Draghi: Growth Essential for Consolidation in Europe

Former ECB President Mario Draghi emphasized that fiscal consolidation is inevitable but not enough to balance public finances. In his lecture at the Swiss National Bank, he stated that governments need growth to implement consolidation measures effectively.

Draghi warned that if governments finance increased spending needs without implementing further consolidation measures or reforms, Europe's average debt-to-GDP ratio would reach 130% by 2040, rising to 155% when weighted by economy size. He noted that typical consolidation measures in the past have generated only a 3-4% overall recovery of GDP.

Draghi pointed out that growth is essential for governments' ability to implement consolidation, as it would allow them to cover around a third of the path towards a sustainable debt trajectory. He suggested that an additional half percentage point of growth per year, sustained until 2040 and accompanied by revenue setting aside, could achieve this.

The former prime minister emphasized the importance of integration in achieving growth, stating that supranational reforms are key drivers of growth. He highlighted that a detailed plan for these reforms was set out in the report on Europe's competitiveness and incorporated into the EU's common roadmap, which he considers an absolute priority.