«The ECB’s monetary policy is correct, I would have been more gradual»- WWN

“I expect underlying inflation to reflect the reduction in the cost of energy. Monetary policy is definitely the right one right now although perhaps I would have pushed for a greater gradualness». This is how Ignazio Visco comments on the work of the European Central Bank. The governor of the Bank of Italy, who after twelve years will leave office in Novemberfrom the stage of the Festival of Economics in Turin, takes stock of macroeconomic and geopolitical issues by lining up the challenges for Italy and Europe: from relations with China to the energy transition through the future of globalisation.

Monetary policy, wages and risks

On inflation and the interventions of the Eurotower he says: “Monetary policy must not be left to operate by itself but must be accompanied by a prudent budgetary policy and by the responsibility of the social partners, a concept that exists in Europe”. And the reference is to trade unions and businesses. The risk of a monetary policy detached from the real economy is to increase inequalities and leave a part of the population behind. “When it is said that there is a shock that should not be accommodated – he explains – it is not because we want to bring down wages but because wages must grow as the economy grows. If a price-wage run-up were to be set in motion, it would be as illusory as it was with us in the 1970s».

“You can’t do without China”

With respect to the geopolitical scenario and the trade war between Washington and Beijing, the governor underlines the importance of effective mediation. «We cannot do without China – he remarks – therefore international cooperation and diplomacy are needed. It is necessary not to give up on crucial principles, but to do everything possible to coexist in the best possible way in that exchange of leadership which must be continuous». At an international level, consumption models must also be rethought. “Globalization has been an extraordinary process, but seasons of very strong changes have benefits and also costs. We had an opening of the markets, an extraordinary technological innovation, but it was not a triumphal march». For Visco, the impact of the borderless consumer boom has had important consequences. «There have been very negative changes, the climate is one of the most evident ones, which is associated with economic progress because pollution is linked to the increase in production activity with the same use of the fossil energy sources used. The change has affected a large part of the middle classes of advanced countries, but the rest of the world has grown tremendously,” she added. However, the number one of Bank of Italy also spoke of the advantages of globalisation, recalling how before there were 2 billion people below the extreme poverty line while today there are 700 million. Less than 10% of the world’s population.

Green breakthrough and innovation

However, the green change is a necessity and in his speech the governor underlined the lost opportunity for the old continent in terms of mobility. «Italy and Europe have remained behind on the electric car. There has been a lack of awareness of the importance of innovation in this field». In the race for the digital frontier, European countries have moved with guilty delay. «The leadership is certainly not European. It is difficult to expect innovation to come from European companies, but we can fall into many areas and developments that we don’t even imagine. However, unity, cohesion and sharing of objectives are needed».