Thank you very much, President von der Leyen.

May I now ask Professor Draghi to join us on the stand, thank you. Thank you.

Ursula, thank you very much for your kind words at the beginning of this conversation,

but also thank you for having given me the opportunity to serve Europe.

Which I try to do at my best.

1 year ago, we met here to discuss 3 challenges set out in the report.

Europe's growth model has long been under strain.

Dependencies threatened its resilience, and without faster growth, Europe would be unable to deliver on its climate,

digital and security ambitions,

not to mention finance its aging societies.

Over the past year, each of these challenges has grown more acute.

The foundations of Europe's growth,

expand in world trade and high value exports have weakened further.

The US has imposed its highest tariffs since the smooth holy era.

China has become an even stronger competitor.

Both in third markets and as US tariffs divert flows inside Europe itself.

Since December last year,

China's trade surplus with the European Union has risen by almost 20 %

We've also seen how Europe's ability to respond is limited by its dependencies,

even when our economic weight is and remains considerable.

Reliance on the US for defense was quoted as one of the

reasons we had to accept a trade deal largely on American terms.

Dependence on Chinese critical materials has curtail our ability to prevent

China's overcapacity from flooding Europe or to counter its support for Russia. Europe has begun to respond.

Since the US absorbs around 3/4 of the global current account deficit,

diversifying away from its market is unrealistic in the short term.

But, for example,

the Mercosur deal with Latin America can offer relief for exporters.

The Commission has launched strategic projects for critical raw materials,

and defense spending is rising sharply.

These defense commitments, however, add to already vast financing needs.

The ECB now puts annual investment requirements annual for 25-31 at nearly 1.2 trillion,

up from 800 billion a year ago.

The public share has almost doubled from 24% to 43%,

an extra 0.5 trillion a year, as defense is mainly publicly funded. Fiscal space is scarce.

Without this new spending, EU public debt is set to rise 10% points over the next decade,

reaching 93% of GDP on growth assumptions that are

more optimistic than what it is at the present day.

One year on, Europe is therefore in a harder place.

Our growth model is fading, vulnerabilities are mounting,

and there is no clear path to finance the investments we need.

We've been reminded painfully that inaction threatens not only our competitiveness,

but also our sovereignty.

The report sets out 3 priorities for Europe.

Closing the Innovation gap in advanced technologies, sharpen the decarbonization path to support growth

As President von der Leyen has underlined, these are also at the heart of the Commission's agenda,

and I welcome her decision to place competitiveness at the center,

and the program is ambitious.

Europe's citizens and companies value the diagnosis,

the clear priorities and the action plans. But they also expressed growing frustration.

They are disappointed by how slowly the EU moves.

They see us failing to match the speed of change elsewhere.

They are ready to act, but fear governments have not grasped the gravity of the moment.

Too often, excuses are made for our slowness.

We say it's simply how the EU is built.

That a complex process with many actors must be respected.

Sometimes inertia is even presented as respect for the rule of law. I think that's complacency.

Competitors in the US and China are far less constrained, even when acting within the law.

To carry on as usual is to resign ourselves to falling behind.

path demands new speed, scale and intensity,

talking together, not fragmenting our efforts, it means focusing resources where impact is greatest, but it means delivering results within month not years. Start with technology.

AI is often called a transformational technology like electricity 140 years ago.

But it depends on the orchestration of at least 4 other technologies cloud to store.

Data super computing to process that data, cyber security to protect sensitive sectors.

Advanced networks, 5G, fiber, satellites for transmission.

In some of these areas, Europe shows progress.

Plans are underway for at least 5 AI gigafactories,

each with more than 100.000 advanced GPUs.

Data center capacity is set to triple over the next 7 years.

A major telecoms reform is expected by year end.

ASML's recent investment in Mistral is a promising signal for domestic AI ecosystem.

Adoption is rising too, as the President has just reminded us,

the EIB finds European firms are taking up advanced technologies at a pace close to US peers,

though from a lower base. But the gaps are stark.

On the AI frontier, the US produced 40 large foundation models last year,

China 15, the EU just 3.

Among SMEs, AI adoption is still low, ranging from 13 to 21%, and in the most strategic field,

AI built on European intellectual property to anchor our core industry,

progress is minimal.

There are 3 areas where more ambition is needed.

