Draghi calls for significant EU reform, including an additional 800 billion euros annually.

• A report from Mario Draghi recommends radical reforms through a new industrial strategy to ensure the European Union's competitiveness, boost social equality, and meet climate targets.
• The European Commission estimates that between 750 billion and 800 billion euros in additional investment per year would be required for the proposals outlined in the report.
• The report also addresses supply chain security and defense spending.

A report from Mario Draghi suggests that the European Union requires approximately 800 billion euros ($884 billion) in annual investment to achieve its competitiveness and climate goals.

The report states that the bloc's efforts to enhance its geopolitical significance, promote social equality, and reduce carbon emissions are being undermined by sluggish economic growth and productivity relative to the U.S. and China.

A comprehensive investigation by Draghi, who was previously the Italian prime minister and ECB president during the euro zone debt crisis, revealed that the EU should prioritize decreasing energy costs, increasing competitiveness, coordinating industrial policy, and bolstering defense spending.

The EU must adapt to a world where "dependencies are becoming vulnerabilities and it can no longer rely on others for its security," the report found, citing the EU's dependence on China for critical minerals, and China's reliance on the EU for absorbing its industrial overcapacity.

If the trend towards supply chain autonomy continues to accelerate, the EU's high level of trade openness will leave it vulnerable, as roughly 40% of its imports come from a small number of suppliers that are difficult to replace, and around half of this volume originates from countries with which the bloc is not strategically aligned, according to a report.

The report recommends that the EU create a coordinated foreign economic policy that includes preferential trade agreements, direct investment with resource-rich nations, stockpiling in critical areas, and industrial partnerships to secure key technology supply chains.

The EU must prevent dependencies from growing and utilize domestic resources through mining, recycling, and innovation in alternative materials.

The goal of reducing trade friction is to achieve full implementation of the single market, which has 440 million consumers and 23 million companies.

To avoid hindering Europe's objectives, the bloc must ensure that its competition policy does not hinder progress in the technology sector.

The European coalition must also promote "massive investment needs unseen for half a century in Europe," through a combination of private finance and public support. At the same time, the EU is facing an "innovation deficit" that must be addressed through changes to research and development funding and policy, according to the report.

The report suggests that the European Securities and Markets Authority (ESMA) should shift from coordinating national regulators to being a single regulator for all EU securities markets, with a focus on overall objectives, similar to the U.S. Securities and Exchange Commission (SEC).

To achieve the defense, digitalization, and decarbonization targets, the EU's total investment-to-GDP rate must increase by approximately 5 percentage points of EU GDP annually, as stated in the study.

The European Commission estimates that achieving the set objectives would require an annual investment of 750 to 800 billion euros.

Ursula von der Leyen, who was re-elected as European Commission President for a second term in July, commissioned the report last year and will appoint new Commissioners this week.

Lorenzo Codogno, founder of Lorenzo Codogno Macro Advisors, stated in an email ahead of the report's release that the findings will spark a significant discussion about the future of the EU/Eurozone, but there is no need to hold one's breath.

The new Commission's full operationalization is necessary before any action can be taken, and even then, the complex and unstable political climate among member states makes it difficult to obtain the necessary political support. However, unexpected events cannot be ruled out, so the political debate that will follow must be closely monitored.