Mario Draghi, President of the European Central Bank, made a surprising statement in Milan on September 11, 2014. Economic recovery will not begin unless the level of business investment in the eurozone increases, he said. ’No monetary stimulus, indeed no fiscal stimulus, can be successful unless accompanied by the right structural policies - policies that foster potential growth and instil confidence’.
The regulatory environment should be more favourable to economic growth he said. And he also wanted lower taxes.
Finally a central banker has demanded structural reforms. At last the ECB has recognised that monetary measures and cheap credit alone cannot stimulate the business investment, writes Prince Michael of Liechtenstein.
This is very important. It is also significant that he emphasised the need for a favourable regulatory environment. It is only disappointing that these measures were not demanded sooner.
‘Italian productivity growth fell so much because of low investment and a low-quality labour force.’ He continued, 'Investments are a function of the institutional context. This consists of a credible and efficient judiciary system, producer-friendly regulation, stable and transparent legislation and light bureaucracy’.
On January 20, 2014, Professor Colombatto commented on the European economy.
He said, ’The keys to a return to healthy growth, in this context, are the same as in the past - deregulation and lower taxes.’
I hope Mario Draghi means fewer regulations when he says, ‘regulatory environment favourable to economic growth’.
GIS asked, among other things, for ‘fitter and looser labour laws’, less red tape and less bureaucracy as a basis for economic growth and lower unemployment in a statement on August 26, 2014 ‘Europe's chronic disease’
If the ECB President is serious about a regulatory environment favourable to growth, he should not exclude his own area, the financial industry. This industry obviously needs clear rules, but it is now aching under constant new regulatory pressures and could be approaching an ‘administrative collapse’.
Mario Draghi added, according to Bloomberg, on September 12, 2014, that governments also need to foster growth by lowering the tax burden and reducing ‘unproductive current expenditure’, while raising public sector investment where possible. These should be a counterpart to stimulus measures and structural reform.
GIS has warned in a number of reports that monetary measures and austerity alone will fail. The ECB president has finally acknowledged that business is the basis for growth. Lowering taxes and reducing economic overheads by unproductive expenditure will create a double positive - reducing the public deficit and reducing costs and limitations imposed on business through red tape.
We hope that the public sector investments he wants include spending on infrastructure projects which will help to increase productivity and economic efficiency.
Poland's Finance Minister Mateusz Szczurek suggested such a step as a concept for Europe.
It is disappointing that Mario Draghi did not emphasise the essential role of entrepreneurs and economic freedom as the main ingredient for healthy and sustainable economic recovery.