now struggling to keep up with the more radical innovations by its extra - european competitors. 4 in the united states, instead, the companies and sectors that spend the most on research and development have changed over time. twenty years ago it was car manufacturers ; the percentage is broadly the same both in terms of purchasing power parity and as a ratio of gdp. the gap is even greater, as shown in figure 3. a, at current monetary values, which are affected by exchange rate fluctuations and differences in price dynamics. at purchasing power parity, the ratio fell from 62 per cent in 2013 to 50 per cent in 2023. e. nindl et al., the 2023 eu industrial r & d investment scoreboard, publications office of the european union, 2023. the figures relate to the 2, 500 companies that invest the most in research and development worldwide. c. fuest, d. gros, p. - l. mengel, g. presidente and j. tirole, eu innovation policy : how to escape the middle technology trap, econpol policy report, 2024. today it is digital economy and technology - intensive companies, with new players continually emerging that are capable of achieving significant growth and capitalization in a short period of time. there are three main reasons for the predominance of middle technology sectors in europe. to begin with, the innovation gap that has been building up since the end of the last century, when europe's production system failed to make the most of the opportunities provided by the spread of the internet and of information and communication technologies. then came the us tech giants ( google, apple, facebook, amazon, and microsoft ), whose access to massive datasets, scientific know - how, financial resources, and extensive customer bases, has ensured them a dominant position today as digital service providers and in cutting - edge fields such as artificial intelligence. the european economy ’ s capacity to innovate is also limited by the fragmentation of research and development activities among firms, universities and research centres based in different countries. this hinders the transfer of knowledge and ideas, and hampers the undertaking of projects with high funding requirements. finally, the lack of integration between the scientific and business worlds and the rigidity of the eu administrative and regulatory framework stand in the way of transforming research results into competitive products and services for the global marketplace. ai is an eminent case in point. 5 although european research centres have produced highlev

foundations for the development of the internet as we know it today. darpa ’ s activities rely on the interaction between academia, the corporate sector and government agencies. creating a common fiscal capacity to finance public goods would help europe overcome this anomaly. to be clear : this proposal does not imply the creation of a ‘ fiscal union ’, and would require neither an eu finance minister nor mechanisms for systematic transfers between countries. 14 the idea, instead, is to set up a common spending programme to finance investments that are indispensable for all european citizens, through a continent - wide productivity compact. to paraphrase keynes, what matters is not to do better or worse those things which the member states are already doing, but to do the things that are not being done at all. 15 here is an example that may help illustrate my point. if the eu issued debt securities to fund up to 25 per cent of an investment plan worth €800 billion a year for six years, by 2030 the european common debt would reach 6 per cent of the eu ’ s gdp. taking into account ngeu bonds and other programmes managed by the european commission, it would reach 10 per cent of gdp ( figure 5 ). 16 let me only mention in passing the other important functions that a common fiscal capacity could perform. as well as mitigating the impact of local shocks that affect only some member states ( a form of mutual insurance ), a common fiscal capacity would enable the better management of aggregate demand. this way, the european fiscal policy would no longer be the mere sum of national fiscal stances, but could be made consistent with the cyclical conditions of the euro - area economy as a whole and with the monetary policy stance. ‘ the important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse ; but to do those things which at present are not done at all. ’ keynes made the point in his 1926 essay the end of laissez - faire, referring to the best way to allocate tasks between the public and private sector within a single country ( j. m. keynes, the end of laissez ‑ faire, london, hogarth press, 1926 ). the macroeconomic assumptions underlying the simulations are that : the interest rate on the productivity compact will be 3 per cent ( equal to the weighted average of the yields on the ten - year bonds of the eu member states ) ; real gdp