“A genuine Banking Union, more symmetrical adjustment and deep structural reforms”: this is the possible trinity to really get the Eurozone moving again.
Marco Buti, director general for economic and financial affairs of the European Commission, presented the recipe at a conference organized by the IAI (Istituto Affari Internazionali) and the Center for Studies on Federalism entitled "Squaring the circle in the Eurozone". The meeting, moderated by Dino Pesole of Il Sole24Ore, was enriched by speeches by the director general of Assonime Stefano Micossi and Marcello Messori, director of the Luiss School of European Political Economy.
A lively debate from which emerges the image of a Eurozone recovering, even in its most vulnerable economies. A recovery that must, however, become more robust. In fact, an internal rebalancing is underway, largely structural, but growth is still weak due to some specific factors in the Eurozone, among which the bank-centric system and a low expansionary economic policy stand out.
The crisis has highlighted the many gaps in the EMU architecture, starting with the accumulation of excessive risks in good economic times in both the public and private sectors. A habit that has uncovered the weakness of market discipline and the insufficiency of control tools. The risks of financial instability inherent in its structure are also holding back the Eurozone: contagion between fragile sovereign issuers, and the vicious circle between these same issuers and the banking sector, and the fragmentation of the Eurozone's financial markets.
To achieve stabilisation, therefore, a strong economic policy response is needed. In addition to what has already been done (from the new crisis management tools to the launch of the banking union, via the strengthening of the surveillance tools) the road to follow is paved by elements that present a difficult coexistence.
In fact, Europe should be able to reconcile fiscal sustainability and sustainable social models. And also, in the countries that need to recover competitiveness, reconcile the increase in competitiveness and GDP with low inflation. clean up the financial sector and at the same time restore credit flows to businesses.
An impossible coexistence, in front of which opens the way, precisely, of what is, according to Marco Buti's report, the only possible trinity, what really can be done. That is, to give life to a genuine banking union which also leads to the consolidation of banks' balance sheets. A fiscal consolidation that is differentiated between the various countries and that is conducive to growth. Finally, an acceleration of the pace of structural reforms is needed to stimulate growth and allow for a more symmetrical adjustment between strong and vulnerable countries.
Once this long journey has been undertaken, the greatest risk would be that of declaring mission accomplished, a risk that increases the need for an adult debate. To close, the speakers focused their attention on a vital element for strengthening confidence in Europe (a confidence necessary to undertake the necessary economic policy reforms): the role of the new Italian government.
