The Draghi Report (September 2024) on ‘The Future of European Competitiveness – A Competitiveness Strategy for Europe,’ drafted by the former Italian Prime Minister and European Central Bank President, Mario Draghi, has become a much discussed piece of research with potential far-reaching implications. While the report primarily focuses on economic stability and fiscal reform within the EU, its insights and recommendations could hold relevance for the Gulf Cooperation Council (GCC) countries. The proposed annual EU investment of nearly 800 billion EUR is a massive economic undertaking, the political roadblocks are great, and whether the EU has the institutional will to act on Draghi’s reform blueprint is yet to be seen.
The Report addresses several critical issues related to economic governance, financial stability, and policy coordination within the EU. It emphasises the need for enhanced fiscal integration, stronger banking unions, and more cohesive economic policies to bolster resilience against future shocks. Although the report is, of course, Eurocentric in nature, its analysis offers potential lessons and opportunities for the GCC and its member states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE).
The Report underscores the importance of diversifying economic portfolios to reduce dependence on any one individual sector. This narrative is particularly relevant for the GCC, where oil and gas revenues have historically dominated. The report’s recommendations align in part with the GCC’s ongoing efforts to diversify their economies, as seen in Saudi Arabia’s Vision 2030, the UAE’s Economic Diversification Strategies and Bahrain’s Economic Vision 2030.
There is also a stress on the benefits of increased economic integration within the EU. Such an effort can lead to more efficient trade, investment, and economic cooperation with its partners, like in the GCC. An economically revitalised Single Market within Europe could place the bloc on a firm footing to finally look once again at an EU-GCC free trade agreement and restart formal negotiations with gusto. After all, over the past decade the GCC has proven its economic and investment potential, with steps to further integrate their own common market, whether that be in property ownership rights, capital movement, and access to heath and education.
Draghi called for improved policy coordination and fiscal integration within the EU. If realised this could offer GCC countries a European bloc with a harmonised EU, with far greater degree of coordination of its economic policies. An EU with enhanced policy alignment could prove beneficial for the ability to achieve more coordinated investments across EU members states in the Arabian Gulf, and for potential EU/GCC joint ventures in emerging and growing industries like renewable energy and artificial intelligence (AI). AI in particular being a growing industry that, for instance, Saudi Arabia has taken a keen interest in as demonstrated by its plans to create a 40 billion USD fund in the booming sector.
The innovation and technology sectors, like AI, could benefit greatly if Draghi’s reforms were fully realised, embedding greater economic resilience through diversification on the European side and opportunity for investment in tech startups in emerging industries on the GCC side.
All the aforementioned opportunities considered however, there is a little evidence that Brussels is willing to deviate from business as usual to lock-in and realise the economic potential within its reach. Re-elected Commission President Ursula von der Leyen has yet to demonstrate that her second five year term will be any different from her first to reflect the Italian’s economic vision for the EU. Furthermore her newly announced socialist pick for second-in-command does not exactly instil confidence for Draghi’s European competitive renaissance. The First Executive Vice President-designate, and current Deputy Prime Minister of Spain, Teresa Ribera will oversee climate and competition policy for the EU, having done little domestically for Spain’s economic fortunes in a similar brief.
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As the GCC continues to navigate its path towards greater economic resilience and growth, it is yet to be seen if its European friends can prove to be a catalyst in this endeavour in spirit of mutual economic benefit. Only a radical strategic change of direction at the heart of the EU’s policy making labyrinth will achieve this, something not currently on offer.