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“There will be a 1,5 trillion plan for Europe’s economic rebirth before the summer”, Gentiloni tells Il Foglio

Claudio Cerasa

Here are some extracts of our interview with the European commissioner for economic affairs in English

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“I would like to be optimistic about the possibility of accomplishing a recovery plan. The term European Recovery Plan was first used by the Americans in 1947 to support Europe after the tragedy of the war. Compared to then, Europe today has the strengths and instruments to achieve a rebirth. We will follow a very tight schedule over the next months. We must accomplish our aims within springtime”.

 

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What are you planning to achieve?

“Over the coming weeks we will define a recovery plan which allows European countries to support their economies in a coordinated way whenever they will start to gradually reopen. To fulfil this plan we must create a fund with a minimum budget capacity of 1,5 trillions. The first 500 billions have already been granted in the Eurogroup’s agreement on the European stability mechanism last week. The next trillion will be made available through the EU budget and the emission of bonds. I believe that we can achieve this target within springtime. This is particularly important because everyone in Europe is currently facing the risk of a serious economic crisis whenever the full lockdown measures will be lifted. This is the moment to make common choices, to reduce fragmentation and to wage war against divisions. This is the moment when European institutions should affirm a self-evident truth: we must not increase the disparities between countries with a common destiny and a common currency. Member states should be aware that the problems of a single country are a problem of the entire community”.

 

“We need to overcome the debate of the past ten years and look straight into the facts. Instead of merely concentrating on the instruments we should start thinking about the objectives. We should connect the missions to the emissions. It is obvious that all grand-scale economic plans imply the emission of bonds. We can’t finance the plan with gold. But it is also obvious that the emission of bonds can only occur if there is a clear, concrete and visible objective. Nobody wants to bind the emission of bonds to the mutualisation of the kind of debt that has been accumulated over the last thirty years. I repeat: nobody. On the contrary, I believe that today there are the conditions to temporarily share an emergency debt for a time limited period and to fulfil well-defined purposes. To do so, we must identify the aims of the emergency fund and provide guarantees that the emission of a common bond will finance measures to tackle the emergency and not, say, Quota cento (a reform adopted by the first Conte government to lower the retirement age in Italy). This is Germany’s position. It must not be demonised but simply understood”.

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“As the European commissioner for economic and financial affairs, I pay particular attention to economic matters and am fully aware of the risks we are currently facing. I am afraid that the debate on the V recovery or U recovery is outdated. Our predictions indicate that each month of lockdown is worth a 3 per cent loss in GDP, and therefore we are set for a substantial fall in economic growth. The decline will eventually plateau but it will take a long time before GDP starts growing back again. I believe that economic growth can recover in 2021 provided that it is supported by an emergency plan. The prospects of a recession in 2020 are not a risk but a reasonable certainty. Most estimates point towards a 5 per cent contraction in Europe’s GDP in 2020, although experts have made more dire predictions. I will announce the official estimates of the Commission on May 7. It is currently impossible to find a balance between economic and health risks which is different from ours. When faced with a pandemic, public authorities have the duty to give greater weight to the risk of losing lives than the risk of losing GDP”.


 

Translation: Gregorio Sorgi

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