Former Italian Prime Minister and President of the European Central Bank, Mario Draghi, stated on Monday at KU Leuven University that Europe faces risks of "subordination, division, and deindustrialization" unless it evolves into a "genuine federation." Draghi asserted that a shift from a confederation to a federation is necessary for Europe to exert power in a "defunct" global order.
"Europe faces risks of subordination, division, and deindustrialization unless it evolves into a genuine federation."
Global Order Dynamics
Draghi characterized the global order's decline, referencing China's entry into the World Trade Organization and subsequent trade with a state aiming to become a separate global pole. He noted this set the stage for a "political backlash," resulting in reduced trade and weaker international rules.
Draghi highlighted a significant shift in the United States' approach, stating the US is imposing tariffs on Europe, threatening its territorial interests. He added that the US views European political fragmentation as serving its own interests.
Simultaneously, he noted China's continued control over critical global supply chain nodes, which it uses to flood markets and manage its economic imbalances by exporting costs.
Call for Pragmatic Federalism
Draghi argued that Europe must significantly alter its structure given the US's blend of partnership and dominance, and China's growth model that externalizes costs. He emphasized that combining small countries does not inherently create a powerful bloc.
He cited areas where Europe has "federated," such as trade, competition, the single market, and monetary policy, as examples where it is "respected as a power and can negotiate as one." This includes successful trade agreements with India and Latin America.
Conversely, in areas like defense, industrial policy, and foreign affairs, where federation is absent, Europe is perceived as a "loose assembly of middle-sized states," vulnerable to division.
Draghi proposed a "pragmatic federalism" designed to resolve current impasses without subordinating any member state. He mentioned the euro as a successful example of member states opting in, allowing others to join later without undermining common purpose.
He concluded by posing a choice for Europeans: to remain a large market dictated by others' priorities or to take steps to become a genuine power, asserting that a Europe unable to defend its interests cannot preserve its values long-term.
A Europe unable to defend its interests cannot preserve its values long-term.