Approximately two decades of relative competitive decline against the United States and China, with an acceleration of this divergence since the 2008 financial crisis, documented in 400 pages, summarized in 170 official recommendations, quantified at 800 billion euros of additional annual investment. The Draghi report, submitted in September 2024, was the most exhaustive diagnosis ever commissioned on the lagging of the European economy. According to the Draghi Observatory (Draghi Observatory & Implementation Index), created by EPIC (European Policy Innovation Council) to monitor its implementation, only 11% of these recommendations are fully implemented one year later, while 90% of the Commission’s official initiatives claim to align with the report. Europe has adopted the diagnosis. It has not begun the treatment.

This is not a problem of vision. The Union knows exactly what it needs to do. The question that now arises is of a different order: why is an organization of 27 states, capable of producing such a diagnosis, structurally prevented from acting on its own conclusions?

The Essentials

  • Only 11% of the 170 official recommendations in the Draghi report are fully implemented one year after their publication, according to the Draghi Observatory of EPIC (European Policy Innovation Council)
  • 800 billion euros of additional annual investment were recommended, equivalent to the Marshall Plan in terms of proportion of European GDP
  • Intra-EU trade barriers still amount to an equivalent tariff of ~44% for goods trade and ~110% for services, revealing that an ostensibly single market remains fragmented in practice
  • The Von der Leyen II Commission claims 90% of its initiatives align with the report, creating a documented gap between political messaging and concrete transformation of the rules of the game
  • The real test will be decided on two specific matters: the union of capital markets and regulatory simplification, both awaiting decisions from member states

800 Billion Euros on the Table, and No One to Sign the Check

The central figure in the Draghi report is this one: 800 billion euros of additional annual investment, or approximately 4.7% of the Union’s GDP. To give scale, the Marshall Plan represented approximately 1 to 2% of European GDP of the time over several years. Draghi was asking for five times that, every year.

This is not a figure pulled out of thin air. It results from rigorous addition: closing the gap in venture capital (Europe raises ten times less than the United States for scale-ups), financing the dual energy and digital transition, reconstituting an industrial base in lost strategic sectors, and building the defense infrastructure that three decades of under-investment have left as a skeleton. The report also identifies where the money would come from: primarily from private capital markets, provided that Europe succeeds in integrating them.

This is where the project gets stuck. The Union of Capital Markets, promised for ten years, remains under construction. A German entrepreneur seeking to raise 50 million euros still faces 27 different tax regimes, 27 regulatory frameworks for securities, 27 approaches to bankruptcy. The Draghi report quantified the cost of this fragmentation: intra-EU barriers amount to ~44% for goods trade and ~110% for services, including financial services. In other words, Europe protects itself from itself more than it protects itself from the rest of the world.

11%, Not Zero

We must be precise about what the Draghi Observatory says, because nuance matters. The 11% of recommendations fully implemented does not mean nothing has changed. According to the EPIC Observatory, 20% are partially implemented and 46% are in progress, while 23% have not yet been addressed. What is alarming is not total inertia. It is the speed, and especially the distribution.

Progress concentrates in areas where the Commission can act alone, through regulation or directive: administrative simplification, reduction in notification delays for state aid, adaptation of the competition framework. These are real advances. The Simplification Act, the new guidelines on state aid, the revision of the semiconductor regulation: all initiatives bearing the imprint of the report.

What is stalling, conversely, are exactly the reforms requiring unanimity or qualified majority agreement from member states. The union of capital markets is the most glaring example. But also partial mutualization of debt to finance European public goods, corporate tax reform, and labor market harmonization. On these subjects, a large majority of member states endorses the diagnosis in the European Council. They then block at the level of texts, for reasons of electoral calendar, pressure from national lobbies, or simply because finance ministers are not ready to share their prerogatives.

The figure of 90% of Commission initiatives “aligned” with Draghi must be read in this context. Declarative alignment is free. It costs nothing to mention the report in an explanatory statement. What costs is voting for the text that changes the rules.

The Fragmented Single Market Remains an Open Wound

The ~44% equivalent tariff intra-EU concerns goods. For physical goods, the single market functions relatively well. It is in services, capital, and data that fragmentation is even more pronounced—around 110% equivalent tariff—and it is precisely there that tomorrow’s industries are at stake.

