Panetta: 'Debt, Italy spends as much on interest as on education. Push productivity and growth. More legal immigrants needed'

In addition, Panetta recalls other reforms needed for the competitiveness of the European economy: enlargement of the single market to sectors that are currently excluded, such as telecommunications and energy, in order to stimulate competition and efficiency; the creation of a regulatory environment conducive to entrepreneurial activity, which can attract private investment and incentivise innovation; the strengthening of links between the academic world and the production system, in order to transform the results of research into competitive products and services on the global market. "Even on the financial markets front, where integration is well advanced, significant progress towards the completion of the banking union and the realisation of a single capital market has been lacking for years. With regard to investment, European leaders have already identified the key sectors on which to focus their efforts: the double transition - environmental and digital - and strategic sectors such as food, energy, health and defence, where it is necessary to reduce dependence on foreign countries".

The Governor then returns to the subject of demographics: he recalls that projections indicate that in the coming decades the number of European citizens of working age will decrease and the number of elderly people will increase. "This dynamic risks having negative effects on the resilience of pension systems, the healthcare system, the propensity to undertake and innovate, and the sustainability of public debts. To counter these effects, it is essential to strengthen human capital and increase the employment of young people and women, particularly in countries - including Italy - where the gaps in labour market participation by gender and age are still too wide. Measures favouring an inflow of legal foreign workers are also an economically rational response, regardless of other assessments. The entry of legal immigrants must be managed in a coordinated manner within the Union, balancing production needs with social balances and strengthening the integration of foreign citizens into the education system and the labour market. Even with more employment and more foreign workers, however, the contribution of labour to growth will be limited. Only higher productivity - i.e. an increase in output per hour worked - will ensure development and high incomes. However, productivity growth in Europe is slow: over the last two decades we have lagged behind the United States by 20 percentage points, mainly due to the difficulty European companies have in using new technologies in the production process'.

In Europe, 'a test for the new European legislature will be the ability to confirm the use of common spending projects and to move towards a more complete and more integrated union in both financial and fiscal terms. Since the NGEU programme will end in 2026, a not-so-distant horizon, it is necessary to start reflecting on the next steps. The design and scope of future programmes will depend to a large extent on the success of the current ones, in particular on the ability of individual countries to use the funds made available by their respective recovery and resilience plans profitably. Second, it is imperative to revive growth, not only to ensure the well-being of citizens, but also to continue to count in the world. Twenty years ago, both the EU and the US produced a quarter of world income; since then, the EU's weight has fallen to 18% while that of the US has remained unchanged'. In short, 'the European economy must be strengthened on several dimensions: by rebalancing its dependence on foreign demand and enhancing the single market; by making it more competitive; by putting it at the forefront of technology and energy; by enabling it to provide for its own external security'.

Furthermore, Panetta returns to the topic of innovation and the fragmentation of research and development activities and the lack of integration between the scientific and business worlds. "European industry is trapped in intermediate technology sectors and has little presence in those at the frontier, despite the excellence of the research conducted in individual countries. The case of artificial intelligence (AI) is emblematic. Although European universities produce quality research in this field, continental companies have a negligible presence in the development of the technology: between 2013 and 2023, private investment in the field of AI was $20 billion in Europe, compared to $330 in the US and $100 in China. So it is clear, for both economic and strategic reasons, 'that Europe cannot limit itself to being a mere user of technology. It must aspire to an active role in its production. A significant European presence in this sector - today dominated by a few global technological giants - would increase competition and bring benefits that go beyond the production dimension and concern the essential rights of citizens, such as the protection of personal data and pluralism in the information sector'.