Europe is a resource and not an obstacle to overcoming the economic crisis, but it must become an economic and political union with federal institutions. Likewise, individual members will have to demonstrate discipline and credibility by keeping their accounts in order. This was the thesis of Minister Plenipotentiary Giuseppe Scognamiglio as he analysed the future of the EU in an editorial written with Ambassador Renato Ruggiero for the latest issue of East, published by Europeye, of which Scognamiglio himself is President.
The European Commission has confirmed that 2013 will be another year to end in recession in the eurozone. Is that an argument against austerity policies?
The final figures confirm the difficulty, especially in Western Europe, of re-injecting dynamism into economies stumbling under the weight of the stagnation of recent years, of an unsatisfactory internationalisation. We must find the key to a growth that is not only the result of austerity, but that doesn’t mean that austerity is not necessary. It is not possible to draft growth policies without having public accounts in order, at least on an annual basis. Nevertheless, it is necessary to try other things, such as an intelligent fiscal policy, which in Italy would mean releasing an enormous amount of wealth – five times GDP – that is, for the most part, unproductive.
What reforms are needed to give the European Union dynamism? A banking union, a fiscal union, eurobonds, increased ECB prerogatives?
All of these reforms are important and perhaps in this same order. The banking union is the most urgent for a more organised governance of the financial system in order to prevent future crises and reassure markets. But over the long run an economic union is also necessary – in order to truly stimulate growth, there have to be counter-cyclical policies that cool things when the economy is going well and jumpstart it in periods like this one. But that will never be possible without a unified economic policy, because there is the tendency to do the opposite at national level, i.e. apply a pro-cyclical policies: austerity when things are going poorly and full speed ahead when they’re going well. From there it’s a short leap to political union, since once you have a unified economic policy there are only a couple of functions typical to a federal political system.
But the reforms we’re talking about are often vetoed by the richer and more virtuous countries of Northern Europe like Germany, whose interests seem to be in opposition to the countries of the South. Isn’t this a major obstacle?
This division remains, especially at the level of public opinion, but if we manage to recuperate that visionary leadership we have seen fade over recent years, we might find out that it doesn’t really even exist. If peripheral countries are in economic straights, wealthy ones are too. Germany’s sells two-thirds of its product to the rest of Europe – if we aren’t able to buy, the whole thing collapses . Therefore, it is also in Germany’s interests to create a governance that puts our economies together, even sharing out our weaknesses, but that doesn’t mean that the Germans have to pay Italians’ debt. Our Greek experience tells us, in fact, that Italy contributed to the rescue in an almost equal way to Germany, which among other things was holding more Greek debt in its banks. So we did more than Germany to satisfy their loan to Greece.
Italy is under the gun for excessive deficit, while a disproportionate debt is restricting its movements. What more does it have to do for Europe? And what more, on the other hand, can it ask for?
We must keep our accounts in order; this is every country’s obligation. We cannot expect to continue the open-handed policies that have marked Italy since the 1980s. We have to help ourselves with structural reforms that restore efficiency and competitiveness to our productive system. Making it possible for the private sector to compete also means creating an efficient public administration system. For example, the Monti government’s pension reforms will have beneficial effects over the coming years, even though the present repercussions are negative. This is the contribution to make to Europe, because, if we present ourselves in Brussels as an efficient country, we will be more credible in our contribution to the institutional evolution of Europe. On the other hand, we can ask Europe to accelerate that evolution toward an authentic federal structure. There is no need to decide immediately, but neither can we remain with a European budget of 1% of GDP, half of which is already earmarked for farming subsidies; we must insist that this budget evolve toward 2 and 3%, including unified and counter-cyclical management costs. If this does not happen we will all be more peripheral in the world and, therefore, our economies and businesses will have less of an impact on productive processes.
Does the euro give us an edge or penalise us?
The euro is a clear advantage for everyone. A study by the Swiss Bank brilliantly demonstrates how much it would cost each Greek citizen, but also each German citizen, to stay in the euro or get out; and we see that it would cost a German at least 10 times more to get out than to contribute to rescuing Greece or Cyprus. The euro is a guarantee of stability for all the countries that have it, as long as there is proper governance – and with a banking union there will be – and a unified economic policy.