Take energy. An industrialist producing green electricity in Spain cannot sell it directly to a factory in Poland. Networks are not interconnected at adequate capacity, market prices are decoupled, access rules vary. Result: Europe produces increasingly renewable energy, but it cannot allocate it efficiently where industry needs it. The article The Race for AI, an Electrical Battle That Gas is Winning documented part of this constraint: demand for electricity from data centers is exploding in Europe, but transport capacity remains national.

For digital services, it is worse. A British or American fintech that sets up in Dublin can address the European market through regulatory passport. A French fintech wanting to establish in Poland faces local requirements for capital, governance, and notification that make organic expansion costlier than setting up in the United States. This anomaly is not new. It has been documented since 2015. It remains unresolved.

The Draghi report proposed on this point a specific mechanism: an optional “28th regime” allowing innovative companies to incorporate under a common European law, freeing themselves from the 27 national laws. This proposal received concrete legislative follow-up: the Commission published on March 18, 2026 a proposed regulation creating the “EU Inc.” status (unified European company).

Why Europe Knows and Does Not Act

The question of diagnosis adopted and reforms abandoned is not specific to Draghi. The Monti report on the single market dates to 2010. The Letta report on the single capital market dates to 2024, a few months before Draghi. Each decade produces its major report, welcomed with consensus, and partially shelved.

Three mechanisms explain this, and they reinforce each other mutually.

The first is structural: the unanimity rule on taxation and major institutional reforms gives each state a veto right. One country can block a reform that would benefit the other 26 if it believes it undermines its comparative advantage or fiscal autonomy. Ireland has blocked corporate tax harmonization for twenty years. Hungary negotiates exemptions in exchange for votes. This is not pathology: it is the system functioning as intended.

The second is political: structural reforms cost in the present mandate and pay off in the next. A government accepting labor law harmonization or debt mutualization immediately bears internal political pressure without seeing competitiveness benefits for five to ten years. Two to four-year electoral cycles create a systematic temporal asymmetry between political cost and economic gain.

The third is institutional: the Commission can propose, but it cannot decide alone. On texts that matter, it depends on the Council and Parliament. The Council brings together ministers answerable to their national parliaments. The European Parliament is crossed by unstable coalitions that change after each election. The effective legislative window for a Commission is about 18 to 24 months at the start of its mandate, before national electoral campaigns begin absorbing political energy.

These three mechanisms are known. They are described in the Draghi report itself, which devotes an entire chapter to governance. The Von der Leyen II Commission has proposed marginal adjustments, notably on the qualified majority rule in certain areas. No member state accepted reducing its veto right.

What Advances Nonetheless: Matters to Watch

Analytical honesty demands not reducing the balance sheet to its shortcomings. Several movements are underway, slow but real.

The review of competition policy is most advanced. The Commission relaxed its guidelines on state aid in 2025 to allow subsidies in strategic industries, following the impulse of the American Inflation Reduction Act. This was a direct recommendation from the report. The semiconductor regulation (EU Chips Act) mobilized 43 billion euros to attract manufacturers to Europe, with already visible results: TSMC is building a plant in Dresden, Intel remains committed despite its own financial difficulties.

Defense industrial policy represents another area where taboos have broken. The SAFE program (Security Action for Europe), presented in 2025, provides for 150 billion euros in joint loans to finance consolidation of European defense industry. This is not common debt in the sense of Next Generation EU, but it is partial mutualization that would have seemed unthinkable in 2019.

On administrative simplification, the Commission published a regulatory “Omnibus” in 2025 aimed at easing reporting obligations for mid-sized companies. European business associations welcomed the direction while noting that concrete effects will depend on national transposition, often slower than the letter of directives.

These partial advances draw a picture consistent with the clear-eyed optimism the situation deserves: the Union is capable of moving in acute crises (Covid, energy in 2022, defense in 2025), but incapable of sustaining structural reform over time outside the pressure of urgency. What capacity for action in crisis demonstrates is that decision-making mechanisms exist. What it also shows is that they activate only at the brink of the precipice.

