How do we shape a resilient recovery in Europe?

May 7, 2021

Corrado Passera's editorial

CEO illimity

There can be no denying that Europe has been through some choppy waters in recent years. Brexit, a tempestuous relationship with the former occupant of the White House, and the tragedy of the Coronavirus pandemic have struck at our continent and had a significant impact on its economy too. How then do we steer ourselves to calmer seas, and build a resilient recovery that plays to our strengths?

This was the question my fellow panellists and I sought to answer at the FT’s flagship international gathering, the Global Boardroom Conference, where I had the real pleasure of joining Ben Hall, the paper’s Europe Editor, for an illuminating discussion on the Future of Europe. Alongside Pierre Gramegna (Finance Minister of Luxembourg), Francesca McDonagh (Group CEO of Bank of Ireland) and Magnus Tyreman (Managing Partner, Europe, McKinsey), I gave my perspective on this pressing question.

Put simply, we sorely need a new phase of sustained and sustainable growth – for Europe’s citizens, but also to defend our sovereignty and counter the social malaise that is spreading throughout the continent. The European Union can play an important role in delivering this resilient recovery by concentrating efforts on five tasks, all in parallel, all interrelated, all challenging, but within our reach.

Firstly, we can’t begin to build the recovery without strong European companies able to compete at the global level, with those of the global superpowers, the USA and China. To have such businesses we need to guarantee a strong, efficient Single Market, which a number of industries – banking included – still lack. We also need friendly business regulation at an EU level and to have European sector champions with a global reach by combining businesses into strategic industries.

Secondly, the pandemic has shown us we need faster decision-making processes at the EU level, through better governance. It’s unrealistic to always insist on unanimity between 27 different countries.

Third, we must rapidly complete the implementation of the Next Generation Europe plan. We’re moving in the right direction and most countries – Italy included – are presenting good investment proposals and useful reforms. But we have to move fast to optimise the impact.

Next, we need to be far more ambitious with investments to boost structural growth. It is fundamental that Europe launches a game-changing plan of federal investments, totally unimaginable at the national level, to match – even partially – what President Biden is driving at the federal level in America. I mean investments selected, managed and funded at the EU level, worth in the around of €4-5 trillion and concentrated on critical physical and digital infrastructure and long-term common research and innovation projects, to build the surest foundations for our future prosperity and productivity and to be on the right footing to compete with China and the USA. This kind of federal investments would require a common budget of at least 2% of Europe’s GDP – today it stands at around 1%, and even that pales into comparison with what the Americans spend – but would largely pay for itself.

Lastly, a priority that is shooting up the ranks is the mission critical need for a Digital Euro. It’s crucial not just for our productivity and competitiveness, but for our sovereignty too. While China and the USA push ahead with a Digital Renminbi and Digital Dollar, Europe lacks a competitive alternative – and right at the moment when unregulated “private” cryptocurrencies are springing up. No global power would dream of relying on the currency of another nation, so Europe must create a Digital Euro now – not in five years – to protect its sovereignty and control of our monetary policy.

The golden thread that ties these five points together is protecting European sovereignty. If that is undermined, a resilient economic recovery will be far more difficult to achieve. The G-Zero world in which we live isn’t the multilateralism of the G-7 or G-20. It is one in which China, the USA, and eventually India, will compete among themselves in harder and harder ways, relying on their economic, technological and military might. Challenges to sovereignty also come from global non-European companies, the tech and asset management giants being obvious examples, who hold trillions of euros and allocate resources worth three or four times the GDP of any European country.

We also have to avoid another Brexit – a historical mistake, in my view – from happening by seeking to learn the lessons of what went wrong with one of the EU’s most prominent members and why so many British people had grown so weary with the European project. And, we have to keep the EU-UK relationship as deep and cohesive a partnership as possible.

Italy will, of course, play its part in delivering a resilient recovery. If Europe is sailing in the choppy waters I mentioned at the beginning, then we are fortunate to have in Mario Draghi a sure and steady hand on the tiller at the time we need it most.

He has already shown clear leadership with an economic roadmap for our national recovery, is regaining the respect of international partners for our country and will be a powerful force to relaunch the European project at a crucial moment. I believe he will do whatever is needed to foster a new phase of investment and spearhead reforms Italy sorely needs – in education, justice, bureaucracy and welfare – and has already demonstrated a clear and bold commitment to innovation, from technology to the energy transition.

So, with a clear plan of what’s needed for the long-term, ways to get there, and bold leadership, I am looking forward to seeing the great continent of Europe create a thriving economy and to it standing tall on the world stage in the years and decades ahead.