The Italian Prime Minister, Mario Draghi, received yesterday the Cercle d’Economia’s first prize for “European Construction”. An award that the entity had given him when he had not yet entered politics: for his enormous work at the head of the European Central Bank.
Draghi did not disappoint those who love economics as much, at least, as politics. Precisely introduced by Professor José Manuel González Páramo, he shared the thesis that the economic projections of Spain and Italy will break ceilings. And he broke taboos on current economic policy.
Faced with the widespread idea that the point that the European ship must overcome is that of the recovery of the level of the pre-crisis economy (GDP in 2019), he argued that the challenge is even greater. That it is about reaching, at least, the moment that would have been reached by following the trajectory since 2019, without the interruption of 2020 and the beginning of 2021.
“Only when we recover” that level can we claim victory. “But we will not get there without additional stimuli”, that is, without greater budgetary (and monetary) expansion, at the aggregate (or coordinated) European level, which could give rise to the 750,000 million increase in the Next Generation-EU program.
This approach is not at all technocratic. If it gains adherents, it could postpone a return to fiscal consolidation, that is, to the fiscal rules of the Stability Pact: as they are or, more likely, reformulated in a more intelligent and less austerity way.
He introduced an addition to that thesis: that the recovery “be self-sustaining”, that is, without interruptions. “And more equitable, to face the risks of populism.” Among other reasons, because it is now about “convincing investors”, with justification, “that we will return to fiscal prudence.”
The former central banker subscribed to the widespread finding that inflation, “after years at very low levels” is growing temporarily, due to the “effects” of “temporary” events. And that the underlying increase (not including energy) in prices is lower in the eurozone than in the US.
But be careful, there are risks that many forget. Because some energy prices could grow with economic changes underway. And because the US-eurozone “decoupling” would not be positive either, due to its monetary and competitive effects.