The Test of the Next Six Months

Two specific matters will allow measurement of whether the Draghi report leaves a lasting mark or joins the library of diagnoses without follow-through.

The first is the directive on the Union of Capital Markets, whose revised version is expected by end of 2025. It must address fragmentation of equity and bond markets, simplify prospectus rules for SMEs, and partially harmonize insolvency regimes. If this directive is adopted without major national exemptions, it will constitute proof that deep structural reform can pass. If it is gutted in Council, the Draghi report will have joined the Monti report on the shelf.

The second is more political: debate on common financing of defense and energy transition. France and Germany (whose new Merz government displays a posture more favorable to common investment than its predecessor) have been negotiating since early 2025 a financing mechanism that could mobilize a significant share of the 800 billion euros recommended. The German federal government has signaled favorable orientation toward the Draghi report as framework of reference for its European policy. This is a non-negligible political signal.

The open question is not whether Europe wants to reform itself. The 11% of full implementation and 46% in progress show it wants to, partially, slowly, and in scattered order. The question is whether competitive pressure from the United States and China, combined with defense urgency, will create the political window necessary to force reforms that remain blocked. Tyler Cowen, in his analysis of American competitiveness, notes that major economic transformations often arrive through external shock rather than rational anticipation. For Europe, that shock is already here. The response is still being constructed.

Sources

  1. Draghi Observatory — Bruegel / Österreichische Gesellschaft für Europapolitik: https://www.oegfe.at/en/policy_briefs-en/greater-competitiveness-and-a-new-industrial-strategy-for-europe-implementing-the-draghi-report/
  2. Draghi Report — “The future of European competitiveness”, European Commission, September 2024
  3. Letta Report — “Much more than a market”, European Council, April 2024
  4. EU Chips Act — European Commission, data on TSMC and Intel investment commitments, 2024-2025
  5. SAFE Program (Security Action for Europe) — European Commission, 2025
  6. European Commission – Official Draghi report site (one year after): https://commission.europa.eu/topics/competitiveness/draghi-report/one-year-after_en
  7. EU Insider – EPIC Draghi Observatory (11% implementation): https://www.euinsider.eu/news/one-year-after-the-draghi-report-europe-delivers-only-1-in-10-promises
  8. ÖGfE – Implementation of Draghi report (383 sub-measures and 46% in progress): https://www.oegfe.at/en/policy_briefs-en/greater-competitiveness-and-a-new-industrial-strategy-for-europe-implementing-the-draghi-report/
  9. Banque de France – Venture capital EU vs. United States: https://www.banque-france.fr/en/publications-and-statistics/publications/how-can-europe-scale-its-venture-capital-market
  10. European Court of Auditors – Special Report Chips Act: https://www.eca.europa.eu/ECAPublications/SR-2025-12/SR-2025-12_FR.pdf
  11. L’Usine Nouvelle – TSMC Dresden Plant Construction: https://www.usinenouvelle.com/article/en-allemagne-tsmc-construit-sa-premiere-usine-europeenne-de-semi-conducteurs.N2217286
  12. L’Usine Nouvelle – SAFE Program 150 billion: https://www.usinenouvelle.com/article/rearmement-en-europe-bruxelles-devoile-la-premiere-repartition-de-safe-son-plan-de-financement-de-150-milliards.N2237453
  13. European Parliament – Legislative Train Schedule (Capital Markets December 2025): https://www.europarl.europa.eu/legislative-train/theme-a-new-plan-for-europe-s-sustainable-prosperity-and-competitiveness/file-market-integration-package-amending-directive
  14. Europe in Nouvelle-Aquitaine – EU Inc. Proposal (28th regime, March 2026): https://www.europe-en-nouvelle-aquitaine.eu/fr/actualit%C3%A9s/la-commission-europeenne-propose-la-creation-dun-nouveau-statut-dentreprise-le-28e
  15. IMF / Contrepoints – Intra-EU barriers 44% goods, 110% services: https://contrepoints.org/le-vrai-visage-du-marche-unique-europeen-44-de-barrieres-internes-pour-les-biens-110-pour-les-services/