Former European Central Bank Governor Mario Draghi has called for stronger coordination within the EU regarding foreign direct investment (FDI), warning that smaller member states could be pressured by large foreign investors, especially from countries with potential security risks.
In his report outlining a new competitiveness strategy for Europe, Draghi emphasized the risks of individual member states negotiating separately. “Asymmetries arising from small member states negotiating with large foreign investors could lead to unwelcome concessions, particularly when security threats and geopolitical rivals of the EU are involved,” the report states.
The EU established its first FDI screening rules in 2019, which created a voluntary framework for information-sharing on investments from non-EU companies. However, final decisions remain with national authorities, and not all member states have implemented screening mechanisms. Greece and Cyprus are the only EU countries without FDI screening laws, following Ireland’s recent adoption of its own regulations.
The report criticizes this fragmented approach, saying it hinders the EU’s ability to leverage its collective power in FDI negotiations. It points to the US as a model, where tighter controls on Chinese investments have led to economic decoupling. In contrast, EU member states have welcomed FDI from Chinese firms, particularly in Central and Eastern Europe.
Since 2020, Chinese investors have announced $44.6 billion worth of greenfield projects in the EU, with Hungary, Germany, Spain, and France among the top recipients. Battery manufacturing, automotive, and renewable energy projects dominate these investments.
Despite concerns, only 5% of FDI transactions notified to the EU in 2022 involved Chinese firms, while US and UK firms accounted for 32% and 8%, respectively.
