Speech to Schuman Centre for Advanced Studies, Florence – “Coordinating Euro Area fiscal policy to drive an inclusive recovery”

21st April, 2021

This is part of a regular engagement I am having with the leading Research Centres on European policy, which began in March with my presentation to the Hertie School in Berlin.


I want to speak with you about the work of the Eurogroup, both in terms of the short-term issues linked to last week’s meeting but also the more medium to long-term issues, and the political and strategic focus that the Eurogroup can bring to these discussions. 


As part of the Eurogroup engagement with key policy makers and influencers, I want to hear your thoughts and questions, as they are important for me in considering how best to advance towards our core Eurogroup objective of building a sustainable and durable economic recovery from Covid, supported by a robust and resilient economic and monetary union. 


As a courtesy to institutions who host me, I try to take some time in advance of my virtual visit to read a book relevant to your local or national history. So, like some other readers at this time of Covid, I have sampled the Decameron. I say ‘sampled’; I sought advice about what stories to read.


But this collection of tales reminded me how eerily familiar the  challenge of a pandemic is to humanity. The introduction to the ten days of ten tales tells of a plague so severe that ‘whenever those suffering from it mixed with people who were still unaffected, it would rush upon these with the speed of a fire racing through dry or oily substances that happened to come within its reach’. In that summer of 1348 mourning and funerals changed in a way all too familiar when Boccaccio writes that ‘it was rare for the bodies of the dead to be accompanied by more than ten or twelve neighbours to the church’.


It is a book with obvious parallels to our present day situation, and indeed, at our March meeting, my Austrian colleague made the point that we are fighting this pandemic with the same tools that have been used for hundreds of years against plagues – quarantine, lockdown and isolation.


But the parallels have profound limitations. Medicine and technology will help us to prevail in the battle against our modern pestilence.


And politics has been vital too. There has been a symmetry in this contest. A union built on political interdependence – the European Union – has to confront a disease that spreads through interdependence.


A core theme of my contention to you this morning is that while the EU has had many expected and unexpected difficulties with the pandemic, it has and is rising to the challenge. The EU has evolved at great speed and it is the vital political dimension to our shared efforts.

I believe this is demonstrated in the work of Eurogroup – to which I will now turn.


Eurogroup Agenda

In Inclusive Format with all twenty seven Member States, we discussed ongoing work on a road-map for the completion of the Banking Union – we have been mandated by Leaders to present this roadmap at the Euro Summit in June. This was a lengthy debate and there is still a lot of work to be done before we reach agreement – but this was the first step towards that process and I am confident that we will be able to do so by our June deadline.


We agreed that the work plan will be holistic, and will focus on the four equally important work streams:

  • The framework for crisis management,
  • The European Deposit Insurance Scheme,
  • The regulatory treatment of sovereign exposures, and
  • Cross-border integration.


Our banking system has proven its resilience during the COVID crisis. This is the result of our common efforts of the past decade. Yet there is still more to be done and I can say that Ministers repeated their commitment to continue our ambitious work to make our banking system even more stable and resilient.


In Eurogroup, first we heard the debrief from international meetings where the ongoing comparison of the EU and US fiscal support packages was raised, which it was agreed was akin to comparing “apples and oranges”.


On insolvency frameworks, there was broad agreement on the need for urgency to tackle inefficiencies, engaging at a minimum on sharing best practice and non-legislative issues to build consensus before going beyond that.


The euro as a digital currency was the subject of a detailed presentation by ECB President, Madame Lagarde, who updated on progress, shared with us some insights from the public consultation and emphasised the need for careful deliberations, given its potential impact on Europe’s strategic autonomy and economic sovereignty.


President Lagarde made it clear to us that the ECB Governing Council will decide in mid-2021 on whether to launch a project exploring the technical design, policy and infrastructure needs of a digital euro. A decision on launching a digital euro will only be taken once there is clarity on its use; protecting security and privacy. The Eurogroup will be engaged throughout this process to provide political steers and guidance. I will come back to this point.


