At the joint ECB and Banka Slovenije conference held in Ljubljana on the occasion of the 10th anniversary of the adoption of the euro, Mario Draghi, President of the ECB, said that at the time when across Western democracies people felt threatened it was necessary to think about “the severity of the euro crisis that has weakened faith in the EU as a foundation of economic security.”
Draghi reminded that “according to one estimate, the EU’s GDP per capita would be as much as one-fifth lower today if no integration had taken place since the war. Another estimate looking at the effects of integration since the 1980s – so after postwar catching-up had run its course –finds a gain in per capita GDP of around 12% relative to the non-membership scenario.”
He reminded that “the countries that joined the EU in 2004 and 2007, such as Slovenia, have also shared in those gains. The increase in GDP produced by EU membership may turn out to be as high as 40% for the 12 new members, which would not be surprising, since the EU is by far the main trading partner for countries in central and eastern Europe and the main source of FDI.“
ECB President said that “today, some are questioning whether openness remains the best way to ensure our economic security. But we need to ask where we would be today if we had not had such a long phase of integration on our continent. And the likely answer is: much poorer.”
In his speech he stressed that Europe was the first to forge a redistribution system across countries to help prevent persistent regional inequalities. “As early as the mid-1970s, European funds were being used to support less developed regions or those threatened with industrial decline. From 2007-13, €350 billion was allocated in the EU budget to structural and investment funds.”
“Trade policy decided in common gives Europe real sway in global negotiations, both in the deals it can extract bilaterally, and in the setting of multilateral rules in the WTO, says Draghi. “A large market has leverage over large multinational firms, allowing Europe to protect what it deems important, such as privacy on the internet. It also permits Europe to use trade sanctions to counter hostility from unfriendly countries, and thereby enhances military security too. And if Europe wants now to integrate further in other areas – such as defence and foreign policy – it will need the economic foundation the single market provides.”
Commenting on the belief that Europe would be better off it had never adopted a single currency but instead allowed its exchange rates to devalue, Draghi said that “but as we have seen, countries that have implemented reforms do not depend on a flexible exchange rate to achieve sustainable growth. And for those that have not reformed, one has to ask how beneficial a flexible exchange rate would really be. After all, if a country has low productivity growth because of deep-rooted structural problems, the exchange rate cannot be the answer.“
To conclude, ECB President Mario Draghi said that the EU should not turn away from what has worked: our model of economic openness reinforced by our single currency. But we must put right the mistakes that have prevented it from working as well as it should.“
“Compliance and convergence, and through it growth, are the keys today to give to the integration process new impetus,“, Draghi said.
“We have to make our Union more stable and prosperous to deliver the security our citizens crave. And by doing so we will put ourselves in a stronger position to confront the new challenges we face today: the rise of political extremism, insecurity on our borders and an ever more uncertain global order,“ he said and added: “unity is the key to security for our continent – today as it always has been.“
