Panetta: 'Incomplete banking union limits the work of groups'

The unfinished Banking Union restricts banks and forces them to operate 'predominantly in national markets'. This is the view of Bank of Italy Governor Fabio Panetta, according to whom the single ECB supervision "has not been sufficient to create a fully integrated European banking market". "The 'full operation' of banks throughout the euro area is indispensable for an integrated capital market," he added, noting that the small steps approach followed so far "has not worked".

The EU must equip itself with a mechanism for "common expenditure to finance investments", including through a European "pro-risk" bond, Panetta said in his speech at the Italy-Spain Forum in Barcelona, making it clear that "this proposal does not imply the creation of a fiscal union nor does it require a European finance minister or mechanisms for systematic transfers between countries". Panetta stressed that it would be possible to finance "25 per cent of an investment plan of 800 billion per year for six years" while keeping the common debt at 10 per cent of GDP.

Coordinated action at the European level: a European productivity compact that mobilises public and private investment towards strategic common goods. And that leverages several key elements to be taken forward together: the creation of a common EU risk-free debt security, the completion of the banking union and the creation of a capital markets union. This is the proposal launched by the Governor of the Bank of Italy, Fabio Panetta, speaking today in Barcelona at the 20th Spain-Italy Dialogue Forum. Europe is facing "epochal changes: the double digital and climate transition, the deterioration of the geopolitical scenario, demographic and migratory pressures," he noted, "the fragmentation of global trade. Profound processes that require adequate responses. "To tackle them we must build an economy capable of growing, innovating and generating widespread prosperity". And according to Panetta, 'no Member State can do this alone'. Hence the need for a pact on productivity. "It is not just a response to the need to catch up, but a perspective for the future. It means strengthening technological sovereignty, creating jobs, improving the quality of life of citizens and protecting fundamental values such as freedom and pluralism'.

"To achieve these goals it is crucial to introduce a European risk-free security," the governor said, "to complete the Banking Union, to develop a European capital market better able to finance innovative high-risk projects. We must also create an economic environment that encourages entrepreneurship and innovation, overcoming regulatory and administrative rigidities that hold back our development potential'. But on these goals "we cannot afford a sequential approach, made up of small steps. The necessary reforms are interconnected and mutually reinforcing: they must be implemented with determination and an overall vision, leveraging the recent analyses of Mario Draghi and Enrico Letta'. All this while aiming to preserve the European economic and social model, which has been consolidated on the principles of freedom, equality and solidarity, as well as on international cooperation. "In many areas it has proved successful, as shown by the data on life expectancy". But to sustain it "we need an economy capable of growth and of generating widespread prosperity". And 'Europe can and must be the protagonist of its own destiny. Like Niccolò Machiavelli's archer, we must aim higher to reach our goal. Together,' he concluded, 'the Member States can turn challenges into opportunities and forge a future of prosperity and progress for all European citizens'.