ECB’s Panetta: European Economy Needs Strengthening Against Fragmentation

23 April 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Fabio Panetta on Tuesday said that it was necessary to strengthen the European economy and develop appropriate responses to the risk of fragmentation.

Speaking at Roma Tre University, Panetta, who heads Banca d’Italia, said, according to a text provided, ‘The solution is to strengthen the European economy along three main directions: rebalancing its growth model; improving its strategic autonomy; ensuring its capacity to provide for its external security, and enhancing its role in the international debate.’

Trade integration had a series of theoretical benefits, but reality was challenging and ‘interconnectedness can quickly turn into vulnerability’, he said.

‘[W]e cannot ignore geopolitical risks and their implications. We need to consider the possibility that we may face further protectionist pressures and a deglobalisation of the world economy, and develop appropriate responses’, he said.

The consequences of world trade fragmentation affected the European economy due to its growth model and its productive and financial integration with the rest of the world, he said.

For this reason, the European economy needed to be reinforced, he said. ‘Going forward, the EU must strengthen domestic demand and make the most of the single market.’

Becoming economically stronger would make it possible for Europe to contribute to competition, integration and dialogue between countries, he said.

‘The solution lies in strengthening the European economy: by rebalancing its growth model and by making the most of the single market, by making it more competitive, by positioning it at the forefront of technology and energy, by empowering it to defend its external security, by providing it with the strength and authority necessary to amplify its voice and contribute to dialogue and cooperation between countries’, he said.