Two years ago, Mario Draghi warned Europe of the incoming “slow agony” we would face if we did not immediately address our competitiveness crisis. Today, only 15.7% of the 383 recommendations laid out by the former Italian prime minister and ECB president in his infamous Draghi report have been implemented. This is despite constant pledges by EU leaders, especially European Commission president Ursula Von Der Leyen, to base Europe’s economic agenda on Draghi’s policy suggestions. This resistance to reform seems to vindicate Mario Monti, another former Italian prime minister who himself published a report on the single market in 2010, when he stated that “The only report that should be produced in the future is a report on why normally the recommendations of the reports are not followed”.
From a defence perspective, this slow progress is increasingly turning into a concrete security gap for Europe. The lack of progress on these necessary economic reforms is also interfering with European rearmament plans, something which is gravely worsened by the tense geopolitical climate our continent is plunged into. With the biggest land war since the second world war exploding at the borders of the union and carrying on for 4 years now, essentially creating a hybrid war between Europe and Russia, and a raging great power competition between China and the United States, Europe has no space to lag behind in terms of it’s security.
The lag is real. According to the Draghi Implementation Index, only 60 provisions have been implemented, whilst 98 have been only partially implemented and 225 remain to be addressed. Importantly, most of the progress comes on smaller initiatives where the commission could act by itself, for example with cutting regulatory burdens, improving access to finance for companies seeking to scale up and accelerating permits for clean technologies. The most consequential and necessary reforms, such as removing barriers inside the single market and cutting strategic dependencies, still remain unaddressed.
- The capital markets union, a reform which could help the EU compete with Chinese innovations and startups, still remains an ambition without any actual progress. This has pushed the Irish Presidency of the Council of the European Union pledging to reach an agreement by the end of the year and to implement meaningful steps towards a full capital markets union. Nonetheless, skeptics question how Ireland, which historically has resisted centralized regulation of the financial sector, will find a deal in a EU still wary of giving up sovereignty, especially in financial matters. Legal analysts also claim the proposed Irish reforms would not simplify lending but instead add more regulatory burdens on banks. This unfortunately encapsulates the lack of efficiency the EU is approaching these critical issues with.
Draghi’s reports main finding was that the Union’s weakness was its fragmentation. This is specially true in the defence sector, with duplicated platforms, incompatible standards and national-champion procurement. Draghi himself argues the solution is joint demand aggregation, but progress on this front has also been incredibly slow. The EU has launched the European Defence Industry Programme, which is worth 1.5 billion euros and consists of pouring money in the continent’s defence manufacturing sector. Nonetheless, whilst it does have provisions to encourage joint provision, it does not mandate it.
- It thus does just enough for EU leaders to claim they have addressed the problem whilst also not doing enough to actually meaningfully change the situation. If the EU wants to truly bolster its defence and strategic autonomy, joint procurement is not optional, but crucial. The SAFE program suffers from similar flaws. Whilst it does provide 150 billion euros in cheap loans for eight European countries for them to buy EU defence supplies, it does not mandate any sort of joint procurement. Therefore, whilst the program does address the issue of reducing extra-EU dependency, it does nothing to address fragmentation, the problem Draghi warned us about.
Since EU member states are not jointly sourcing their equipment, they are directing their allocation toward their own national industry (even with SAFE funds for example), on their own national timeline and duplicating a capability that their neighbours are also working on. This essentially creates real waste in our already low defence spending, with incompatible standards, duplicated platforms and no economies of scale. With the difference in economic output between us and the US and China, we cannot afford to be this inefficient.
- Additionally, fragmented standards and equipment will hinder us from operating as a unified fighting force in the case of an eventual conflict, with Russia for example. Harmonizing standards, equipment and procurement would greatly bolster our capabilities, make our defence spending more efficient, and possibly even pave the way for an eventual unified EU army or at the very least a sovereign and strategically autonomous EU defence framework. The EU itself has recognized this, which is why it has aimed to have all procurement occur jointly between member states by 2030. Nevertheless, the goal seems currently difficult to achieve given the lack of progress and initiative on this front. It is clear more action is necessary, and soon if the EU wants to meet the 2030 deadline, which is critical as experts cite that year as well for when a possible Russian invasion of continental Europe could launch.
