European economic recovery efforts should be smarter, not bigger


The author is an intern visiting professor at the London School of Economics and the former Director-General of the Italian Ministry of Finance

Is Europe doing too little or too late to support its post-pandemic economic recovery? Even after an investigation by the European Union this week, the issue remains unresolved. The most ambitious deal In the world financial market. For the future, the key is that Europe’s fiscal, economic and monetary support need not be greater, but must be smarter.

Some respected decision makers, such as Wolfgang SchaeubleThe former German finance minister supported the EU’s debt-driven stimulus plan, but still urged the rapid restoration of fiscal and monetary discipline. Others warned of the risk of withdrawing support prematurely and returning to an inappropriate policy mix. In my opinion, the starting point is to structure the debate in an appropriate way.

The 27-nation European Union and the 19-nation Eurozone are at its core and are examples of unfinished business. The missing part includes enough macroeconomic stabilization tools.The fragility of the current system includes the risk of financial and banking troubles Complement each other, As we saw 10 years ago. The lack of fiscal capacity of the central government has led to excessive reliance on the unconventional monetary policy of the European Central Bank and politically disputed reliance.

During the pandemic, all EU countries, especially those with the most vulnerable economies, have benefited from the suspension and suspension of EU fiscal rules. The European Central Bank’s umbrellaNational policies involve state guarantees for bank loans, compensation for lost income of workers and businesses, job retention programs, and the deferral of certain taxes. Despite some difficulties and delays, these measures have generally effectively stabilized the EU economy and laid the foundation for recovery.A kind Generous and multifaceted EU plan It also played a role in responding to the economic recession.

It is true that the policy response is not perfect. It was pieced together in a temporary and urgent way. It is geared towards fiscal transfers between member states, and what the Eurozone really needs is Europe’s safe assets and centralized fiscal capacity.

Nevertheless, even if the government’s response could have been more timely and effective, it is difficult to say that it should be larger. The European Finance Commission is an independent advisory body of the European Commission. to sum up This week, “So far, the policies adopted or credibly announced by the government seem to have achieved an appropriate level of financial support.” I agree with this assessment.

In any future crisis, the important thing is not to do more, but to do better. For this reason European dimension Must be involved. Focusing on the EU’s safe assets and permanent fiscal capacity, the EU’s policy response will be at least as strong as the current national policy, but it will be more sustainable, automatic and timely.

Another part of EU’s recovery plan It’s about resilience. The aim is to increase potential growth through public investment supported by structural reforms.Although most of the macroeconomic stabilization work is left to national initiatives, the flexibility plan will make extensive use of co-funded European funds, such as 20 billion euros over a 10-year period Bond issuance Initiated by the European Commission this week.

The plan is biased towards those countries that need help most. They include less affluent member states, and the European Union’s Regional Assistance Fund has long accounted for a considerable share of their gross domestic product.But one of the two biggest beneficiaries will be Italy, This is so far Net contributor To the EU budget. Poor economic performance for a quarter of a century caused Italy to slip into the second half of the EU in terms of GDP per capita.

With the implementation of the EU’s recovery plan, Italy and Spain, the other major beneficiaries, will bear huge responsibilities. These funds need to be effective. Specific reforms European governments and voters in other countries must be able to see the EU so that the EU can consider future integration steps.

Of course, some countries failed to implement Structural reform And make good use of past public investments. However, tight fiscal restrictions sometimes make it difficult for some governments to co-finance projects that benefit from EU structural funds and maintain appropriate levels of expenditure on public investment. This exacerbates their growth problems.

In addition, the wrong response to past crises and the unfavorable combination of fiscal and monetary policies are not conducive to the political and social consensus required for deep-level supply-side structural reforms. instead, Populism, anti-establishment movement The expansion of scale has caused some reform progress made in the past to regress.

There is no doubt about this Fiscal discipline The entire European Union must be restored at some point. However, from a larger perspective, the most important goal is to reform the European economy and prepare for the challenges ahead. This will require improving the fiscal framework and the proper balance between budget policy, economic strategy, and the European Central Bank’s monetary measures. Europe’s task is not to propose a bigger response, but a better response.



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