BRUSSELS — Two years after Mario Draghi warned that Europe faced an “existential” threat from economic decline, his plan to make the continent competitive again has become the EU’s official agenda — but implementation lags behind rhetoric.

The Commission has proposed a series of Draghi-inspired measures, from an industrial policy overhaul to new funding for competitiveness and defense. Yet grand ambition has come up against the realities of the EU legislative machine, and many proposals remain stuck in negotiations as national governments continue to defend their spending priorities and policymaking turf.

A year ago, Draghi didn’t sound too happy with how quickly his plan was being implemented. Since then, his frustration with the lack of progress has become increasingly visible. The former Italian prime minister recently co-founded the Rhine Group with Stripe chief Patrick Collison, bringing together business leaders, economists and former policymakers to push Europe from diagnosis to action.

The group says Europe is “in a harder place” than when Draghi’s report was published in September 2024, and warns that decline is inevitable unless governments act urgently. Its creation is itself a sign that Draghi believes the institutions responsible for delivering his agenda are moving too slowly.

Europe’s leaders broadly agree that competitiveness matters. The harder question is what they are willing to give up to pay for it.

Here’s POLITICO’s assessment of progress so far.

The EU budget

Draghi’s main recommendation was to steer EU money from agriculture and regional payouts toward competitiveness and innovation. The Commission delivered on this in its proposal for the 2028-2034 EU budget, when it floated creating a new European Competitiveness Fund worth €410 billion. But during the ensuing budget negotiations, governments have diverged from Draghi’s advice.

The draft negotiating position prepared by Cyprus last summer downsized the ECF while increasing funding for agriculture and regional funding. In a further swipe at the Draghi report, the Commission reduced the budget’s leeway by giving countries the possibility to immediately hand €45 billion from a rainy-day fund to farmers. 

On a more positive note for the EU executive, member state governments broadly approved a new budget structure that prioritizes flexibility at the expense of pre-defined allocations. 

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Finance

Draghi’s hopes of turning the EU into an investment hub to rival Wall Street are still very much a work in progress. The Commission proposed a host of bills to realize the former European Central Bank chief’s vision, although many of them are still making their way through Brussels’ legislative machinery — with varying degrees of success.

The Commission’s marquee markets initiative aims to upgrade the EU’s securities regulator into a financial super-cop to police the sector. Vying national and business interests threaten to undermine Draghi’s hopes for a European equivalent to the U.S. Securities and Exchange Commission — but you can’t fault the Commission for trying.

Beyond supervision, Draghi wanted to use the trillions of euros sitting in bank accounts to turbocharge the economy by getting people to invest their retirement savings in the stock market. The Commission did its part by amending EU rules for personal and workplace pensions, which EU governments, in turn, gutted. Any efforts by MEPs to salvage the reforms are unlikely to convince EU capitals, which are highly protective of their pension systems.

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Joint debt

Joint EU debt is a long-standing obsession of Draghi, and one of his more controversial recommendations. The EU has previously made good use of common debt to finance a post-pandemic recovery fund, cheap loans for military spending, and Ukraine’s defense against Russia. Draghi suggested using further eurobond issues to invest in strategic projects and public goods, including electricity grids, interconnectors and breakthrough research.

But political appetite for more eurobonds is low. Frugal nations are reluctant to keep raising EU debt, which fuels angry rhetoric from populist parties. A bold proposal from Spain for the Commission to borrow an additional €850 billion per year on behalf of EU countries landed on deaf ears among EU countries in the Council. 

In its budget proposal, the Commission included several more realistic ideas to continue issuing joint debt over the coming seven years. While these proposals have faced strong opposition from frugal Northern countries, it remains unclear whether they will survive the endgame of the budget negotiations. 

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Automotive

The automotive sector is a shining example of the Commission implementing Draghi’s recommendations — but that doesn’t seem to have mattered when it comes to maintaining automotive jobs in Europe. At the start of this month, Volkswagen’s board unanimously approved a cost-cutting plan that will ax 100,000 jobs, or nearly 16 percent of its workforce, and shutter up to four factories on German soil. Suppliers aren’t doing much better.

Draghi also recommended giving automakers flexibility on emissions targets. The Commission has done away with a ban on combustion engines after 2035 and put forward a “technologically neutral” proposal for the emissions targets that automakers must reach. (It allows all powertrains past 2035, but requires carmakers to offset the extra emissions with investments in alternative fuels and green steel.) The industry and conservative-leaning parties say that’s not enough, and are negotiating a further weakening of the standards.  

