Mario Draghi: ‘Forget the US, Europe Has Successfully Imposed Taxes on Itself’

Former ECB President Mario Draghi made a significant intervention with an article in the Financial Times titled ‘Forget the US, Europe Has Successfully Imposed Taxes on Itself.’ Draghi, former President of the ECB and Prime Minister of Italy, highlights the fragile recovery of the Eurozone and the potential for the US to impose tariffs. He refers to two critical factors that have placed Europe in a difficult position: the long-term inability of the EU to address supply constraints, particularly high internal barriers and regulatory obstacles, which are more damaging to growth than any tariffs the US could impose. The IMF estimates that Europe’s internal barriers equate to tariffs of 45% for manufacturing and 110% for services. Compliance costs with GDPR, for example, are estimated to have reduced profits for small European tech companies by up to 12%. The second factor harming the EU is its tolerance for persistently weak demand, exacerbating all issues caused by supply restrictions. Both these shortcomings largely originate from within Europe itself, making them changeable through unwavering efforts to remove supply restrictions and redirect demand back to the domestic market. Draghi calls for more visionary fiscal policy in the form of higher productive investments, emphasizing that this path requires a fundamental shift in mindset. Until now, Europe has focused on either individual or national goals without considering their collective cost.