Finally, we heard the results of a review of the Eurogroup’s current transparency standards, which was endorsed by Ministers. I am committed to ensuring a continued high level of transparency and engagement with citizens, businesses, and policy experts, such as yourselves; indeed it is one of the core objectives of my work programme and part of the reason I am so keen to hear your questions and comments today.



Digital Euro

As I mentioned earlier, the proposal for a digital euro is still at an early stage, the decision point will come later, but it is important that we start thinking about what we want out of it.


The Eurogroup confirmed its support for the continuation of the technical and preparatory work, in line with the Euro Summit mandate.


A properly-designed digital euro has the potential to unlock major benefits for citizens, businesses, Member States and the overall functioning of our economic and monetary union.


The primary aim of a digital euro would be to ensure costless access to a simple, universally accepted, safe and trusted means of payment in a context of a rising demand for digital money. At its core, a digital euro can be a way to enhance the efficiency of our payment infrastructure and contribute to the digitalization of our economies.


However, a digital euro would be issued as a complement, and not a replacement, to cash. The choice of whether to use a digital euro will be in the hands of citizens and savers but it will not mean the end of banknotes, coins and bank accounts.


At the same time, it could have a number of important economic and societal implications. These include, depending on the design of a digital euro, potential impacts on the use of cash and on the banking sector as we know it. There could also be important implications in terms of financial stability, financial inclusion, privacy, illicit financing, or tax evasion.


The increase in digital payments also raises geopolitical and security questions in the context of fast paced innovation outside of Europe. Would we be comfortable about putting this in the hands of third country private digital giants or a foreign government with a less than perfect human-rights record?


There are a number of important technical questions to be explored, and experimentations to be carried out, to ensure the robustness and resilience of a digital euro before it is introduced on a large scale.


We must ensure that a digital euro responds to and is tailored for the needs and specificities of our European economies, businesses and citizens, carefully considering the potential political, societal and economic implications.


This technical work will take some time. But when the work is done, there will be very important political decisions to be taken – within the respective institutional roles and mandates of all actors involved.


Having tools available does not necessarily equate to political willingness to use them; when the time comes we must be decisive.


EU Fiscal Supports and Vaccine Rollout

Turning now to our response to the pandemic. We have always been guided by the aim of protecting the health and lives of our citizens, which has necessitated stringent containment measures in the EU.


You will be familiar with this given the experience in Italy, and in my own country we have had one of the longest running lock downs in Europe. But we are fully focused on fighting the pandemic – and, while there have been delays, the pace of vaccination is now picking up fast and we are increasingly confident about the outlook.

Europeans have led the world in developing and exporting vaccines and funding vaccine procurement for the world’s poorest countries.


We should be proud of Europe’s industrial capacity; it has not only delivered more than a landmark 100 million doses to EU Member States to date but has also provided vaccines to the rest of the world.


That capacity is rapidly increasing and we expect to reach an annual production capacity of more than 3 billion doses by the end of this year.


At EU level there are prospects for a substantial increase in vaccine delivery in the coming months, which will enable us to reach the objective of having 70 percent of the EU population vaccinated by the summer. The vaccine strategy includes the fact that:

  • In the first quarter 107 million doses have been delivered;
  • It is expected that 360 million doses will be delivered by the end of June;
  • Looking at the successes of specific Member States, France reached its target of 10 million vaccinations a week early, and is set to double that within a month; and
  • Germany injected a record 720,000 vaccines last Thursday, and by next month expects to be giving 3.5 million vaccines a week.


For smaller Member States, including Ireland, the EU’s united approach to the vaccine programme means we are receiving vaccines at a scale that would have been impossible had we been forced to negotiate deals with manufacturers by ourselves.


As a result of these successes, all forecasters see growth accelerating throughout this year. We expect growth of around 4% this year and a return to pre-pandemic levels next year in the euro area as a whole.


There are already positive signals in the economic data with:

  • Economic sentiment increasing strongly in March;
  • Retail trade up by 3% in February;
  • All the PMI indicators rising sharply in March and now the composite PMI pointing firmly to expansion.


