Prime Minister Monti and I just discussed the political and economic situation in Italy and in the eurozone as a whole, as well as the future architecture of the Economic and Monetary Union.
To deal with the uncertain situation we are in, we have a triptych: short-term actions to safeguard financial stability, a long-term vision for the Economic and Monetary Union, and deep reforms in each and every country.
Let me start with the latter, and in particular with the impressive reforms carried out by the government of Prime Minister Monti, to bring Italy back where it belongs: in the heart of Europe.
Italy is turning its economy around: breaking monopolies, cutting red tape, fighting against vested interests and working hard to create jobs. This work has to be done, euro or no euro, EU or no EU. It's a huge long-term and collective effort; which asks sacrifices today and will secure growth and create jobs tomorrow. It is also continuing the fiscal consolidation started earlier.
It is in the interest of Italy, it is in the interest of Europe: there is no contradiction.
Looking at what has already been achieved, looking at the determination of the Italian people to attack each problem, one by one, I am confident the efforts will be met with success -- knowing they must be pursued relentlessly, giorno dopo giorno…!
Whilst these reforms are underway, risk premia can be disconnected from economic fundamentals and reform efforts. This can have negative repercussions for the stability of the eurozone as a whole.
In such cases, we have tools and a clear political commitment to do more. In June, eurozone leaders affirmed that they were ready to use existing instruments in a flexible and efficient manner.
And two days ago, the European Central Bank presented a framework under which substantial action can be taken provided member states carry on their adjustment efforts.
Before the summer European leaders agreed that in addition to tackling the manifestations of the crisis, we needed to address the initial deficiencies of the eurozone as a whole. I am preparing a report in close coordination with the Presidents of the European Commission, the Central Bank and the Eurogroup, with the aim of redesigning the architecture of the euro area. We will hold bilateral consultations with the Member States and with the European Parliament in the next few weeks and I will report on our progress to the European Council in October and finalise the report by December.
There already is a degree of convergence on basic ideas. We focus our work on four building blocks which are inextricably linked: First: a banking union - to avoid tax payers systematically picking up the bills for bank failures; Second: a fiscal union - to avoid unsustainable deficits, including through more central enforcement and more solidarity mechanisms; Third: an economic union - to jointly improve competitiveness of the euro area as a whole, internally and externally, And fourth and final: a deeper political union - to ensure that these measures are underpinned by strengthened democratic legitimacy and accountability.
Achieving this vision will take time and will necessarily be a gradual process. But to ensure that we reach our goal, we must embark on this path now.
At this stage, let me insist on one element in particular: the banking union.Banks and national supervisors have proved unable to deal with systemic risks in an integrated financial market. To break the vicious circle between the crisis in the banking sector and that affecting public debt in the eurozone, we need better prevention and resolution mechanisms. This morning I explained to the Ambrosetti Forum,1 why these two elements, common supervision and common resolution, cannot go without one another.
It is this triptych -- of short-term actions, a long-term vision, and deep reforms in each and every country -- which makes the euro irreversible. And all European leaders and institutions share a commitment to its integrity too. In particular – and I say this having been in Athens yesterday – so long as Greece is committed to the euro, its partners will continue to fully support its efforts.
I should like to conclude with a more political point on the state of European integration. This project, to which Italy has contributed so much ever since our founding Treaty of Rome, remains today, even in the middle of financial turbulence and social uncertainty – as President Napolitanoreminded us this morning – the light-house, il faro, for all of us!
That is why I welcome the suggestion to have a discussion on the future of the European idea. I had originally scheduled this for late 2014 but the current situation invites us to accelerate this common reflection.
Of course there are tensions and constraints, there is opposition and critique, there are caricatures and cartoons – I am very well aware of all those. And yet. And yet a gigantic collective effort is taking place, involving all euro countries, all EU institutions, all citizens, to muster the political will, the parliamentary majorities, the means and money, to help each other and to come out of this crisis together. It is de facto solidarity of an unprecedented magnitude.
Mario Monti and I agree that overcoming the crisis requires ambition, it requires patience and a shared understanding that reforms take time, and it requires fairness.
And if all leaders and institutions across Europe work together – in finding the solutions and in bringing our citizens along, I am confident we will get there.
1Speech at Ambrosetti Forum 2012