Recognizing the competitive threat from Chinese automakers, Draghi pushed for more investments to help the sector catch up on software and autonomous driving. Robotaxis are starting to pop up in European cities — but it’s American or Chinese tech that is powering them. A group of member states is calling on the Commission to move faster to push autonomous driving from pilot projects to full-scale deployment.  

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Energy

Draghi identified soaring electricity costs as a major bottleneck for competitiveness, largely due to the bloc’s high reliance on imported fossil fuels. The EU is undeniably trying to lay the groundwork for a more sustainable energy future, even as the war in Iran, gas storage woes and growing attacks on European energy infrastructure send prices upwards.

Draghi prescribed boosting Europe’s transition to renewables, specifically by modernizing, expanding and digitizing its creaking grid architecture. The EU’s grids package — unveiled last year and soon to be discussed by national capitals and lawmakers — aims to address many of these challenges, though governments agreed to water down key parts of the proposal in response to a perceived push by the EU executive for excessively centralized planning and financial power.

Draghi also frowned at Europe’s fragmented approach to energy purchases, with myriad companies and countries pursuing different priorities and often competing against each other instead of making full use of the bloc’s market power to negotiate better prices for supplies. Even though EU countries are steadily increasing their share of long-term supply deals — instead of buying on the spot market, where prices are more volatile — no centralized procurement structure has yet emerged, and the bloc has failed to decisively buy enough gas to fill its reserves amid growing competition with more centralized economies in Asia.

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Telecoms

Draghi’s aspirational vision of a single EU telecoms market is still far from reality. Several of his ideas, such as harmonizing the allocation of mobile frequencies and phasing out legacy copper networks, have made it into the European Commission’s proposal to overhaul the bloc’s telecom rulebook, the Digital Networks Act.

But those ideas remain a tough sell to national governments, which are bristling, as ever, at Brussels stepping on their toes. Draghi’s call for more “commercial investment sharing” between operators and data-hungry Big Tech companies — an outgrowth of the long-running and controversial “fair share” debate — has also rippled into the proposed law, where it is expected to prove divisive in the European Parliament.

It’s still too early to know what will survive the legislative process. But the proposals inspired by Draghi are already facing serious headwinds.

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Competition

Draghi’s prescription for how Europe can build world-beating companies included loosening rules around mergers — a recommendation the Commission has taken to heart. Competition chief Teresa Ribera delivered her draft overhaul of the bloc’s merger guidelines at record speed after Commission President Ursula von der Leyen imposed a dramatic acceleration to their original end-2027 deadline. 

The guidelines, which are now scheduled to land in final form at the end of this year, make room for innovation and investment to be included as parameters to assess corporate mega-deals — just as Draghi called for. 

How far the guidelines will allow the Commission to bend its strict antitrust rulebook, however, is yet to be seen: Von der Leyen and Ribera don’t seem to be on the same page on cheering for European champions, particularly if consumers end up getting ripped off in the process.

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Trade

Slowly but steadily, the EU’s trade policy is becoming more assertive — and Draghi would probably approve. New deals with India, Indonesia, Mercosur, Mexico and Australia will bring some much-needed relief and growth opportunities to European exporters.

But on the defensive side, the EU is still mostly very, very careful. The bloc did raise tariffs on steel imports but offended allies like Japan and Korea in the process. Perhaps it comes closer to Draghi’s idea of a genuine foreign economic policy, but the EU’s biggest trading partners are already worrying about new measures and laws like the Industrial Accelerator Act, which aims to protect the bloc’s industrial base.

But how far Europe can go in its quest to be both protectionist and open to trade is an open question. When Ursula von der Leyen delivers her State of the EU speech later this month, chances are she’ll present the new contours — or at least a few investigations — to show Brussels now means business on protecting its industry. With Germany finally joining the club of EU countries running a trade deficit with China, the bloc is united in realizing that something needs to give. As one EU diplomat put it earlier this year: “We agree on the symptoms, now we need to agree on the cure.”

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Cybersecurity

Draghi warned that Europe remained dangerously dependent on high-risk telecom suppliers — primarily China’s Huawei and ZTE — potentially exposing critical networks and citizens’ data to foreign eyes. When he wrote his report, 14 EU countries still had no restrictions on high-risk suppliers in place. By March 2025, a report by telecom consultancy Strand Consult showed that 10 countries had implemented the EU’s 5G security toolbox, with seven showing significant implementation, six partial and four zilch. 

