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Transcription of the intervention of Italian Prime Minister Mario Monti at the European Business Summit

In my opinion, the policies to be avoided, because they would be an illusionary short-cut to growth, are the purely old-style Keynesian, demanded policies through the expansion of budgetary deficits and old debts. This would run against the recently-embedded discipline of the Fiscal Compact and would produce no good on a medium term basis for the European economy or the national economy. All the efforts that each of our countries is putting into budgetary consolidation, and Italy is among the countries that are deploying huge political, economic and social efforts in this regard with the aim of achieving budgetary balance already in 2013 - which will mean a primary surplus net of interest payments of 5% of GDP - all of this shows we reject old style policies of purely intentional growth through deficit generated demand growth.

But let me come to the last part of my intervention and this is to say that although structural reforms, not ephemeral deficit spending, is the answer, we must not neglect the fact that structural reforms per se do not deliver growth. Because if a country becomes more productive and competitive, but there is no demand for its products domestically or around it, growth will not materialize and, in effect, all the structural reforms and budgetary consolidation measures that we are now putting in place if anything are deflationary not creating growth. So we need demand to be there. I believe that we have to cater for categories of expenditure that at the same time create demand today and generate an expansion of supply tomorrow, which is not the case, for example, for government-consumption expenditure, but which is the case for well-defined, cross border or domestic infrastructures and investment projects be they private or public. Public investment is not necessarily worse for the European economy than private consumption, although the present framework of policy treats it in this way. This is not about putting into question the fiscal compact and the other budgetary discipline weaponry. But about avoiding that in two or three years those budgetary discipline instruments go through the same inglorious end of the stability pact in 2003. We must look forward to other growth-enhancing policy instruments and actions such as the increase of the capital of the European Investment Bank, cross-border infrastructures and a more appropriate treatment of genuine public investment in the national accounts. We need to consider all of this with an open mind not, as a way of eluding budgetary discipline, but as a way to make budgetary discipline really sustainable in the medium term and really enforced because it will be in a context of growth and not in a context of depression.

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