While Malta’s recent major worry is concentrated as to whether grass will grow through a strata of gravel in Ta’Qali or not, there are much more serious issues that could affect us, which we are not even discussing. One of such serious issues is the direction the European Union project needs to head into if it is to survive. The question of whether the EU is project will ultimately have a bright future, is increasingly being asked, particularly in light of sluggish economic performance and growing internal frustrations over bureaucracy and political divergence. As highted by Mario Draghi, to survive, the European Union project needs to move ahead into a more integrated federal project, with short-term and long-term implications for a small island state like Malta.
A core concern for the future of the EU is its persistent lack of substantial economic growth. For many years, the EU’s economic growth has lagged other major global economic blocs. Looking at the past decade (2014-2023), the average annual GDP growth rate for the European Union was approximately 1.7%. While this figure is positive, it masks years of near-stagnation and is significantly lower than that of major global economies. Added to this is the fact that many of the fastest-growing major economies globally are found in Asia, such as India and China, with projected or actual GDP growth rates often in the 5-7% range, alongside other nations in South-East Asia. Critically, many of these rapidly growing economies, are not linked to true liberal democracies. This challenges the narrative that the democratic and regulatory model of the EU is the most effective path to prosperity, creating a political and economic conundrum for the bloc.
The EU’s competitiveness deficit has been officially acknowledged and dissected. Former European Central Bank President Mario Draghi, in his report on European competitiveness, delivered a stark assessment, warning of an “existential challenge” for Europe due to sluggish growth, technological lagging behind the U.S. and China, and the end of the post-war era of relying on cheap Russian energy and U.S. security. His diagnosis highlighted that Europe can no longer rely on past drivers of growth and must urgently address deep-seated issues like slowing productivity and excessive bureaucracy. Draghi’s central message was a call for a far more united Europe, arguing that to compete globally, the EU must “act more and more as if we were one state.” His key proposals included completing the Capital Markets Union (CMU) which would unify fragmented markets to unlock private savings, which are currently high in Europe, and channel an estimated €8 trillion of dormant capital into productive investments, particularly for green and digital transitions. Mario Draghi also proposed an €800 billion annual investment boost (equivalent to 4-5% of EU GDP) to fund innovation in AI, green technologies, and defence and also spoke about the so called “28th Regime” meaning the creation of a simplified, EU-wide legal and regulatory framework for innovative companies to scale up quickly across the continent without navigating 27 different national rulebooks. Draghi made it clear that private capital alone is insufficient for this massive investment requirement. He proposed joint public financing models at the EU level, building on the model of the NextGenerationEU recovery fund, which was financed through common EU debt issuance. This would involve mobilising private investment through larger venture capital funds, but critically, it would require common EU borrowing to provide the necessary scale and stability for public investment in “European public goods” like cross-border energy grids and advanced defence capabilities.
On the basis of this report, the European Commission set itself the priority of simplification, aiming to reduce the administrative burden on businesses, particularly Small and Medium-sized Enterprises (SMEs). To achieve this, the Commission has been working on various Omnibus packages, which are legislative proposals designed to revise multiple legal acts simultaneously to cut red tape.
However, the path to simplification has immediately encountered the very bureaucratic hurdles it seeks to eliminate. The European Parliament has been divided, with a substantial number of amendments being proposed, which has delayed the adoption and created considerable legal uncertainty for companies. This includes the first omnibus package, where the necessary political majority for rapid adoption was not secured, illustrating the difficulty in enacting timely and substantial reform.
The EU’s entangled bureaucracy poses a severe threat to its ability to act quickly on the necessary reforms outlined by Mario Draghi. The delay in implementing simplification measures means that EU economies run the risk of becoming less competitive in a rapidly evolving global market. The lengthy legislative processes and vested national interests create inertia, making it difficult to pivot swiftly.
This economic malaise, combined with perceived elitism and ineffectiveness in Brussels, creates a fertile ground for political fragmentation and the rise of extreme politicians. These politicians are often hell-bent on destroying the EU project or fundamentally undermining its core principles. As economic growth stagnates and opportunities diminish, the electorate becomes more receptive to anti-EU, nationalist, and populist narratives. The inability of the EU to deliver tangible prosperity on a continental scale significantly increases the chance that these extreme politicians are elected in various European countries, ultimately threatening the bloc’s cohesion and survival.
The true sensible path, if the European project is to secure its long-term future and global relevance, is to move beyond a loose confederation of states and evolve into a more united federation. This will allow Europe to truly use its large economic power by deepening integration and finally completing the key pillars of the Single Market: a true single market (eliminating remaining national barriers in services), a Capital Market Union (creating a single pool of investment capital), and a Banking Union (ensuring financial stability).
Such a profound shift towards a united federation would have significant implications for a small island nation like Malta, carrying both immediate risks and substantial long-term rewards.
In the short-term, the greatest implication would be a loss of autonomy over key national policies. Malta has successfully built a competitive economic model, partly through the flexibility allowed by its current fiscal and corporate taxation regime. Moving towards a deeper political union, especially one that implements common debt, a unified corporate tax base, or tighter tax harmonisation measures, would directly threaten this competitive advantage. The complete dismantling of national protective barriers through a truly single market and the implementation of a deep Capital Markets Union and Banking Union would also enforce tighter, centralised financial regulation and increase competition for local businesses, which could initially be disruptive to the established local financial services and corporate structures. Essentially, the immediate risk is the erosion of the unique competitive edge Malta currently leverages within the EU.
However, the long-term benefits of Malta being anchored to a federal European superpower would outweigh these initial sacrifices. Firstly, the completion of the Capital Markets Union and Banking Union would result in a massive, resilient, and stable financial ecosystem, which is the ultimate form of economic security for a small, open economy. Maltese businesses, especially innovative start-ups and SMEs, would gain unfettered, efficient access to a deep pool of capital and over 450 million consumers, enabling scale and growth far beyond the constraints of the domestic market. Furthermore, a united European Federation would possess a significantly stronger and more coherent voice on the global stage, allowing Malta’s interests to be better defended in a world dominated by giants like the US and China. The political security derived from being part of an economically robust and unified superpower acts as the most effective long-term safeguard for the island’s stability and prosperity.
The question is whether we, the citizens and leaders of Europe, have the courage to carve out a new brighter future for Europe. Stagnation is a choice. Bureaucracy is a barrier we can dismantle. The economic forces challenging us from Washington and Beijing demand a response that is not timid, but courageous and powerful. We must embrace the uncomfortable necessity of deeper unity—completing the Single Market, forging a true Capital Market Union, and acting as one sovereign economic force. For Malta, and for all of Europe, the sensible path is the bold path. We must not allow fear of change or the lure of short-sighted national interests to consign us to global irrelevance. The time for hesitant steps is over; the moment to build a stronger, more united Europe is now!
