Stournaras: Dragi report helps solve EU competitiveness problems

For its report and guidelines, the Governor of the Bank of Greece spoke, in an article in Kathimerini, stressing that in order to overcome the competitiveness problem of the European Union (EU) they must receive the necessary attention of the people who decide on its future. According to Mr Stournara’s article, the report strengthens the resolution of the EU’s competitiveness problems and not only, as Dragi proposals relate to improving its operation, in general, its productivity and competitiveness and do not concern a particular block of countries, e.g. the European South or individual sectors. At the same time, Mr Stournaras argues that the Dragi report is of similar importance to the Delor report on the single market and points out that it should be read together with the Letta report on the future of the single market, which was presented last April, because it is complementary. ‘First of all, it diagnoses the causes of the European Union’s lag in relation to the US and then makes proposals. In essence, it finds a delay in two areas: Firstly, investments, which is why he proposes to increase by about 4.5% of European GDP and secondly, in flexibility, structural changes and productivity,” notes Mr Stournaras. He points out that he is addressing structural problems and proposes appropriate reforms, which solve problems from the point of view of the offer and adds that he touches on all the issues that many have spoken about in the past, such as Europe’s fragmentation, while proposing that the Banking Union, with the Pan-European Deposit Guarantee, should proceed immediately with the Crisis Management and Deposit Insurance Framework, with the Union of Capital Markets. Furthermore, according to the TTE commander, the report emphasises something very important: that delaying in finding a consensus in solving the problems does not help, noting that we must proceed as quickly as possible with the measures proposed. With regard to investments, Dragi does not consider that their increase of 4.5% of European GDP can come entirely from the private sector. It argues that around 25% must come from a joint debt issue, as was done with the Recovery Fund in the pandemic. “I note here that his investment proposals are a central point of the report and an integral part of it, as they concern both the strengthening of demand and supply and productivity. It is therefore not helpful to reject this point in this report, as some politicians have rushed to do.” As the central banker notes, and other studies, by the ECB and the Bank for International Settlements, point out that the lag of Europe compared to the USA in terms of productivity, considered one of Europe’s main problems, is mainly due to the lag of investment. This is because, as he adds, it is not only the volume of investment that plays an important role, but also where they are directed. A recent study by the European Investment Bank has shown that investments in new technologies and human capital are 4 times more productive than real estate investments. As far as Greece is concerned, Giannis Stournaras notes that as a member state of a monetary union which, with Dragi proposals, will gradually begin to acquire stronger features of an Economic Union, a banking union, a capital market union and a fiscal union, he will undoubtedly benefit. “The multipliers of economic activity will be stronger, the potential product will increase, cohesion will be stronger, the individual distortions that adversely affect regional markets, such as in the energy market, will be mitigated, and will also benefit from the coordination of policies, particularly in the defence sector,” he says. In conclusion, Mr Stournaras notes that what the report says is not for the first time, the opposite being based on significant studies of organisations and academics, particularly the ECB, the International Settlement Bank, the OECD, the European Commission, private economists and academics. However, he points out that the weight of the Dragi name and its great contribution to the public things of the Eurozone undoubtedly give prestige and weight to these ideas.