Desperate To Do Whatever It Takes, Unlikely To Make Any Difference: A Dire Warning From Mario Draghi
By Eric Peters, CIO of One River Asset Management
“We’ve made very clear to China -- and many other countries have as well -- that they should not be supplying Russia with weapons for use in its aggression against Ukraine,” said Secretary of State Blinken after a meeting of G-7 foreign ministers.
“It’s allowing Russia to continue the aggression against Ukraine and it’s also helping Russia overall rebuild its defense forces and defense capacity,” he said, as America works to hold the West together, while it manages its slow inward turn, and each major economic block scrambles to secure itself, as the geopolitical gears grind onward, on a little planet that is tearing itself apart.
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“In a benign international environment, we trusted the global level playing field and the rules-based international order, expecting that others would do the same. But now the world is changing rapidly, and it has caught us by surprise,” said Mario Draghi, former European Central Bank Chief, speaking at the High-level Conference on the European Pillar of Social Rights.
“Most importantly, other regions are no longer playing by the rules and are actively devising policies to enhance their competitive position. At best, these policies are designed to re-direct investment towards their own economies at the expense of ours; and at worst, they are designed to make us permanently dependent on them,” said Draghi, sounding an existential alarm on Europe.
“China, for example, is aiming to capture and internalize all parts of the supply chain in green and advanced technologies and is securing the access to the required resources. This rapid supply expansion is leading to significant overcapacity in multiple sectors and threatening to undercut our industries,” he said.
“The US, for its part, is using large-scale industrial policy to attract high-value domestic manufacturing capacity within its borders – including that of European firms – while using protectionism to shut out competitors and deploying its geopolitical power to re-orient and secure supply chains,” he said.
“We have never had an equivalent “Industrial Deal” at the EU level, even though the Commission has been doing everything in its power to fill this gap. As such, despite a number of positive initiatives that are underway, we are still lacking an overall strategy for how to respond in multiple areas,” said Mario.
“We are lacking a strategy for how to keep pace in an increasing cutthroat race for leadership in new technologies. Today we invest less in digital and advanced technologies than the US and China, including for defense, and we only have four global European tech players among the top 50 worldwide,” he warned, articulating the reasons why Europe is becoming even less relevant.
“We are lacking a strategy for how to shield our traditional industries from an unlevel global playing field caused by asymmetries in regulations, subsidies and trade policies,” said Draghi, desperate to do whatever it takes, unlikely to make a difference.
To appreciate the profound challenges facing Europe, read the full Mario Draghi speech [here].
