The €175 billion budget proposed by the European Commission for the next iteration of Horizon Europe “is welcome” but the funding could “fall short” of its goal to boost EU’s competitive advantage in advanced technologies, according to Mario Draghi, a former president of the European Central Bank and the godfather of the EU’s competitiveness agenda.
Draghi made the comments on September 16, at an event marking one year since the publication of his 401-page report warning Europe that its global relevance is set to decline unless member states and Brussels agree to push through swift reforms and raise investments in cutting edge technologies.
The report prompted a flurry of proposals, including a future restructuring of the EU budget, which signalled that the Commission is indeed putting economic competitiveness at the top of its political agenda.
However, Draghi said the Commission’s actions have not matched the ambitions his report set a year ago, as rapid geopolitical shifts since the start of Donald Trump’s second term in the White House are making his doomsday diagnosis even more acute.
In July, the Commission presented plans to almost double Horizon Europe’s budget to €175 billion as part of a wider €409 billion European Competitiveness Fund (ECF), which is set to be launched under the next long-term budget for 2028-34.
But, according to Draghi, doubling the budget will not help the EU close the innovation gap with China and the US “unless the additional resources are concentrated into sizeable priority programmes.”
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In his speech, Draghi said that the EU executive, together with member states, should agree and implement faster the “28th regime” for start-ups, a new EU-wide incorporation method that would reduce administrative friction and allow innovative businesses to operate, trade and raise money across all 27 member states.
Draghi acknowledged that the Commission is already moving in this direction but pointed to “uncertain backing from member states” as the main reason for an underwhelming start. “The first step towards the 28th regime will likely be limited to a digital business identity,” he said.
Budget uncertainty
Meanwhile, at another Brussels conference on September 16, research Commissioner Ekaterina Zaharieva did not seem confident that the €175 billion figure will survive two years of negotiations with national governments. “Hopefully, during the negotiations, we are going to keep this budget,” Zaharieva said.
However, she added that the Commission will not wait until 2028, when the next EU budget kicks in, to make changes to the way it coordinates its R&D. It is already allocating large chunks of R&D funding to industries that Draghi deemed existential for the competitiveness of the EU, with €1 billion going research and innovation projects in that would help Europe’s car manufacturers catch up with China on electric vehicles.
Zaharieva also urged the private sector to chip in more, as private R&D investment in Europe is much lower than in the US and China, while public investments are at comparable levels. The Commission will use its main tool for national financial reviews to give out advice to governments on how they could boost private R&D investments through tax exemptions, she said.