Mario Draghi’s report represents a clarion call for European reform, emphasizing growth over greenery, and Brussels-directed public spending over German-style austerity.

Although these may be good ingredients to wake up sluggish Western Europe, they risk alienating the European Union’s dynamic East. Poland, for instance, has overtaken Greece and Portugal in GDP per capita, with a realistic goal of catching up to Italy and Spain by the end of the decade.

Draghi fails to acknowledge what Europe’s East-West divide means for the continent’s future and his proposals could slow the East’s progress. The former Italian Prime Minister calls for boosting centralized EU budgetary spending to fund an expensive industrial policy, which could favor the West. Such policies risk access to crucial EU Cohesion Funds, which have been instrumental in modernizing the former communist countries

Until now, the EU has spent more on the East than it receives back. Western money builds highways, rail networks, and clean energy networks. Under Draghi’s recipe, some €800 billion a year would be spent to boost competitiveness, most of which would come from EU-level debt.

The money would most benefit highly indebted nations led by Italy and France, with Germany shouldering much of the financial risk.

Central and Eastern European countries “have the potential to become a much stronger engine of Europe’s growth,” says Marcin Piatkowski, professor of economics at Kozminski University in Warsaw. “Their specific needs and opportunities must be taken into account in EU-level decision making.”

Easterners remain unable to compete against Germany in a subsidy race to attract semiconductor and other high-tech investments. While Poland and Hungary have developed strong automotive sectors, especially in battery production, they remain low-cost players in the European value chain. Without targeted support, such countries will struggle to compete in the high-value sectors that the Draghi report champions.

Trade represents another potential flashpoint. Germany’s export-driven economy thrives on free trade, making Berlin wary of protectionist measures that could lead to retaliatory tariffs. Central and Eastern Europe have less to fear from such retaliation, and may even benefit, attracting investments from both Asia and America designed to circumvent the trade barriers.

Of course, not everything in the Draghi report represents a danger. The former Italian Prime Minister points to the crippling impact of high energy costs.  European firms pay significantly more for energy than their counterparts in the US and China. Central and East European countries are particularly vulnerable due to their high reliance on fossil fuels. Poland alone faces an enormous price tag for meeting “Fit for 55” targets, with energy transformation costs expected to reach one trillion zlotys. Common European projects could help ease the cost.

But past EU debt initiatives such as the post-pandemic Recovery and Resilience Plans suffered from severe bureaucratic delays and inefficient fund allocation. No guarantee exists that Draghi’s plan would deliver timely and effective support, particularly for Eastern countries that require immediate investment in energy infrastructure.

Despite its ambition to chart a new course for the EU’s industrial policy, the Draghi report inadvertently reveals the EU’s deep divisions. Slow economic growth in the West contrasts with the dynamism in the East, yet the report largely addresses the reality of Western Europe and ignores the East’s potential. If the Draghi report indeed becomes the European Commission’s roadmap to the future, half of the continent will remember it for what it omits. The old European democracies must acknowledge that the EU’s newer members are becoming rich – and embrace this success.

Maciej Bukowski is a non-resident fellow with the Digital Innovation Initiative Program at the Center for European Policy Analysis. He is a climate diplomacy and energy security expert, and a PhD candidate at the Institute of Political Science and International Relations at the Jagiellonian University in Cracow. 

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

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