This optimism will be further quantified when the Commission publishes its Spring Forecast in May.


This publication will also start to forecast the economic impact of the Recovery and Resilience Facility (RRF) and National Recovery and Resilience Plans. This is a once-in-a-generation opportunity to achieve significant investment and reforms, especially in those parts of the EU where they will make the biggest difference.


The agreement on the RRF is also a symbolic crossing of the Rubicon for the EU – though clearly defined as a temporary measure, the issuance of joint debt by the Commission was unthinkable before last year and highlights our deeper integration as a result of this crisis.


The EU and its Member States have co-ordinated to put in place an extraordinary level of support for citizens and businesses, protecting livelihoods and ensuring that the economy bounces back as soon as restrictions are relaxed – for example, the 100 billion euro SURE scheme contributed to protecting almost 30 million jobs in Europe, with 75.5 billion euro already disbursed to 17 Member States, including Italy and Ireland.


The Commission’s SURE social bond issuances have had strong investor interest and have been oversubscribed, demonstrating clearly the market confidence in the EU’s efforts.


The EU’s policy response has been unprecedented in speed and in scale and this was made possible by an unprecedented unity of purpose by Member States. This unity is truly where our strength lies, and I am proud of the role the Eurogroup has played in this.


This March, we repeated our commitment to keep fiscal support in place in a Eurogroup statement: We will not withdraw fiscal support prematurely.


We are all agreed that our response should remain agile – we can see that week by week as different Member States extend their measures – so I am confident we will continue to have the correct strategy in place for Europe as the situation develops.


In fact, the total amount of fiscal support is still increasing, with new announcements every week. Just recently:

  • Germany just passed a 60 billion euro supplementary budget;
  • Spain recently announced 11 billion euros of additional support for SMEs;
  • Italy is preparing a substantial budget revision [amounting to 32 billion euros];
  • And many other Member States are in the process of passing supplementary supports.


None of these decisions have the profile of a single massive stimulus plan. But they are happening and they will save livelihoods and accelerate growth.


Because the pandemic is a global challenge, comparisons between different countries’ approaches to tackling it at times are almost inevitable. 


One of the most frequent comparisons we face is against the US, but the headlines ignore that these are not like-for-like comparisons.


Although the US has spent a lot to boost unemployment benefits and health coverage, in the euro area our safety nets and our job protections were, on the whole, much stronger to start with.


It is true that direct fiscal support has been higher in the US, though the difference is not huge once you dig below the headline figures. Besides the direct fiscal support, the EU also has substantial liquidity guarantee schemes in place to support companies and these are much larger than their US equivalents.


For 2020, the Commission assessed that EU fiscal support was around 8% of GDP in the area, and to that, one should add the liquidity measures and guarantees, which add up to around 19% of GDP according to the Commission – with the US effort being approximately 10% and 7.7% of GDP respectively.


Indeed, the IMF in its Regional Economic Outlook published last week actually finds that the EU fiscal policy response has been appropriate – the total fiscal spend is slightly lower, but it “has been more effective in preserving households’ disposable income and firms’ liquidity”.


When you have a good story to tell, like Boccaccio, you don’t always need to overly focus on the facts or details.  


Europe’s response has been appropriate and adequate and I am confident that we will prevail in terms of protecting lives and livelihoods across Member States.



I have talked about the Eurogroup’s united approach to this crisis, and it is what I have strived to do in facilitating discussions between Ministers to develop a consensus – whether that is on a digital euro, the future of Banking Union or our fiscal stance. Every voice has equal value, and I am always reminded that we each face the same issues at home, so we should share our experiences and learn from each other for the betterment of all.


I look forward to engaging with your questions now and I’d like to finish with a quote – not from Boccaccio [because the union he refers to is not the same kind of union we are talking about] but from your great statesman and one of the fathers of the European Union, Alcide de Gasperi: “Only if united we are strong”.


Thank you very much.