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BRUSSELS (Reuters) -The European Union needs far more coordinated industrial policy, more rapid decisions and massive investment if it wants to keep pace economically with rivals the United States and China, Mario Draghi said on Monday in a long awaited report.The European Commission asked the former European Central Bank chief and Italian prime minister a year ago to write a report on how the EU should keep its greening and more digital economy competitive at a time of increased global friction.”The situation at the moment is really worrisome,” Draghi told a news conference in Brussels. “Growth has been slowing down for a long time in Europe, but we’ve ignored (it)… Now we cannot ignore it any longer. Now conditions have changed.”Trade protectionism was increasing, the supply of cheap energy from Russia was gone, the bloc needed to pay more for its defence, and its population was shrinking.In his nearly 400-page report, Draghi said the bloc needed investment of 750-800 billion euros ($829-884 billion) per year, up to 5% of GDP – far higher even than the 1-2% of EU GDP in the Marshall Plan for rebuilding Europe after World War Two. And the bloc must act on several fronts.”It’s ‘Do this’ or it’s a slow agony,” Draghi warned.EU countries had already responded to the new realities, Draghi’s report said, but it added that their effectiveness was limited by a lack of coordination.Differing levels of subsidies between countries was disturbing the single market, fragmentation limited the scale required to compete on a global level, and the EU’s decision-making process was complex and sluggish.The report suggested so-called qualified majority voting – rather than a need for unanimity – should be extended to more areas, and as a last resort that like-minded nations be allowed to go it alone on some projects.While existing national or EU funding sources will cover some of the massive investment sums needed, Draghi said new sources of common funding – which countries led by Germany have in the past been reluctant to agree to – might be required.German Finance Minister Christian Lindner said joint borrowing would not solve EU problems and Germany – the biggest economy in the 27-nation bloc – would not agree to it. Analysts said the EU may well drag its feet on Draghi’s suggestions.”Political difficulties in Germany and France, and longstanding divisions among other EU member states, will likely prevent a significant leap forward in integration that Draghi prescribes,” analysts at Eurasia Europe said.”Furthermore, recent political developments in France, notwithstanding (Michel) Barnier’s appointment as PM last week, make us much more sceptical about the EU’s capacity to deliver meaningful fiscal ambition…”SMARTER REGULATIONDraghi also said EU antitrust regulators should base merger approvals not just on competition within EU borders, but on whether a takeover could boost innovation in sectors, such as technology, where scale is critical to compete. Security and resilience should also carry more weight, he said.The report also featured proposals for 10 economic sectors, including energy, AI, pharma and space. Andrew Kenningham, chief economist at Capital Economics, said there were a lot of sensible proposals, but many were unlikely to be adopted, pointing to previous reports by former Italian prime ministers Enrico Letta this year and Mario Monti in 2010 that had “mostly fallen on stony ground”.EU growth had been persistently slower than that of the United States in the past two decades and China was rapidly catching up. Much of the gap was down to lower productivity.If the EU maintained its average labour productivity growth since 2015, it would only be enough to keep GDP constant in 2050, Draghi said. However, the bloc needs greater wealth to cover decarbonisation, digitalisation and strengthening its defence.Draghi’s report comes as the issues he raised – lack of investment, loss of cheap energy and changing demographics – are casting doubt on the economic model of Germany, once the EU’s growth engine. Volkswagen (ETR:VOWG_p), Europe’s biggest carmaker and one of Germany’s industrial keystones, said last week it was considering its first plant closures there.Draghi said the EU was struggling to cope with higher energy prices after losing access to cheap Russian gas and could no longer rely on open foreign markets.The former central banker said the bloc needed to boost innovation and bring down energy prices while continuing to decarbonise as well as reduce its dependencies, notably on China for essential minerals, and increase defence investment.What is productivity and why is Europe so desperate to crack the code? Listen now to Reuters Econ World.($1 = 0.9051 euros) More

