Mario Draghi, who had flown to Barcelona to receive the European construction award at the Cercle d’Economia, gave a speech by 15 minutes. To listen to him, in the front row, the Spanish President Pedro Sanchez, with whom he is always expected today, June 18, a bilateral summit. From the health emergency to the community responses to re-emerging from the economic crisis, the Italian Prime Minister, at the end of his speech, received a long applause, with the audience standing up while Draghi himself was besieged by journalists. «The overall favorable outlook hides some significant risks. Although the pandemic situation seems increasingly under control, we are still far from the end », he began. Draghi reiterated the twofold problem of economic inequalities between countries: «Vaccination efforts so far have been concentrated in the rich world. Only 0.3% of doses in low-income countries, while the richest have distributed l’85%, a difference that is not only ethically unjust, it is also very dangerous. As long as the virus continues to circulate freely, there will always be a risk of new variants. One or more could be resistant to our vaccines, compromising the countryside ». After focusing on the aspects closely related to the Coronavirus, the premier outlined the boundaries of the current economic situation.
Draghi: “The decisions of the monetary authorities are of particular importance”
“After a long period in which world inflation has remained too low, it has recently started to rise. The inflation rate in the OECD area has reached 3,3% in April, up from 2,4% in March, the highest since 2008. Most economists believe this effect is temporary. We must remain alert to the possibility that inflation expectations may vary in the future. We must also monitor the risk of divergence between the euro area and the US economy, and the consequences for the position of the respective central banks ”. Considering the high levels of debt in the world, he continued, “the decisions of the monetary authorities are of particular relevance. In 2020 the debt / GDP ratio in the EU increased by 16.7 percentage points. In Spain, this ratio has increased by more than 25 percentage points and in Italy of 15.8 percentage points. In addition, governments have provided companies with generous guarantees. Alla end of 2020, in the four largest EU countries alone, such guarantees amounted to almost 450 billion euros. In the event of corporate failures, these guarantees could lead to an even higher level of sovereign debt in the future ”.
“An expansive economic policy is essential to reduce debt, both public and private”
Once we reiterated that expansionary policy is “essential” to preserve growth. “Such a policy will, in turn, make it possible to reduce debt, both public and private.” Draghi, however, also reassured investors that «we will return to fiscal prudence as soon as the recovery continues independently. This is why we are now focusing on non-recurring tax expenses, and it is also why we need to focus these expenses where the impact on growth will be greatest. A long-term anchoring system will help keep interest rates low and allow governments to continue strengthening investments. “We have to make sure that the recovery is fair and sustainable. In the recent past we have forgotten the importance of social cohesion. We have taken democracy for granted and ignored the risk of populism, ”he added, however anticipating what could be the next crisis.
“At the same time, during this recovery, we must ensure greater attention to climate change. We cannot get out of the health crisis and then enter, as sleepwalkers, into an environmental crisis. A successful exit from the pandemic requires coordination, especially within the euro area. We must continue to strengthen our institutions and foster a climate of mutual trust. And we must remain united, as Europeans, to tackle the greatest challenges of our times: climate change and inequality. For decades, the rest of the world has looked to Europe for its unique ability to combine equity and prosperity ”. Draghi, finally, concluded by quoting Jean Monnet: “Europe will be shaped by its crises and will be the sum of the solutions found to resolve these crises”.