The visionary economist Mario Draghi opened the influential Rimini Meeting on Tuesday by acknowledging the unprecedented historical period that Europe is living – a crisis sparked by a global pandemic, piling upon the combined damage of two recessions, all in the space of twelve years.
The consequences of this new crisis entail a rise in unemployment and a worsening of the overall economies (meaning that those left without work will not be reabsorbed into the workforce quickly). More still, entire societies ground to a halt for some time, freezing not only economic growth but human interactions; the Italian and European economies shrank at a rate comparable to that which followed World War II.
“The mobilisation of all available resources to protect workers and businesses […] has prevented an inevitable recession from turning into a prolonged depression. But the state of emergency and the measures it has justified will not last forever,” warned Mr Draghi, adding that “now is the time for wisdom in the choice of the future that we want to build.”
He then set out his pathway to recovery, one based on a mixture of ethics and Keynesian pragmatism. In a disorienting reality, where the rise of national politics has brought historical institutions (including the WTO and the EU) into question, the time has come for reforms that do not betray Europe’s guiding principles, argued the expert.
“Economic policy must not compound the uncertainty already being caused by the pandemic and rapid change. Otherwise we will end up being controlled by uncertainty instead of us controlling it,” he quipped. Thus, the first order of business is to restore that economic certainty, which will “inevitably be accompanied by debt stocks destined to remain elevated for a long time.”
This can be eased by joint debt issuing and mutualisation between EU member states (as seen most recently with the European recovery fund, writer’s note), and by ensuring that said debt can be continuously underwritten because it is “good dept”, i.e. aimed at increasing productivity.
“If debt is used for unproductive purposes, it will be seen as ‘bad’ debt and its sustainability will be eroded. Low interest rates are not in themselves a guarantee of sustainability, the perceived quality of the contracted debt is equally important,” pointed out Mr Draghi.
If we achieve that certainty, according to the economist, we may go on to plan the post-pandemic future, one entailing environment protection and sustainable reconversion of our lifestyles. Digitalisation, too, is here to stay; remote working will not disappear and the implications will be society-wide.
Mr Draghi then declared that the “imperative and urgent” condition for all of the above is that societies must invest massive financial and intellectual resources in today’s young. It must happen not only to prepare them for the world to come but for a more moral reason, which is that the debt currently being issued will be paid by none other than them. Thus, it befalls today’s leaders to grant them the means to sustain that debt while living in a better society than the current one.
“For years, a form of collective selfishness has led governments to divert attention and resources towards initiatives that generated guaranteed and immediate political returns. This is no longer acceptable today. Depriving a young one of their future is among the worst forms of inequality,” quipped Mr Draghi.
The EU can come out of this crisis stronger, he argued, as its monetary policy is the solid terrain onto which governments may direct their action and its funds for future generations (Next Generation EU) are the means to build tomorrow’s society.
“Let’s not forget […] that the solidarity which should have been spontaneous came from negotiations,” said Mr Draghi with reference to the approval of the EU Recovery Fund deal. Joint debt emission, the common European budget, even a future common Treasury can assure the eurozone’s continued stability, which in turn will make the recovery – and the underlying efforts – truly European in scope.
Following the immensely influential speech, which quickly climbed trending lists across social media, Formiche.net reached out to four influential figures from across the Italian panorama to gauge their reactions – which were all linked by a deep appreciation of Mr Draghi’s words.
Ferruccio de Bortoli, journalist and former director of the major Italian daily Corriere della Sera, told us that he believed Mr Draghi abstained from referencing Italian problems directly to quell rumors of his entrance in politics – but his messages, though not being addressed directly to the current government, were nonetheless identifiable in his society-wide critique.
According to Mr de Bortoli, Mr Draghi outlined an alternative and progressive idea of Europe, one which cannot think of imprisoning itself into rigid norms (like it did in 2008-2009) but rather coalesce around shared principles and values, expressible in the ethical effort to rebuild after the pandemic. The journalist expressed a deep appreciation for Mr Draghi’s distinction of good and bad debt. This was echoed by Luciano Violante, former head of the Chamber of deputies, who told us that he hoped politicians would listen to this.
Marco Bentivogli, a leading trade unionist, found the speech “very strong content-wise despite the gracious tones; [the speech] tried to transmit a vision that’s lacking from Italian politics today.” He thought that Mr Draghi critiqued the current political class because of its short-sightedness in bringing up solutions that only offer quick electoral dividends while unloading their weight on future generations and refraining from posing the basis for growth.
When asked if he thought that the economist’s messages would be listened to by those politicians, he expressed doubts. “[Mr Draghi] himself talked about the three virtues necessary to a management team: courage, humility and knowledge […] three blows to politics, which lives in the blackmail condition of the short-term. These are three virtues that have been missing in the last decades, and it doesn’t look like it’s getting better.”
A thought shared by Enrico Giovannini, an economist and former minister of labour and social affairs who is today leading the Italian Alliance for Sustainable Development (ASviS). “We can restart by changing the mentality that brought us here,” he told us; “the economic, social and institutional fragilities that were highlighted by the pandemic are a result of a development model that’s solely focused on efficiency.”
Mr Giovannini argued that immaterial investments are also essential to transform the country, as opposed to only investing in sterile projects that are not developed within the system’s context. “We need a recovery plan that’s not made of subsidies, but rather of investments into the different forms of capital: physical, natural, human and social. The European funds are meant for this. The rest must be done with national funds.”
“Politics is hope, and the day we lose hope is the day politics ends,” quipped Pier Ferdinando Casini, a seasoned politician and former president of the chamber of deputies. He expressed his deep appreciation for Mr Draghi’s speech and argued that it captured the unexpressed mood of the current situation. “I find myself in [Mr] Draghi’s words, that not everything is lost. The problem is that the course will be very arduous.”
Mr Casini highlighted Mr Draghi’s words on the young, “which risk becoming the great victims of this pandemic if nothing is done for them […] We’re unloading on the younger generations the cost of a welfare state which we cannot sustain. The very politics of debt is anti-juvenile. That’s why we need virtuous and sane politics. An example? Enough with this rainfall of subsidies. Even [Mr] Draghi said it, there’s little to distribute if we produce little.”