(Reuters) -Wall Street was set for a higher open on Monday, rebounding from a week of heavy losses as investors remained optimistic about a soft landing scenario for the U.S. economy ahead of a crucial inflation report later in the week.All megacap stocks rose in premarket trading, with Tesla (NASDAQ:TSLA) leading the gains, rising 2.2%.Most chip stocks, which also saw heavy selling last week, recovered with AMD (NASDAQ:AMD) and Marvell (NASDAQ:MRVL) Technology advancing 1% and 1.5%, respectively.Global markets were rattled last week as uncertainty over the U.S. economy’s health rippled across assets, adding fuel to an already volatile period that has investors grappling with a shift in the Federal Reserve’s policy and worries over stretched valuations.Friday’s weaker-than-expected August jobs data spurred worries on economic growth and drove the Nasdaq Composite to its worst week since January 2022, while the S&P 500 saw its biggest weekly drop since March 2023. Still, S&P 500 was 13.4% higher so far this year as hopes of a soft landing for the U.S. economy remained alive with the Fed expected to begin its rate-cutting cycle next week.Markets will be squarely focused on U.S. consumer prices data on Wednesday that is expected to show a moderation in headline inflation in August to 2.6% on a yearly basis, while on a monthly basis it is expected to remain unchanged at 0.2%.”While the inflation battle is not fully won, it appears safe to say that the Fed should feel comfortable that inflation is sufficiently under control to begin moving monetary policy in a less restrictive direction,” said Ronald Temple, chief market strategist at Lazard (NYSE:LAZ). This will be followed by producer prices data on Thursday. Money markets currently see a 75% chance of a 25-basis-point rate reduction by the Fed next week and expect a total monetary easing of 100 bps by the end of the year, according to CME’s FedWatch Tool.Bank of America, the most conservative among Wall Street’s brokerages on the size of the Fed’s expected rate cuts this year, raised its forecast to match most of its peers’ expectations of 25 bps of easing in each of the three remaining policy meetings this year. At 08:25 a.m. ET, Dow E-minis were up 227 points, or 0.56%, Nasdaq 100 E-minis were up 111 points, or 0.6% and S&P 500 E-minis were up 28.75 points, or 0.53%. Debate between Democrat Kamala Harris and Republican Donald Trump on Tuesday – the first time ahead of the presidential election on Nov. 5 – will be closely eyed by the investors.Among individual movers, Boeing (NYSE:BA) advanced 3.7% after it reached a tentative agreement with a union representing more than 32,000 workers in the U.S. Pacific Northwest, in a deal that could help avert a possible crippling strike as early as Sept. 13.Eli Lilly (NYSE:LLY) climbed 1% after the drugmaker appointed insider Lucas Montarce as its chief financial officer. Dell Technologies (NYSE:DELL) and Palantir (NYSE:PLTR) rose 4.9% and 8.4% respectively, while Erie climbed 3.3% as they are set to join the S&P 500 index on Sept. 23.These companies will replace American Airlines (NASDAQ:AAL) Group, Etsy (NASDAQ:ETSY) and Bio-Rad Laboratories (NYSE:BIO), respectively, in the index. More

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The European Union requires radical reforms through a new industrial strategy to ensure its competitiveness, to boost social equality and to meet climate targets, according to a keenly awaited report from economist and politician Mario Draghi.
The proposals laid out in the report would require between 750 billion and 800 billion euros in additional investment each year, the European Commission estimates.
Other areas of concern include supply chain security and defense spending, the report states.

Italian Prime Minister Mario Draghi during the press conference at the Multifunctional Hall of the Prime Minister on July 12, 2022 in Rome, Italy.
Massimo Di Vita | Mondadori Portfolio | Getty Images

The European Union needs up to 800 billion euros ($884 billion) in additional investment per year to meet its key competitiveness and climate targets, according to a report from economist and politician Mario Draghi.
The bloc’s goals of bolstering its geopolitical relevance, social equality and decarbonization are being threatened by weak economic growth and productivity compared with the U.S. and China, the report states.

The wide-ranging study led by Draghi — who previously served as prime minister of Italy and president of the European Central Bank during the euro zone debt crisis — found EU priorities must include reducing energy prices, strengthening competitiveness, coordinating industrial policy and raising defense investment.
The EU must also adapt to a world where “dependencies are becoming vulnerabilities and it can no longer rely on others for its security,” the report found, citing the EU’s dependence on China for critical minerals, and China’s reliance on the EU for absorbing its industrial overcapacity.
The EU’s high level of trade openness will leave it exposed if trends toward supply chain autonomy accelerate, the report continues. Roughly 40% of Europe’s imports come from a small number of suppliers which are difficult to replace, and around half of this volume originates from countries with which the bloc is not “strategically aligned,” it says.
“The EU will need to develop a genuine “foreign economic policy” that coordinates preferential trade agreements and direct investment with resource-rich nations, the building up of stockpiles in selected critical areas, and the creation of industrial partnerships to secure the supply chain of key technologies,” the report states.

