The need for further debate
In this article Thomas Piketty explains his support for Draghi’s report on Europe’s competitiveness and future. He argues that real interest rates in Europe and the US have been historically low for the past 20 years, an indication of an abundance of underutilized savings. In such a situation, governments should mobilize these funds for investments in critical areas like training, healthcare, research, new technologies, and infrastructure. But he emphasizes the need of a more balanced approach that includes:
- A more inclusive approach that benefits disadvantaged territories and regions.
- A balanced compromise between major EU countries like France, Germany, Italy, and Spain.
- A debate on the specific types of investments and development models to promote.
Once the principle that Europe needs to invest massively has been accepted, it’s healthy for different visions to be expressed as to the type of development model and welfare indicators we want to promote. In this case, Draghi’s approach is technophile, mercantile and consumerist.
Europe must invest: Draghi is right
By: Thomas Piketty – Paris School of Economics
A much stronger criticism
André Wolf in this article is far more critical of Draghi’s Plan:
- Questionable Policy Solutions: While the report identifies key challenges facing Europe, the author argues that its policy prescriptions are problematic.
- Revival of Top-Down Industrial Policy: The author criticizes Draghi’s proposal for sector-specific policy solutions as a return to an outdated approach to industrial policy
- Lack of Innovation: The proposed policy mix does not include many innovative measures, focusing instead on implementing existing EU strategies and supporting large-scale investments.
- Insufficient Justification for State Investment: The report lacks a fundamental economic justification for the state’s role as an active investor, especially regarding the transfer of business risks to taxpayers.
- Softening of Merger Rules: The author expresses concern about Draghi’s suggestion to soften merger rules, arguing it could harm long-term productivity growth and competition in the internal market
- Case-by-Case Trade Policy: The proposed shift from trade openness to a case-by-case approach is criticized for imposing high decision costs and risking abuse.
- Potential Conflicts with Strategic Partnerships: The author warns that unilateral trade policy instruments could harm potential strategic partners and undermine the EU’s credibility as a guardian of rules-based trade.
Will Mario Draghi’s plan for European competitiveness work?
By: André Wolf – Centre for European Policy, Berlin
The Draghi proposal and the telecommunications sector
Tomaso Duso, Massimo Motta, Martin Peitz, and Tommaso Valletti in this article focus their criticism on the proposals regarding the telecommunications sector:
[W]hile the report rightly recognises that the availability, affordability, and quality of telecoms services are a key driver of European competitiveness, its recommendations on telecoms are misguided and dangerous.
Specifically:
- Market Definition: The authors challenge the proposal to define telecoms markets at the EU level rather than the national level. They argue that retail markets remain largely national, and artificially broadening the market definition would allow harmful intra-national mergers.
- Consolidation: The report’s recommendation to relax merger control and encourage consolidation is criticized. The authors argue that empirical evidence consistently shows telecoms mergers lead to higher prices and are unlikely to boost investment.
- Investment Commitments: The proposal to focus on investment commitments as merger remedies is seen as problematic. The authors argue these behavioral remedies are difficult to enforce and often fail to restore competition permanently.
- Spectrum Allocation: The authors warn against the proposal to allow a single operator to obtain as much spectrum as it wants as long as its retail market share is less than 50%. They argue this could lead to one or two operators acquiring all available spectrum.
Counter-Arguments and Evidence
- European Competitiveness: They argue there’s no compelling evidence that Europe lags behind in telecoms infrastructure investment and quality.
- Price Comparisons: The authors note that retail prices for telecoms services are lower in Europe than in other parts of the world, particularly the US.
- Effects of Competition: Citing empirical studies, they argue that more competition (i.e., more operators) is associated with lower prices and higher overall investment in the sector.
Alternative Recommendations
- Cross-Border Mergers: They argue that existing merger rules do not hinder beneficial cross-border mergers.
- Market Integration: The authors support initiatives to create a more integrated European telecoms market, such as streamlined access regulation and harmonized spectrum licensing rules.
- Industrial Policy: They suggest targeted industrial policy to boost investment in specific technologies and regions that bring positive externalities to Europe.
Draghi is right on many issues, but he is wrong on telecoms
By: Tomaso Duso, Massimo Motta, Martin Peitz, Tommaso Valletti – DIW Berlin, Pompeu Fabra University, University Of Mannheim, Imperial College London
