ECB’s Panetta Proposes Creating a European ‘Common Spending Programme’
3 December 2024

By Marta Vilar – BARCELONA (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Tuesday that Europe would need a fair amount of resources to grow sustainably and be strategically independent.
In a speech at the XX Dialogue Forum of Spain and Italy in Barcelona, Panetta, who heads the Banca d’Italia, said that ‘the European economy is struggling to keep pace with the most dynamic countries, the United States above all, mainly because of low productivity growth.’
Europe's lag versus the US in terms of information communication technology, the digital revolution and artificial intelligence had to do with structural weaknesses, he said.
‘According to various analyses, a further €800 billion per year will be required in public and private investment until 2030 for the twin green and digital transition and for strengthening [Europe's] defence capacity’, he stated.
Capital investments in Europe have come mainly from the private sector, but nevertheless the proportion of public investments was expected to rise, he said.
Despite the high levels of public debt in some countries, like Italy and Spain, common debt was low for Europe as a whole, he said.
As the volume of EU bonds under the Next Generation EU programme would start declining in 2028 and would get close to zero in 30 years, Panetta said, Europe should focus on a common fiscal approach.
‘Creating a common fiscal capacity to finance public goods would help Europe overcome this anomaly’, he said.
After reiterating that he was not calling for the creation of a fiscal union, Panetta said that the EU could ‘set up a common spending programme to finance investments that are indispensable for all European citizens.’
The increase of common debt would increase productivity in Europe, limit individual states’ expenditures and help them decrease their public debt levels faster, he said.
‘The creation of a liquid secondary market would make it possible to reduce EU bond yields, which are currently penalized by the low liquidity of trading and the absence of derivative instruments to hedge market risks’, he added.
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