The EU will need to ensure dependencies do not increase and look to “harness the potential of domestic resources through mining, recycling and innovation in alternative materials.”

Other goals include full implementation of the single market, which includes 440 million consumers and 23 million companies, by reducing trade friction.
The bloc must also seek to ensure its competition policy does not become a “barrier to Europe’s goals,” particularly in the technology sector.
The European coalition must also facilitate “massive investment needs unseen for half a century in Europe,” through a mix of private finance and public support. The EU is meanwhile suffering an “innovation deficit” which must be tackled through reforms to research and development funding and policy, the report states.
Across many sectors, the report calls for greater harmonization of policy and focusing of funding. In clean technology development, for example, it found financial support was fractured among different programs, while manufacturers were struggling to compete globally, given Chinese subsidies and the huge domestic support provided by the U.S. Inflation Reduction Act.

On steps to mobilize private finance, the report recommends transitioning the European Securities and Markets Authority (ESMA) from a co-ordinator of national regulators into a single regulator for all EU securities markets able to focus on overarching goals, similar to the U.S. Securities and Exchange Commission (SEC).
To fast-track policymaking, the report proposes limiting the voting items that require support from an absolute majority of member states.

Funding question

Public and private investments are being hindered by the size of the EU budget, its lack of focus and its risk aversion, the Draghi report says. It adds that looming repayments of the huge debt-financed NextGenerationEU Covid-19 recovery program starting in 2028 mean that the EU’s effective spending power will be reduced without a decision on sourcing new resources.
Certain areas of spending proposals, including defense projects and cross-border grids, will require “common funding,” it continues, adding that the EU should move toward “regular issuance of common safe assets to enable joint investment projects among Member States and to help integrate capital markets.”
Germany, traditionally resistant to moves toward additional common borrowing, responded to the proposals on Monday.

“The communalization of risks and liability creates democratic and fiscal issues. Germany will not agree to that,” Finance Minister Christian Lindner said, according to a CNBC translation of a Reuters report.
The EU’s total investment-to-GDP rate will have to rise by around 5 percentage points of EU GDP per year to levels last seen in the 1960s and 70s to meet defense, digitalization and decarbonization targets, according to the study.
Overall, the objectives set out would require a minimum annual additional investment of 750 to 800 billion euros, according to European Commission estimates.
The report was commissioned last year by European Commission President Ursula von der Leyen, who was elected for a second five-year term in July and is set to appoint new Commissioners this week.
Some analysts were quick to pour cold water on the scale of the resulting reform.
The findings “will trigger a crucial debate for the future of the EU/Eurozone, but there is no need to hold your breath,” Lorenzo Codogno, founder of Lorenzo Codogno Macro Advisors, said in comments emailed ahead of the report’s release.
“Nothing will happen until the new Commission becomes fully operational, and even after that, the tricky, fragmented and fragile political situation across member states makes it challenging to obtain the political support necessary for action. Still, some surprises cannot be ruled out, and thus, the political debate that will follow needs to be monitored carefully,” he said.
David Roche, founder of Independent Strategy, said the report would not result in an immediate market impact.
“The gap between US and EU productivity could be bridged by [Draghi’s] proposals to integrate nationally based supply side sectors and markets and boosting public and private investment massively. But it won’t happen,” Roche said in a note Monday, describing Europe as “paralysed by populism and incompetence at the national level.”
– CNBC’s Sophie Kiderlin contributed reporting. More

