A greater ideal

It won’t be easy for Mario Draghi to assume the lead of the European Central Bank (ECB), which is experiencing “the most tense period of” its “entire life”. However, the ongoing difficulties might lead to greater stability for the EU. It is the view of Simona Beretta, professor of International Economic Policies at the Catholic University of Milan, interviewed by Francesco Rossi for SIR Europe on the appointment of the current Bankitalia governor to ECB presidency. Draghi, 63, on November 1st will succeed French Jean-Claude Trichet and will remain in office until October 31st 2019. What is the role of the president of the European Central Bank? “The president has an important function from the political angle: he reports monetary policy decisions along with the state of health of the Union to the European Parliament and to the EU Council of Ministers. He isn’t only a technician. He is tasked with providing explanations on European monetary policy decisions that are taken in total autonomy”.Does Draghi’s appointment at the ECB presidency have a meaning also for his home country, Italy? “I am sure that the institutions acquire the value of those working for it. Certainly this appointment is the recognition of the value of an individual and of a solid tradition of Italian central bakers, within a larger tradition of European central bankers capable of carrying out fruitful team work”.What are the upcoming challenges?“The ECB is undergoing the period of greatest tension in its entire life, since the specific aspect of the macroeconomic structure of the European Union, marked by a single currency and many States, and by sovereign fiscal policies, is experiencing a setback. This contradiction should have been solved with the Growth and Stability Pact, that in fact was never respected. There have been decades when we overreached ourselves and we’re now paying the dues, whereby the fiscal policies of a small Country are enough to jeopardize an entire system. This is Draghi’s situation: the EU’s credibility must be recovered”.How can this be done?“I think that nobody knows it for sure. We have to trim our sails according to the wind, aware that we have good propositions and the courage to innovate, shunning excessive attachments to approaches that belong to the past. Rather, I am concerned about the fact that today it’s hard to identify those principles that underlaid the European unification project. If we have reduced ourselves to mere economic cooperation void of a greater ideal, capable of supporting emerging costs, we risk having no more reasons to keep the EU together”.Do we risk an implosion? “There always are risks. But if we draw a balance of the monetary unification project it can be said that there have been many benefits, and we’re also learning to share national prerogatives. The contradiction of a monetary power in the hands of a European subject that has the power of surveillance as well as that of adopting remedies to financial instability within national governments and institutions broke out with the 2007-2008 crisis, which triggered the first attempt to share financial policies. Now the challenge of Greece and that of other countries experiencing national debts has sparked off a new crisis that could lead – despite ongoing difficulties and uncertainties – to shared fiscal sovereignty”. Could the Greek crisis result providential to the EU’s development? “We’re treading – albeit on uncertain grounds – towards development of a permanent structure with a single currency and of a federal public finance system. Moreover, the story of the EU is marked by temporary solutions following the same direction, namely, sharing sovereignty in specific fields. This is what has happened in the past. Today we must once again decide whether to continue along this road. However, it’s not up to the ECB to take this decision. Its intervention will consist in technical and/or political mediation”. Are there priorities that the new ECB president must bear in mind? “The priority consists in identifying informal ways whereby consensus will yield what hasn’t been obtained via the treaties, namely, to step up the shared fiscal and financial responsibilities, so as to avoid not only excessive public indebtedness but also excessive indebtedness of private banks and families. Daily behaviours must be guided with a firm hand aiming at overall coherence, so as to pursue survival, which entails the realization of the original intuition that led to the creation of the European Union”.