But the patchwork approach remained a problem, so in January 2026 the Commission included a proposal to turn voluntary de-risking into law through its revised Cybersecurity Act. If approved, this law would give the Commission powers to require certain sectors to phase out high-risk technology.

Draghi also urged Europe to reduce its dependence on U.S. cloud providers. Here, the picture is less impressive. Despite years of talk about technological sovereignty, Europe remains heavily reliant on non-EU providers for its digital infrastructure — leaving one of Draghi’s central warnings largely unresolved.

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Defense

Defense is one of the sectors where the Commission has done the most work. Since last year, it has launched a €150 billion Security Action for Europe rearmament plan to provide EU countries with low-interest loans to buy weapons.

It has also proposed allocating €131 billion to defense and space in the EU’s next long-term budget, a fivefold increase. The size of the final cash pot — and of the European Competitiveness Fund it lives within — is now up to EU countries. But Draghi may have just irked his closest allies in boosting competitiveness by only appointing one member from Eastern Europe — former Estonian President Toomas Hendrik Ilves — to his Rhine Group.

Draghi recommended the EU build a more consolidated defense industry, noting that having fewer, bigger defense companies has been fundamental to the ability of the U.S. to deliver the high capacity and scale required by American armed forces. Some diplomats and officials argue that the huge amount of EU money put on the table for defense could actually disincentivize consolidation of the European industry, as governments tend to like the idea only when it’s a way to save jobs.

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Health

Turbocharging Europe’s appeal as a place to carry out clinical research was at the heart of Draghi’s recommendations for the pharmaceutical sector. While the EU is brimming with promising drug candidates, industry is increasingly taking those molecules to the U.S. and China to test them in patients. The Commission has proposed the Biotech Act, designed to boost Europe’s appeal as a destination for clinical trials.

The juiciest offering to industry is a one-year patent extension for biotech drugs tested in Europe. But industry argues it doesn’t go far enough to speed up trials in Europe, while also lamenting the patent conditions. Eyes are now on the capitals and EU lawmakers who are preparing their amendments to the law. If they keep the patent extension, that would be a win for Draghi, who strongly backed intellectual property as “the key driver of medical innovation.”

The law also proposes making AI and data-driven tools core components of drug discovery, clinical trials and biomanufacturing. That would be music to Draghi’s ears. But when it comes to life sciences financing, Draghi’s wish for more cash, provided more quickly, may be thwarted, depending on how much of the Commission’s proposed €22 billion pot for health policy, bioeconomy and agriculture makes it into the final European Competitiveness Fund — and how much goes to the life sciences sector.  

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Sustainability

Green regulation was the first target of the Commission’s Draghi-inspired push to make it easier to do business in the EU, through an “omnibus” bill slashing European Green Deal-era environmental disclosure rules for business. Since then, things have got complicated.

Brussels’ simplification drive has continued, with a weakening of anti-deforestation rules, watered-down 2040 climate targets, and a decision to put the brakes on the EU’s most important climate policy, the Emissions Trading System. But a European summer of extreme heatwaves, wildfires and drought, combined with renewed anxiety over dependence on foreign fossil fuels, has injected new energy into the decarbonization and environmental push. 

Overall, the push to slash green rules has found a natural limit with EU legislators, where weakening the rules is acceptable, but gutting them outright is not. Protecting the environment remains embedded in Europe’s political mainstream, even if that means upholding laws that business finds annoying or burdensome. But ongoing debates over emissions trading and environmental permitting laws promise to test these limits further.

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Agriculture: Farmers fight back

Agriculture barely registered in Draghi’s grand plan for Europe’s economy. His 400-page report offered no real prescription for farming, and saw the EU’s vast farm subsidies as money that could instead be spent strengthening Europe’s industrial base, bolstering security and funding other priorities.

Two years on, negotiations over the EU’s next seven-year budget are exposing what Draghi’s report missed. Farmers may account for a shrinking share of Europe’s economy, but they remain a potent political force in Brussels. After waves of tractor protests, capitals are pushing to protect almost €294 billion in direct farm support, with billions more potentially available for agriculture. The pressure for cuts is falling instead on competitiveness, defense and foreign policy.

Draghi largely left farmers out of his plan. They are now helping decide how much of it Europe can afford.

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Zoya Sheftalovich, Gregorio Sorgi, Bjarke Smith-Meyer, Jordyn Dahl, Ben Munster, Mathieu Pollet, Francesca Micheletti, Koen Verhelst, Antoaneta Roussi, Jacopo Barigazzi, Helen Collis, James Fernyhough and Bartosz Brzeziński contributed to this report.

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