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September futures on the S&P/TSX index were up 0.9% at 6:18 a.m. ET (10:18 GMT).The composite index ended at an over three-week low on Friday due to declines in technology and commodity-linked shares after U.S. and Canadian jobs data came out.Canadian unemployment rose to 6.6%, its highest level in more than seven years excluding the pandemic years.While the U.S. employment numbers came in below analyst expectation and cemented a base case for a soft landing, it also gave jitters to the global markets over an economic slowdown in the world’s largest economy.Policymakers are widely expected to cut rates by 25-basis points in the Federal Reserve’s next policy meeting on September 18..U.S. consumer prices data is also due on Wednesday.On the political front, the first-ever presidential debate between Democrat Kamala Harris and Republican Donald Trump on Tuesday will set the stage for the upcoming U.S. elections in November.In Canada, the energy sector looks strong as oil prices jumped over 1% on the possibility of a hurricane hitting the U.S. Gulf Coast. [O/R]The materials sector remained in focus as gold prices eased due to a strong dollar, while copper prices rebounded after their biggest weekly loss since mid-July. [GOL/] [MET/L]In corporate news, Canada’s Alimentation Couche-Tard said it was open to engage in talks with Japanese retail giant Seven & i Holdings after the latter rejected former’s $38.5 billion takeover.COMMODITIES Gold: $2,404.8; -0.1% [GOL/]US crude: $68.36; +1.0% [O/R]Brent crude: $71.74; +1.0% [O/R]FOR CANADIAN MARKETS NEWS, CLICK ON CODES:TSX market report (TO)Canadian dollar and bonds report [CAD/] [CA/]Reuters global stocks poll for CanadaCanadian markets directory($1 = 1.3561 Canadian dollars) More

BEIJING (Reuters) -China’s consumer inflation accelerated in August to the fastest pace in half a year but the uptick was due more to higher food costs from weather disruptions than a recovery in domestic demand as producer price deflation worsened.A sputtering start in the second half is mounting pressure on the world’s second-largest economy to roll out more policies amid a prolonged housing downturn, persistent joblessness, debt woes and rising trade tensions.The consumer price index (CPI) rose 0.6% from a year earlier last month, versus a 0.5% rise in July, data from the National Bureau of Statistics (NBS) showed on Monday, but less than a 0.7% increase forecast in a Reuters poll of economists. Extreme weather this summer from deadly floods to scorching heat has pushed up farm produce prices, contributing to faster inflation. China’s affected crops due to various natural disasters totalled 1.46 million hectares in August, state media reported on Monday.”The higher CPI in August was due to high temperatures and the rainy weather,” NBS statistician Dong Lijuan said in a statement. Food prices jumped 2.8% on year in August from an unchanged outcome in July, while non-food inflation was 0.2%, easing from 0.7% in July.”But the rebound was softer than expected and did little to ease deflation concerns. Much of the improvement has been food reflation, which is susceptible to fluctuating weather conditions and capacity changes,” said Junyu Tan, North Asia Economist at Coface.Core inflation, excluding volatile food and fuel prices, was 0.3% in August – the lowest in nearly three and a half years – down from 0.4% in July. The consumer inflation gauge was up 0.4% month-on-month, compared with a 0.5% increase in July and missing economists’ expectations of a 0.5% gain.China’s yuan dipped against the dollar on Monday as long-dated yields hit record lows after monthly inflation data added to economic worries and calls for fresh easing. China stocks ended morning trade lower. In unusually strong comments, China’s ex-central bank governor Yi Gang urged efforts to fight deflationary pressure at the Bund Summit in Shanghai last week.A national campaign to earmark $41 billion in ultra-long treasury bonds to support equipment upgrades and trade-in of consumer goods has proven lukewarm in spurring consumer confidence, with domestic car sales extending declines for a fourth month in July.”These policies will take time to filter through, so a demand-led reflation is obviously not yet on the horizon,” Tan said.Meanwhile, the producer price index (PPI) in August slid 1.8% from a year earlier, the largest fall in four months. That was worse than a 0.8% decline in July and below a forecast 1.4% fall.”The ongoing deflationary pressures boil down into a broader problem of production surplus, which is still outstripping demand,” said Tan of Coface.”We think increased fiscal spending will drive an uptick in domestic demand over the coming months. But government policy is still too skewed toward investment, and so increased fiscal spending may ultimately exacerbate the overcapacity problem,” said Gabriel Ng, assistant economist at Capital Economics.Faltering economic activity has prompted global brokerages to scale back their China 2024 growth forecasts to below the official target of around 5%. China has room to lower the amount of cash banks must set aside as reserves, a central bank official said on Thursday. More