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EU Falling Behind on Growth, Reforms Even More Urgent, Says Draghi
Published by Global Banking & Finance Review®
Posted on September 16, 2025
2 min readLast updated: January 21, 2026
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Mario Draghi warns the EU is lagging in growth and competitiveness, urging urgent reforms to address AI, energy, and trade challenges.
EU falling behind on growth, reforms even more urgent, says Draghi
Challenges Facing the European Union
BRUSSELS (Reuters) -The European Union is falling further behind global rivals on growth and governments are failing to grasp the urgency to act, former European Central Bank president and Italian prime minister Mario Draghi said on Tuesday.
Draghi, who delivered a far-reaching report on EU competitiveness at the European Commission's request 12 months ago, said the EU's growth model was "fading fast", vulnerabilities were mounting and there was no clear path to financing necessary investments.
Draghi said the bloc had come up with ambitious plans, but it was moving ahead too slowly and governments had "not grasped the gravity of the moment".
Impact of U.S. Tariffs
"To carry on as usual is to resign ourselves to falling behind. A different path demands new speed, scale and intensity. It means acting together, not fragmenting our efforts," he told an audience of EU officials, including European Commission President Ursula von der Leyen, in Brussels.
SQUEEZED BY U.S. TARIFFS
AI and Technology Constraints
Draghi addressed a number of challenges facing the European Union, now squeezed by U.S. tariffs and a trade deficit with China that has expanded by 20% since December 2024.
In AI, the European Union was building gigafactories and expanding data centre capacity, but gaps were clear. The United States produced 40 large foundation models - learning based on large datasets - last year, China 15 and the EU just three.
Draghi said more action was needed to address barriers to scaling up in Europe, regulation on the use of data and adoption of AI by industry.
Need for Structural Reforms
Energy prices, such as natural gas nearly four times higher than in the United States, were also a constraint on technology, with AI electricity demand set to rise 70% in Europe by 2030.
Europe had structural problems to fix, but the main step taken by EU countries had been to subsidise prices for temporary relief.
"The more we push reforms, the more private capital will step up and the less public money we will need. Of course, this path will break long-standing taboos, but the rest of the world has already broken theirs," Draghi said.
(Reporting by Philip Blenkinsop and Tierney Kugel)
Key Takeaways
- •Mario Draghi warns EU is falling behind in growth.
- •Urgent reforms needed to boost EU competitiveness.
- •US tariffs and AI constraints impact EU growth.
- •High energy prices hinder technological advancements.
- •Private capital needed for sustainable EU reforms.
Frequently Asked Questions about EU falling behind on growth, reforms even more urgent, says Draghi
1What did Draghi say about the EU's growth model?
Draghi stated that the EU's growth model is 'fading fast' and that vulnerabilities are mounting, indicating a need for urgent reforms.
2How is the EU affected by U.S. tariffs?
The EU is currently squeezed by U.S. tariffs, which are impacting its competitiveness in global markets.
3What challenges does the EU face in AI development?
The EU is building gigafactories and expanding data center capacity, but it faces significant gaps in AI development compared to the U.S.
4What is Draghi's view on energy prices in Europe?
Draghi highlighted that energy prices, particularly natural gas, are nearly four times higher in Europe than in the U.S., constraining technology growth.
5What reforms does Draghi suggest for the EU?
Draghi suggests that more reforms are needed to attract private capital and reduce reliance on public funds, emphasizing the urgency of acting together.