First, As the President has remarked before,

removing barriers to scaling up new technologies.

A true 28 regime must become a reality, allowing innovative firms to operate, trade,

and raise financing seamlessly across all 27 member

states just as competitors can in other large economies.

This is especially important to give young Europeans a chance on their continent. They won't stay here.

They don't want to go elsewhere to have success.

The Commission is moving in this direction.

But with uncertain backing from member states,

the first step towards the 28th regime will likely be limited to a digital business identity.

Early stage funding also needs stronger backing.

The Scale up Europe Fund can help startups grow if its size matches their financial needs.

The planned increase of Horizon Europe to 175 billion is welcome.

But for breakthrough research,

this will fall short unless the additional resources are concentrated into sizable priority programs.

Resources must flow into centers of excellence.

They must focus on high risk, high reward projects chosen through a DARPA style process.

They must be reinforced by strong industry linkages

to academic institutions to turn research into real applications.

Implementation must rest with expert project managers, not bureaucrats.

Europe should be capable of making direct investments in a few large strategic deep tech initiatives. The second area is regulation.

Across European companies,

one of the clearest demands is for a radical simplification of GDPR.

Not just the primary law, but also the heavy gold plating by Member States.

Training AI models require vast amounts of public web data.

Yet legal uncertainty over its use creates costly delays,

slowing deployment in Europe. Research backs this up.

GDPR has raised the cost of data by about 20% for EU firms compared with US peers.

Yet the only change on the table so far is an

easing of record keeping and extending SMEs' derogations to meet CAPS.

Broader reform towards simpler, harmonized rules is still vague.

The IA Act is another source of uncertainty.

The first rules Which included the ban on unacceptable risk systems,

landed without major complications.

Codes of practice signed by most major developers,

together with the Commission's August guidelines, have clarified responsibilities.

But the next stage,

covering high risk AI systems in areas like critical infrastructure and health.

Must be proportionate and support innovation and development.

In my view, implementation of this stage should be paused until we better understand the drawbacks.

More broadly, enforcement should rest on ex post assessment,

judging models by their real world capabilities and demonstrated risks.

The third area is the vertical integration of AI into industry.

Sectoral AI applications are even more critical than raw supercomputing power. Here, Europe has a real advantage.

Its firms hold more than half the global market in industrial automation solutions,

a cornaissance of industrial AI.

Yet only around 10% of manufacturing firms used the AI last year.

Industry and governments must work together to turn this head start into proprietary European solutions.

The Commission's applied AI strategy this autumn will be a key test.

Natural gas prices in the EU are still nearly 4 times higher than in the United States.

Industrial power prices are, on average, more than double.

Unless this gap narrows, the transition to a high tech economy will stall.

Energy is fondamental and technology in drive a.

Electricity demand by data centers in Europe will rise by 70% in 2030.

Power already accounts for up to 40% of their operating costs. The IEA warns that without action one in five plant projects globally

By Box only countries only the line.

Energy strategy with digital policy will capture the largest games in the AI race. The Commission has launched

its Clean Industrial deal and the Action Plan for Affordable Energy,

both consistent with the report's agenda.

But the main step so far has been to

relax state aid rules so Member States can subsidize prices. That may offer temporary relief.

But it doesn't fix the structural reasons why energy in Europe is so expensive.

This includes gas prices that, following Russia's invasion of Ukraine,

are still about double their pre COVID levels.

A pricing system in which gas still sets the market price for electricity most of the time,

even as renewables expand. And high charges and taxes.

Decarbonisation, let's get this straight, decarbonisation is the best long term path for Europe to achieve energy independence,

despite its lack of natural resources.

But it requires much faster investment to make a renewables heavy system work.

In grids, interconnectors, and clean baseload generation,

such as nuclear.

Today, half of the cross-border capacity needed by 2030 has no investment plan.

Even approved projects take more than 10 years. We have time lost to permitting.

The agreed package due at the end of this year and

the proposed budget increase for cross border links are a step forward.

But the current system,

national coordination of permits and financing is not fit for a European energy market.

Cross border projects need EU level planning and execution.

At the same time, we must be realistic.

These measures will not cut energy prices quickly.

That is why we must act on the levers that can deliver faster relief.

To stand out Improving the functioning of gas markets

and loosening the grip of gas on electricity prices.