The economic issues faced by Europe also directly hinder our defence and security. The public funds governments need to fund their procurement is directly dependent on the nation’s GDP growth, tax base, and room to service debt. The reforms Draghi proposes are designed specifically to address Europe’s issues in these fields.
- The lack of a dominant and innovative technological sector like that of the US causes Europe to miss out on an important driver of GDP growth and measured productivity increases. Europe’s tax base is shrinking due to the demographic issues faced by the continent, whilst massive compliance gaps exist (for example, EU estimates place the VAT gap at €128 billion) and experts note a chronic under-taxation of mobile financial assets compared to immobile wealth like real estate. Europe also faces problems with servicing debt, since despite the union’s strong credit rating, it still pays higher interest rates to borrow money compared to countries like the US or Germany.
- This is due to a multitude of reasons, such as the exclusion of EU bonds from sovereign bond indices, the low liquidity of EU bonds in secondary markets, and the premium demanded by investors for the fact the EU does not have the same taxing power as a single state has. All of these factors seriously hamper the EU’s economic development and growth, and thus directly affect the union’s ability to defend itself and to arm itself in these times of tension.
The widening AI gap with the US and China is another important shortcoming of the EU, that Draghi reforms could alleviate or possibly solve. The European Commission’s own account puts EU AI investment at roughly 4% of what the US spends. This has caused Brussels to launch a 200 billion euro InvestAI program and to pledge 11.4 billion euros for 7 AI gigafactories on the continent. Nonetheless, the fact that both of these were explicitly framed as catch up demonstrates the Commission is well aware of the AI gap’s reality and structural nature.
- What is even more worrisome for Europe is that US private AI investment was 285.9 billion dollars in 2025 against China’s 12.4 billion, and yet both countries are essentially tied on model performance and overall AI development. This shows how Europe could compete with the US despite lower spending and investment, and instead Brussels fails to be a third pole in either the spending or the development and performance competitions.
This gap has direct military and security implications for the whole Union, as AI defence technology is developed downstream from civilian advances. The gap is thus also observable in the defence sector. The Pentagon’s autonomous-warfare programme covers drones, counter-drone systems and AI-guided interceptors under what’s been dubbed “DAWG”. It has been valued at approximately 55 billion USD and has already landed contracts, such as the first AI-powered drone-interceptor under Replicator 2 in January 2026.
- The European equivalent is Helsing, the German defence-AI company building autonomous strike and ISR software, which raised $1.8bn in July 2026, the largest funding round any European defence startup has ever closed. The record breaking sum raised by an EU defence company is a small fraction of what the US spends yearly on one of it’s programmes. The difference is stark, and calls for more action by the part of the EU. This is especially crucial as AI is completely transforming the way modern conflicts are fought. From targeting systems which helped the US strike 1000 targets in the first day of the Iran war to AI powered drones disrupting Russian supply lines in Ukraine, the impact AI has on the battlefield is undeniable. Falling behind in this technology would be a death sentence, especially with the prospects of a future confrontation with Russia.
2026 is demonstrating that Europe truly needs to take tangible action immediately if it wants to convert its rhetoric on strategic autonomy and competitiveness reform into reality. Draghi’s warning about fragmentation rings especially true in the face of the collapse of the FCAS fighter project due to a dispute between France and Germany over leadership in the project.
- If the two countries the most rhetorically committed to European strategic autonomy and reform cannot put aside their differences for a fighter program, and allegedly a tank program, the MGCS which is supposedly undergoing a similar dispute to the one that collapsed the FCAS, then how can we expect all 27 member states to collaborate together on procurement and defence without meaningful tangible reforms?
- What Europe needs is concrete action taken immediately, rather than politically comfortable initiatives which only begin to address the problem. The union needs to meaningfully implement reforms and policies suggested by Draghi’s reports, if it wants to remain a global power, both economically and militarily, in the 21st century and if it wants to avoid turning Draghi’s warning of a “slow agony” into a prophecy.
