Draghi warns EU needs true federation or faces decline

Tuesday 03 - 14:20

By: Dakir Madiha

Draghi warns EU needs true federation or faces decline

Mario Draghi, former Italian prime minister, delivered a stark warning during a ceremony at KU Leuven University in Belgium, where he received an honorary doctorate. Europe risks becoming "subordinate, divided, and deindustrialized" unless it evolves from a loose confederation into a genuine federation. This candid assessment from one of the continent's most influential economic voices comes amid escalating trade tensions with the United States and intensifying competition from China, just ten days before Draghi addresses EU leaders at an informal summit on competitiveness.

Draghi painted a picture of a crumbling international system, declaring the post-war global order "dead" and the shift to what follows "not easy for Europe." He traced this erosion to China's 2001 entry into the World Trade Organization and the ensuing political backlash, which birthed a world of reduced trade and weaker rules. Yet the real peril lies in the emerging landscape: the US now levies tariffs on Europe, threatens its territorial interests, and openly views European political fragmentation as advantageous. Meanwhile, China dominates critical global supply chain nodes and stands ready to wield that leverage.

In areas where Europe has federalized trade, competition, the single market, and monetary policy the bloc commands respect as a unified power, negotiating with one voice, as seen in recent deals with India and Latin America. Where it remains unfederalized defense, industrial policy, foreign affairs it gets treated as a disjointed collection of mid-sized states, ripe for divide-and-conquer tactics. Draghi advocates "pragmatic federalism," where member states opt into deeper integration voluntarily, modeled on the euro: some joined early, others later. "We don't have to sacrifice our values to achieve power," he stressed.

Draghi will share this vision directly with EU heads of state and government at a February 12 retreat at Alden Biesen Castle in Belgium, invited by European Council President António Costa alongside former Italian Prime Minister Enrico Letta to discuss bolstering the single market. "Among those caught between the US and China, Europeans alone have the chance to become a true power," he concluded. "An Europe unable to defend its interests won't long preserve its values."