Europe is already the world's largest buyer of US LNG.

And has committed to purchasing up to $750 billion in US energy products.

Whatever the conditions of that deal,

it should be treated as a chance to reorganize how we purchase gas.

Since March, LNG landed in Europe has cost from 60 to 90% more than the same gas would cost in the United States,

even after accounting for logistics and regasification.

Collective EU purchasing as first proposed by the Commission after Russia's invasion.

Could certainly narrow this gap by strengthening our bargaining power,

reducing intermediaries margins and shielding us from volatile spot markets.

In parallel, Europe must deliver on the work of the

gas market task force and bring more transparency to energy trading.

Profits for the four largest global traders quadrupled between 20 and 22.

Joint supervision and a stronger rulebook are overdue.

We must then decouple the remuneration of renewables and nuclear from fossil generation by expanding contracted energy,

meaning purchasing power agreements and two ways, contracts for difference.

Some useful initiatives are underway,

such as the EIB's pilot PPA Purchasing Power Agreement guarantee.

But far more decisive action is needed.

Long term contracts must be extended to all renewables and nuclear assets,

new as it is today, but also existing alike.

The current mechanism for setting prices simply awards huge rents to many vested interests.

As we press ahead with decarbonisation, the transition must also be flexible and pragmatic.

The Commission has eased some of the most onerous reporting requirements through its omnibus on sustainability,

but in some sectors, such as automotives,

targets rest on assumptions that no longer hold.

The 2035 deadline for zero tailpipe emissions was meant to trigger a virtuous circle. Firm targets would drive investment in charging infrastructure.

Spur innovation in Europe and make EVs models, electric vehicle models, cheaper.

Adjacent industries, batteries, chips were expected to develop alongside,

supported by targeted industrial policy. But this hasn't happened.

Charging point installation must accelerate 3 to 4 fold

in the next 5 years to reach adequate coverage.

The EV market has grown more slowly than expected.

European innovation has lagged, models remain expansive,

and the supply chain is fragmented.

In fact,

the European car fleet of 250 million vehicles is aging.

CO2 emissions have barely fallen in recent years.

Has suggested in the report that the upcoming review of the CO2 emissions regulation should follow.

Technological neutral approach and take stock of market and technological developments. We also need a

joint up approach to the ramp up of EVs, covering supplies

infrastructure needs and the potential of carbon neutral fuels.

In the coming months, the automotive sector will test Europe's ability to align regulation, infrastructure and supply chain development into a coherent strategy for an industry,

lets not forget that, employs more than 130 million people across the value chain.

The report called for using industrial policy actively

to cut dependencies and guard against state sponsored competition.

At the time, concerns were raised about economic nationalism,

protectionism and the risk that Europe might abandon global rules.

But the past year has shown clearly that we are operating in a different world.

The line between economy and security is increasingly blurred.

States are using every tool at their disposal to advance their interests.

So far, Europe's response has fallen into two traps : uncoordinated national efforts,

or blind faith that market force will build new sectors. The first can never deliver scale.

The second is impossible when others distort markets and tilt the level playing field.

Instead, we must build the capacity to defend ourselves and withstand pressure at key choke points.

Defense, heavy industry, and the technologies that will shape the future.

3 levers can give us the scale and intensity we need.

The first is a new approach to coordinating state aid.

In practice, state aid often acts as protectionism,

locking activity within borders instead of building European industries that are globally competitive.

IMF research shows that aid in one country often

comes at the expense of growth in its neighbors.

Europe does have coordination tools, such as important projects of common European interests.

Which can focus support and reduce these spillovers.

Yet in 2023 EU countries spent nearly €190 billion on state aid,

five times more than has been allocated to IPCIs since 2018.

strategically, IPCIs could help Europe achieve scale in sectors like innovative nuclear technologies, such as small modular reactors,

or in the automotive supply chain for affordable zero and low emission vehicles.

The Commission is taking measures to make such projects more attractive and accessible.

But the EPCI model is still essentially national in design and funding.

This creates an inherent ceiling compared to our competitors.

Take Europe's semiconductor IPCI approved in 2023.

It mobilized €80 billion of public funding spread across 14 member states,

68 projects, and 56 companies.

Action target reaching a 20% Global Share of semi-conductor Manufacturing by 2030 is one the European Court of Auditors already called very unlikely.

