Panetta on European integration
Closer European integration is the best response to global fragmentation. It provides us with the necessary foundations to strengthen our resilience and our influence on international developments. It is what was stated by Fabio Panettamember of the executive board of the ECB, at a conference organized by Bruegel Instituteabout how the geopolitical situation will affect economic relations in the 21st century.
“History suggests that the world is faced with a trilemma – explains Panetta – in which peace, global trade and competition politics they struggle to coexist. Trade and peace can only be achieved if a stable political, economic and legal international order, underpinned by common institutions, offers a non-confrontational way of dealing with disagreements.”
“This lesson was the basis for the creation of multilateral international institutions and for European integration after the Second World War”, recalled the economist, noting that “in recent years serious geopolitical tensions, which pose a threat to both peace and trade and, in turn, prosperity. These tensions the risks of multiple shocks increase of offer that they destabilize prices and the economymaking more difficult for central banks to carry out their mandates“.
According to Panetta, globalization “poses challenges for the EU economy and for the ECB’s monetary policy”. “Weaker trade integration could significantly reduce welfare because our economy is more outward-oriented and its interdependencies could therefore turn into vulnerabilities,” but “fragmentation can also affect the monetary policy of the ECB” causing some volatility in output and inflation.
In this context, the challenge is to maintain the characteristics of multilateralism while preparing to address fragmentation through greater integration. Initiatives for strengthen the economic and monetary union and the integration of the single market they would make our economy more resilient and stable, especially if supported by adequate capacity common budget. Such fiscal capacity would support the investments needed in EU public goods in areas such as the green transition, digital innovation and military spending.
“There are no easy answers to geopolitical challenges that endanger peace, trade and prosperity, especially when the decisions that guide geopolitics do not fall under the control of national policy makers”, concludes the banker, stating that the current and future structure of the European Union and the euro area it is in the hands of the Europeans“.
“One more close European integration is the best answer to global fragmentation. It gives us a stronger voice on the international stage to promote cooperation and openness. It provides the scale needed to invest in technology and capitalize on national resources. And it is the right level on which to promote an open strategic autonomy that builds on the single market, rather than weakening it”. (Ticker)