Europe’s ambitious effort to reestablish itself as a competitive powerhouse in cutting-edge innovation, intended to narrow the widening technological divide with global rivals like the United States and China, has encountered serious obstacles and remains far from achieving its goals. Nearly twelve months ago, former Italian prime minister and former president of the European Central Bank, Mario Draghi, famously cautioned that the European Union was confronting nothing less than an “existential challenge.” His message was stark: without swift and substantial investment in breakthrough technologies such as artificial intelligence and other advanced digital capabilities, Europe risked falling irreversibly behind in the global race for technological supremacy.
In a comprehensive and widely discussed report, Draghi argued that Europe had already forfeited its opportunity to become a global leader in transformative domains such as cloud computing and quantum research. Despite this acknowledged setback, he nevertheless emphasized that the continent still retained a meaningful opening to take the lead in newer, rapidly evolving sectors such as generative artificial intelligence and other frontier technologies. Yet, according to a recent report released by Deutsche Bank, the follow-through on these recommendations has been disappointingly modest.
The bank’s research, drawing on a detailed assessment conducted by the European Policy Innovation Council, reveals that of the 383 bold and specific proposals Draghi had outlined, only 11.2 percent have been fully carried out. Even when partial or ongoing progress is included, less than one-third of the entire agenda has been implemented as of early September. This stark shortfall points to systemic inertia. Furthermore, the audit highlights pronounced disparities across different sectors: initiatives in transport logistics and sourcing of critical raw materials are advancing relatively well, while momentum in energy policy and digital transformation remains mired in complex political disputes, regulatory deadlock, and ownership fragmentation across member states. As Deutsche Bank summarized, the overall trajectory conveys “mixed progress” — not entirely devoid of reform, but lacking the transformational breakthroughs Draghi had envisioned.
One area where the Union has shown comparatively greater commitment is defense. Germany, for instance, has significantly expanded its military budget, raising annual expenditure from an already substantial €74 billion in 2024 (roughly $87 billion) to an anticipated €128 billion in the following year. In parallel, European institutions have introduced a large-scale loan facility worth approximately $176 billion to enable member states to strengthen arms production capacity. This surge in defense investment demonstrates that where national priorities overlap and political will converges, Europe can act decisively. In the sphere of innovation-driven technologies, however, progress has been considerably weaker. Deutsche Bank frankly concludes that the Union has made only “limited improvements” in narrowing the innovation gap with its Atlantic and Asian competitors, leaving Europe lagging behind.
The European Commission has, to its credit, unveiled initiatives like “InvestAI,” designed to mobilize a sizable pool of $235 billion as a catalyst for artificial intelligence development. Plans even extend to supporting the establishment of AI gigafactories — large-scale hubs aimed at industrializing AI capabilities. Yet the bulk of these initiatives remain embryonic, announced in principle but awaiting real-world execution. A complementary program, aptly titled “Apply AI,” is being prepared to stimulate greater adoption of artificial intelligence solutions across the business landscape, though Deutsche Bank’s report stresses that corporate uptake within Europe remains inconsistent at best. More worryingly, structural deficiencies persist: limited availability of growth financing for scale-ups, inadequate cloud and data infrastructure, and the persistent failure to commercialize patents effectively have all prevented Europe from creating a technology ecosystem comparable in dynamism to Silicon Valley in the United States or the state-supported model seen in China.
Efforts to alleviate bureaucratic obstacles have yielded some promise but fall short of addressing the underlying structural issues. Through its “Omnibus” proposals, the European Commission intends to ease the regulatory burden for small and medium-sized enterprises, with forecasts suggesting potential annual savings of roughly $10.5 billion. Similarly, a new regulatory framework tentatively scheduled for implementation in 2026 could enable startups to opt into a unified pan-European system, thereby circumventing the constraints of inconsistent national-level regulations. Nevertheless, Deutsche Bank cautions that these measures, while constructive, remain incremental and often politically contentious. Crucially, more profound reforms in taxation, pension systems, and labor markets — areas Draghi unequivocally designated as vital to Europe’s long-term competitiveness — remain stalled within individual member states, where fiscal constraints and the growing influence of far-right political movements have all but paralyzed consensus-building.
Taken together, the Deutsche Bank report paints an unambiguous picture: after a year marked by both cautious optimism and renewed urgency, the European Union has demonstrated seriousness in addressing sectors where member states’ interests coincide, namely defense expansion and bureaucratic streamlining. Yet, when it comes to fostering innovation — which Draghi and others view as Europe’s most critical vulnerability or “Achilles’ heel” — the continent’s performance continues to fall short. With the stakes rising as both the United States and China accelerate their technological dominance, the lingering question is whether Europe can muster the political cohesion and strategic discipline necessary to transform well-meaning promises into tangible progress. The European Commission, when approached for comment on these findings, had not provided a response at the time of publication.
Sourse: https://www.businessinsider.com/europe-innovation-deutsche-bank-report-draghi-us-china-2025-9
