Piketty discusses Draghi report on Europe’s competitiveness and austerity

Mario Draghi's report on Europe's competitiveness emphasizes the urgent need for the continent to invest an additional €800 billion annually, which is about 5% of the EU's GDP. This investment is crucial to restore levels seen in the 1960s and 1970s and is proposed to be funded through EU borrowing, similar to the recovery plan initiated in 2020 due to the Covid-19 pandemic. The report warns that failure to make these investments could lead Europe into a prolonged decline compared to the US and China. The report challenges the prevailing austerity mindset, particularly in Germany and France, which advocates for strict fiscal discipline and primary surpluses to repay past deficits. Piketty argues that this approach is economically flawed, especially given the historically low real interest rates in Europe and the US. Instead, he suggests that public authorities should mobilize underutilized savings for productive investments in various sectors, including healthcare, research, and infrastructure. While acknowledging the high level of public debt, the report points out that it is not unprecedented and compares it to historical debt levels in France and the UK. The current situation presents an opportunity for Europe to leverage its financial resources effectively rather than succumb to austerity measures that could stifle growth. In conclusion, Draghi's report represents a significant shift in the conversation around fiscal policy in Europe, advocating for a proactive investment strategy to ensure the continent's competitiveness and economic vitality in the global landscape.