Political commitment and analytical rigour. These are the two qualities that the great economist Federico Caffè was able to pass on to one of his favorite students: the president of the European Central Bank Mario Draghi. Also remembering his professor in his historic faculty, that of Economics of the University of Rome "La Sapienza", was the governor of the Bank of Italy, Ignazio Visco.
While some students protested against him outside the building, the ECB president began his speech by recalling, in Caffè's words, that "it cannot be accepted that an entire generation of young people should suffer their state of job insecurity as an ineluctable fact” and that “it is the duty of economic policy to act so that the economy can get as close as possible to full employment”.
WELFARE – Jobless young people are the major victims of the international crisis and one of the great evils afflicting Europe. The unemployment rates recorded in the European Union are an example of this. In the first three months of 2012, in Italy 32,4% of young people between 15 and 24 did not have a job. And this has two macro-effects: less growth and less innovation. "Underutilization of youth resources, in addition to hurting equity, constitutes a waste that we cannot afford," Draghi said. In Italy, social safety nets are still too weak and are accompanied by "a relatively high level of job protection". Welfare must be rethought to move towards flexsecurity: society needs social mobility.
EUROPA – “We have reached a point where the process of European integration needs a courageous leap of political imagination to survive,” said Draghi. "Because of this, a growth compact is needed alongside the fiscal compact“, which is based on three pillars. what politician which sees the need for Europe to outline common objectives for a policy capable of supporting the single currency. That of structural reformsespecially in the labor market. “It is desirable that a discipline be introduced that leads to European harmonization of objectives and instruments” to achieve growth and equity. Finally, the third pillar is that of revival of public investment. Draghi takes the side of the French president François Hollande and the premier Mario Monti: "The proposals to strengthen the European Investment Bank and reprogramming the structural funds go in this direction". But he adds, "there can be no sustainable growth without public finances in order. This is why I hope that, once the emergency is over, the governments aim for a decrease in current spending and the tax levy”.
MONETARY POLICY – The president of the European Central Bank recalled the importance of maintaining price and inflation stability within an established range for the welfare of society. In the most recent economic studies it is demonstrated a “negative correlation” between long-run inflation and growth and employment. “For policymakers, a 2 percentage point increase in inflation corresponds to 3-5 percentage points less growth”. This is not to say that in reality this is literally true, but the numbers offer an idea of the power of monetary policy and how, when used judiciously, it can contribute to the collective well-being.
ECB and LTRO – “Neither in normal times nor in times of crisis can the ECB be held responsible for the survival” of banks close to bankruptcy. The president of the Frankfurt institute puts his hands forward. “The reasons why banks don't lend money to businesses and there are three families,” Draghi explained, “: lack of liquidity, lack of capital and risk aversion. With the operations of Moreover, the ECB has only removed the first obstacle“. And the liquidity injections have achieved, according to the president, the objective for which they were born: the normalization of the rates applied by banks to businesses and of the disbursement of credit, the data of which the Bank of Italy will soon show, are confirmation. The ECB has done what was in its hands, but now "it is vital for growth and employment that credit institutions are once again in a position to finance the economy".
