Mario Draghi, former European Central Bank president, is pushing for the EU to become a "genuine federation" as the bloc's industrial base contracts. EU industrial output dropped 7% in 2025, with Germany alone shedding over 200,000 jobs. Since 2018, 700,000 manufacturing positions have disappeared across the union.
The numbers tell the story. EU industrial electricity demand fell 6% in 2023, with Germany's energy-intensive sectors down 13% in the first half alone. Capital goods production dropped 8.7% in the 12 months to November 2023. Draghi argues this decline stems from high energy costs, Chinese competition, and US subsidies like the Inflation Reduction Act.
The EU's response has been incremental. The Net-Zero Industry Act targets 40% local clean tech production by 2030. The proposed Competitiveness Fund allocates €4 billion annually for clean technology - a figure critics call insufficient given the scale of US and Chinese industrial policy.
Worth noting: Industry groups aren't backing Draghi's federation push. Confindustria, BDI, and Medef want single market completion, affordable energy, and ETS reform instead. They've called the proposed 90% CO2 reduction by 2040 unfeasible without significant conditions. Germany is separately seeking delays on ETS free allowances for steel and iron to encourage investment.
The sovereignty debate has tech implications. European cloud providers - Scaleway, Hetzner, UpCloud, Open Telekom Cloud - have positioned GDPR compliance and data residency as competitive advantages against AWS. AWS's response, the European Sovereign Cloud launching in the de-east-1 region, attempts to address these concerns while maintaining its infrastructure advantage. Whether federation accelerates or complicates this landscape remains unclear.
Draghi's call aligns with February 2025's Clean Industrial Deal proposal, now under member state review for the 2027 budget framework. The EU exposed vulnerabilities through COVID and Ukraine has driven "de-risking" efforts across semiconductors, batteries, and renewables. The real question: whether political appetite for federation exists when industry itself is asking for simpler rules, not deeper integration.