We need a change of gear. He has no doubts Fabio Panettagovernor of the Bank of Italy as well as member of the executive of ECB. Speaking at Bocconi University in Milan, the expert called for “a more traditional and truly far-sighted approach to monetary policy, in line with our medium-term orientation”. Spotlights on euro ratesthe current situation must push towards a cut: “It is time to normalize our monetary policy orientation and move to neutral or, if necessary, even expansionary territory.”
It is no longer the time for restrictive policiesPanetta’s message. A common sense line to turn the page from the improvised turning points recorded in 2022 and 2023 due to what have been renamed “exceptional shocks”, such as to bring inflation close to 10 percent in Europe. The number one of Bankitalkia highlighted that now “they are gradually vanishing and inflation in the euro area is not only lower, but also less volatile than it has been for a long time”.
A dig at the ECB at an interesting time for monetary policy. Panetta highlighted that the euro area has made a long and historic journey through the terrae incognitae that began after the Covid-19 pandemic and the return to a mapped territory certainly represents good news. Now for the expert there are two challenges to address: “Globally, geopolitical tensions are high and political developments in several countries are difficult to predict. In the euro area the economy is stagnant and interest rates are still in restrictive territory”.
As regards the Italian economy, Panetta focused on the interventions to be carried out to strengthen the financial system: “We often highlight our defects and rightly so but we are not very different from other parts of Europe. Ten years ago Italy was not growing and was considered the great sick man of Europe. Today when they talk about the great sick man of Europe they tend to point to Germany. Things change.” Words that do not leave much room for interpretation: “What we must do is what Europe as a whole must do. We must continue with structural reforms and modernize our economy and strengthen our ability to produce technology and stimulate competition.”
Broadening his gaze again to Europe, Panetta specified that try to compete with super-economies like the USA and China at the individual country level it would be a hopeless competition. “Until recently, economic and financial conditions were very different between various countries and there was little appetite for a fiscal union, particularly on the part of the stronger countries” Panetta’s analysis: “Now perhaps these reasons they are changing a bit because it is clear to everyone that trying to compete with giant economies like the United States and China on a national level would be a hopeless competition.” What is happening in the artificial intelligence sector is emblematic, where the USA has invested 300 billion dollars, China 100 billion, and we just 20 billion.
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