades.
The Wall Street Journal's editorial board failed to cite any key cause of the EU's demise other than regulation.
And the WSJ defends point two without discussion. Government rarely spends money wisely. Investment must come from private industry, but regulations are problematic.
Mario Draghi proposed “Vice President for Simplification”.
Did the WSJ editorial board really read the entire report?
I scoffed at my acceptance offer Former ECB President Mario Draghi proposed “Vice President for Simplification”.
One of my readers commented that my response was too long. The key points here are ones that the WSJ failed to discuss and Mario Draghi went to great lengths to avoid.
- Draghi's spending proposals are completely out of the question under EU budget rules.
- Draghi wants to increase the financing capacity of the banking sector and complete the banking union. This is a violation of treaties signed by all countries.
- Draghi praised the EU's wealth redistribution scheme. How did the WSJ miss that?
- Draghi wants a strong pension system without saying who will pay for it. It's another miss for the WSJ.
- Draghi moans about the EU's decarbonisation costs but supports them anyway.
- Draghi proposes a buyer cartel for LNG what a hurry
And finally!
To begin reducing the “stock” of regulation, the report recommends hiring a new commission vice president to streamline acquisitions, while adopting a single, clear approach to measuring the cost of new regulatory “flows”!
Vice President for Simplification
What a bloody hoot! You probably couldn't make this up.
Both the EU and the EMU (Eurozone Monetary Union), are broken beyond repair.
They cannot be repaired because any change in the contract requires unanimous consent.
Draghi's budget proposal is a nonstarter because of the budget.
Heck, the EU bureaucracy is such that it will probably spend the next five years creating a “Vice President for Simplification”. And what it will do (at best), is bring in more regulations, which some countries will object to.
Contract changes
In Draghi's 69-page report, he mentions the word “agreement” just four times. And it was a futile attempt to get around the fact that everyone at the time needed a treaty change.
Questions and answers on basic problems
Q: What's holding the EU back?
Answer: The contract itself.
Q: Why wasn't the contract changed?
Answer: It must take unanimous approval. Each nation effectively has a veto and it only takes one.
Q: Which race is the biggest obstacle?
Answer: Germany for fiscal regulation and France for agricultural regulation.
Q: What is Germany's role?
Answer: Germany only entered the EU and EMU if it had veto power over a common budget, and the German constitution also precludes this.
Question: What is the role of France?
Answer: France wants to protect small, unskilled French farmers. It has veto power over all agricultural policies except those expressly authorized by the Treaties.
Q: What about trade negotiations?
Answer: Every country has a veto in trade negotiations. That's why it took the EU 15 years to agree a seemingly simple deal with Canada. And every country that joins the EU has the same veto power.
Q: Why wasn't the treaty amended to allow for majority rule?
Answer: Germany said no on finance, France said no on agriculture, and many countries said no on trade issues and military issues.
Is this hopeless?
Yes, obviously.
With no Microsoft, Google, Amazon, Apple or Facebook in the EU, the EU will break them up before they grow up in the name of creating competition.
And the EU is looking for essentially the same reasons on the outside, but add DEI.
For a long time, see Former ECB President Mario Draghi proposed “Vice President for Simplification”.
Finally, the whole idea of a “Vice President of Simplification” adding layers of bureaucracy to eliminate bureaucracy, without any power (by contract) to change anything, speaks for itself.
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