Mario Draghi, the former Prime Minister of Italy and former President of the European Central Bank, delivered a thought-provoking address at the annual Centre for Economic Policy Research (CEPR) Symposium held recently in Paris. His insights on the current economic climate in the European Union (EU) and the urgent reforms needed to boost internal productivity have sparked widespread discussion among policymakers and economic analysts.
During his speech, Draghi emphasized the stagnation of governmental efforts to complete the EU's internal market. He stated, "I governi hanno fatto ben pochi sforzi per completare il mercato interno dell'Ue e l'applicazione delle sue regole è diventata più debole...". This weak enforcement of rules has impeded the overall growth of productivity within the region.
Draghi's discourse revolved around the necessity for the EU to advance with fundamental reforms aimed at both the single market and capital markets, which he described as "fondamentali" for supporting the foundational mechanisms of productivity growth. According to him, without comprehensive market reforms, any efforts made through macroeconomic policies would yield only limited results. He asserted, "Senza riforme tra 25 anni il Pil Ue sarà uguale a oggi...". This stark warning highlights the potential for economic stagnation if structural changes are not implemented swiftly.
Another prominent theme from Draghi's address was the urgent need for the EU to reconsider its fiscal strategy. He argued for the issuance of joint EU debt, stating, "Se l'Ue emettesse debito congiuntamente, potrebbe creare uno spazio fiscale aggiuntivo da utilizzare per limitare i periodi di crescita inferiore al potenziale...". He expressed concerns about how, without such measures, the bloc would face significant public fiscal challenges exacerbated by existing commitments and declining demographic trends.
Draghi pointed out the importance of enhancing public investment and coordination among member states. "Senza questo debito comune..., dovremo anche spostare la nostra azione politica...", he noted, emphasizing the balance between creating additional fiscal space and improving the quality of fiscal policies being pursued.
Touching on external competition, Draghi discussed the shifting dynamics of the Chinese market and the EU's reliance on the US as economic partners. "Il mercato cinese è diventato meno favorevole per i produttori europei...", he highlighted, cautioning about the competitiveness decline and the challenges posed by changing market conditions, which require the EU to rethink its economic strategies.
Historically, the EU has leaned on low wage strategies to bolster competitiveness; Draghi, nonetheless, labeled this approach as unsustainable. He remarked, "Le politiche europee hanno tollerato una bassa crescita dei salari...", indicating this has aggravated income cycles and consumption deficiencies.
The psychological aspect of Europe's identity was not lost on Draghi, who expressed concerns over the importance of retaining societal values amid these economic fluctuations. "Tutti desideriamo la società che l'Europa ci ha promesso...", he stated, reminding listeners of the collective vision for the Union and the need to sustain those values through dedicated efforts.
Regrettably, Draghi noted, some observers find comfort in underestimations of the challenges facing Europe, but he called for realistic assessments and swift actions to avert what he characterized as approaching crises. "Sarebbe rassicurante credere che questi problemi non siano così gravi come sembrano...", he warned, urging the need for proactive measures rather than complacency.
Draghi’s articulation of the challenges may resonate with many who fear stagnation. He forecasted dire fiscal futures if productivity continues along its current average growth rates. With demographic trends adding stress to existing social spending obligations, Draghi underscored serious consequences for public programs if growth does not improve.
He concluded with strong emphasis on the need for investment not only to maintain current societal commitments but also to prepare Europe for future technological and environmental challenges. He stated, "...750-800 miliardi di euro all'anno che la Commissione e la Bce stimano saranno necessari per investire nell'energia, nella difesa, nella digitalizzazione e nella R&S...". These investments are deemed pivotal for ensuring Europe remains "inclusiva, sicura, indipendente e sostenibile".
Mario Draghi’s passionate plea at the CEPR symposium is more than just another call to action; it highlights the interconnectedness of economic reforms, societal values, and sustainable growth. His insights bring to the forefront the potential pathways for the EU to navigate its economic future amid increasing global pressures and internal challenges.