Publish Support the a smaller economy into a single large scale leader in advanced ships.

It is focused on clear objectives,

backed by major firms as investors and anchor customers.

And it moves far faster, aiming for mass production by 2027.

Europe should learn from this concentrated model and extend it to other advanced technologies,

combining public and private investment for disruptive innovation and large scale industrial projects. The second lever is public procurement.

State aid cannot build new supply in critical technologies without matching European demand.

Regulation can help by removing barriers to adoption.

But procurement is the most powerful tool to create markets.

It works in two ways, with total public procurement equal to 16% of EU GDP.

Directing even a small share to European industries would

create stable demand for innovation and strengthen strategic sectors.

Second In industries where scale is decisive,

harmonized rules can drive standardization and sustain long capital intensive investment cycle.

The potential is clear across many sectors.

Reserve an EU share in defence chip

procurement support in European Cloud and vertical AI.

Quotas for clean techs products such as green steel and aluminum Work has begun on preferential EU procurement rules for the public sector,

though details still are unclear.

But success will depend on harmonization across Member States.

Without it, procurement,

like state aid risks sliding into national protectionism and failing to deliver the necessary scale. The 3rd lever is competition policy.

Here will basically reiterate what the president has just said.

In defense and space and the dual use technologies that underpin them,

market dynamics are very different from consumer markets.

Here, consolidation is not necessarily a threat to consumers.

It can be a way to cut duplicated R&D.

Low cost accelerate innovation and Focus Procurement budgets, competitors in US and Asia benefits not

Only from state support and vast procurement markets, but also from consolidation in these sectors.

Yet Europe remains split between multiple national champions and overlapping industrial bases.

Europe should be able to protect competition while still promoting consolidation and innovation.

A review of merger guidelines is underway. But industry can't wait until 2027.

By the way, this deadline is actually consistent with the procedure that was chosen originally.

Resilience and innovation must be built into competition policy now.

At a minimum, a fast track process should be established immediately.

The next question is how do we increase speed?

In some areas, the EU can do more with the powers it already has.

Regulation is where the Union can act fastest and most decisively.

Europe has long styled itself as a regulatory power, it must now prove it

can adapt to a fast changing technological landscape.

In other areas, deeper reform is needed of competences,

decision making and financing.

Ultimately, in some crucial areas,

Europe must act less like a confederation and more like a federation.

But such reform will take time, time we may not have.

In the meantime, progress may depend on coalitions of the willing,

using mechanisms such as enhanced cooperation.

Even without Treaty change,

Europe could already go much further by concentrating projects and pooling resources.

If we succeed in focusing our efforts in this way,

the logical next step is to consider common debt for common projects.

Whether at EU level or among a coalition of Member States,

to amplify the benefits of coordination.

Joint issuance would not magically expand fiscal space, but it would allow Europe to finance larger projects in areas that lift productivity,

breakthrough innovation, scale technologies, defense R&D or energy grids,

where fragmented national spending can no longer deliver.

By raising out faster than interest costs,

such projects will gradually restore fiscal space and make broader investment needs easier to finance.

The report estimated that even a modest 2% increase in total factor

productivity over a decade could cut the public finance burden by 1/3rd

And if we lower barriers in the single market and let firms scale faster,

we will also accelerate the growth of European capital markets.

These can help finance the private share of investment needs.

In substance, the more we push reforms, and this is a point I made several times, the more we push reforms,

the more private capital we step up and the less public money we will need.

Of course, this path will break longstanding taboos.

But the rest of the world has already broken theirs.

For Europe's survival, we must do what has not been done

before and refuse to be held back by self imposed limits.

Most importantly,

we must move beyond broad strategies and backloaded timelines.

We need concrete dates and deliverables and to be held accountable for them.

Deadlines should be ambitious enough to demand real focus and collective effort.

This was the formula behind Europe's most successful projects, the single market and the euro.

Both advanced through clear phases, firm milestones and sustained political commitment.

And I will conclude on the same lines as Ursula a moment ago.

Europe's citizens are asking that their leaders raise their

eyes from their daily concerns towards their common European

destiny and grasps the scale of the challenge. Only unity of intent an urgency of

response will show they are ready to meet extraordinary times with extraordinary action Thank you

Thank you very much, Professor Draghi,

and thank you very much again, President von der Leyen.