of the Minister for European Affairs Paolo Savona
Signor President of Confindustria, Lord and Gentlemen,
the date of 27 June, day before the Council of Europe, has proven to be an obstacle to fulfilling my commitment to attend this meeting. At this very moment I am in the Chamber to gather the will of the Deputies on the position that the Government, through its President, will take over at the next summit of 28-29.
Nonetheless, I want it to come to this meeting, together with my apologies for the involuntary absence, a short message from me.
1° The Chapter 2 of the Report on “How and why to strengthen Europe” is the best most recent analysis I have read on the subject. I feared that this topic could not even be discussed in Italy and reading the document reassured me and encouraged me to address the problems under discussion in Brussels by leaving the ccontingent and framing them in the need and urgency of changes in institutional architecturealand dell’EU. Congratulations therefore to the authors of the Chapter and to the Presidency who wanted this meeting-debate.
2° The first, the third and fourth blocks of theIntroduction contain a summary of the contents of the European matters waiting to be regulated. They are therefore an excellent agenda of the choices that must be made. Obviously it doesn't mean that I agree with all the initiatives proposed as a solution, but if we agree on the objectives, an agreement can be found on the technical tools.
3° I agree that the solutions are not “impossible”, but they are “hardly achievable”. Although everyone agrees, especially abroad, on the incompleteness of the architecture of the Union, however, everyone stops at the threshold of the answer to give in the event that the solutions prove to be impracticable. I find this hesitation worryingly dramatic. The unpreparedness to face every possible negative event is never a good sign. The inability of a country's ruling groups to face the problems that legitimize their role.
4° I agree with the assessment that the initial setup of the euro did not take into account the non-optimality of the euro area, nor ways to defend against external shocks. It was believed that the common market operating within the fiscal constraints placed on the level of the deficit and public debt and that an autonomous monetary policy would allow the non-optimality of the monetary area to be overcome. I have never believed in the validity of this "hope", but my "secular doubt" pushed me to wait for the proponents of this political line to prove in practice the validity of their expectations and that, if they were unable to do so, they would have drawn the necessary consequences. This did not happen and today they shy away from the duty to suggest solutions by putting forward specious arguments, fears and threats of looming crises. If these crises manifested themselves, they would be confirmation of the existence of defects in European institutional architecture.
5° My thesis is that the Statute of the ECB must be adapted in terms of objectives and instruments assigned to those available to the main central banks. Draghi did an excellent job within the mandate assigned to the ECB, but the powers he should have had need to be strengthened.
6° The supply policy (the reforms) which is constantly invoked is the essence of current European policy and cannot produce the desired effects without a demand policy centered on investments aimed at bridging the gaps in internal and external real growth. In this regard, see the collection of writings by Franco Modigliani and Giorgio La Malfa edited by the Ugo La Malfa Foundation and the seminal analysis published in 1989 by Paolo Baffi on Press to warn the country and Europe above all against the exchange rate policy it was embracing. On this important aspect of the European problem the coverage coming from economic theory and practical experiences is total. Believe that the problem can be solved with the appointment of a European Minister of Finance, who is the guardian of the supply policy, It seems to me to be a reinforcement of an inadequate approach. Nor a European banking union based on lowering banking risk mechanically assessed on five parameters, nor the offer to create a European Monetary Fund that intervenes by imposing conditionality to guarantee reforms, much less can they remedy the absence of a demand policy. To launch a demand policy, the EU must equip itself with its own resources, otherwise there is no possibility of giving exogenous boosts to macroeconomic growth. I do not deny the importance of the stability objectives pursued, but I believe that they cannot be achieved in a way divorced from the choice of adequate tools, which depend on the institutional architecture of the EU. Also for this aspect, many aspects of the document under discussion today are worthy of consideration.
7° In this regard, I add particular appreciation for the extensive analysis advanced on how the American federal system works; this case represented a constant reference for me, also for the teachings of Jan Kregel, former authoritative member of the Confindustria Study Center and now director of the Study Center named after the great banking expert Hyman Minsky at Bard College in Annandale on Hudson. I suggest meditating on Kregel's writings, even recent ones, on the euro and fiscal policy.
8° The debate on the strategy that the Government must follow in Europe has seen some progress in the latest writings of Italian economist-journalists. I hope that this is the result of a better awareness of what to do induced by the heavy economic and political situation that Italy has been dragging on for a decade in particular, especially on the financial side. However, the importance of a central point of the problem raised here still does not emerge: There is a close relationship between the institutional architecture of the EU and its politics. Acting only on the second is a tiring and in many ways useless task, if not exactly dangerous for European cohesion and the future of Italy.
Thanks for your attention and good work.
Paolo Savona
27/06/2018
