BRUSSELS, Sept 9 (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.

"Europe is the most open economy in the world so when our

partners don't play according to the rules, we are more

vulnerable than others," Draghi told a news conference.

In the opening section of a report set to run to some 400

pages, Draghi said the bloc needed additional investment of

750-800 billion euros ($829-884 billion) per year, up to 5% of

GDP - far higher even than the 1-2% in the Marshall Plan for

rebuilding Europe after World War Two.

"Growth has been slowing down for a long time in Europe, but

we've ignored (it)," Draghi said.

"Now we cannot ignore it any longer. Now conditions have

changed: World trade is slowing, China is actually slowing very

much and is becoming much less open to us... we've lost our main

supplier of cheap energy, Russia."

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.

"It will require refocusing the work of the EU on the most

pressing issues, ensuring efficient policy coordination behind

common goals, and using existing governance procedures in a new

way that allow member states who want to move faster to do so,"

the report said.

It suggested so-called qualified majority voting - where an

absolute majority of member states need not be in favour -

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.

"If the political and institutional conditions are met,

these projects would also call for common funding," the report

said, citing defence and energy grid investments as examples.

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.

Draghi's report comes as doubts emerge over the economic

model of Germany, once the EU's motor after Volkswagen

weighs its first ever 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 and both reduce its dependencies on others, notably

China for essential minerals, and increase defence investment.

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