Dollar Less Dominant, Opportunity for Europe – BoI Chief

Rome: The US dollar is less dominant at the moment and this represents an opportunity for Europe, Bank of Italy Governor Fabio Panetta told the annual assembly of the Italian Banking Association (ABI) on Friday.

According to Ansa News Agency, Europe has “new opportunities” in today’s environment where “uncertainty is growing about the role of the United States in the global economy and investors are seeking alternatives to the dollar and American markets, initiating-albeit gradually-a partial reorientation of global portfolios,” said Panetta in his speech to the assembly.

These are “opportunities that can only be seized by resolutely relaunching the integration project, completing the single market, and adopting common policies for innovation, productivity, and growth,” he urged.

Panetta added that Europe could be a protagonist with Eurobonds and full integration and urged the European Central Bank to stick to a flexible and pragmatic policy. “In a changing world, Europe has the resources to play a leading role,” he said, stating that “the plan remains incomplete” and “only full integration across all dimensions can generate concrete benefits for citizens and businesses.”

Panetta reiterated his call for “the introduction of a European public bond” to fully implement “capital market union,” “whose progress so far has not met expectations.” According to estimates conducted by the Bank of Italy, he explained, “an integrated capital market based on a common risk-free bond could reduce the cost of financing for businesses by half a percentage point, stimulating additional investment of 150 billion pounds per year.”

“This alone, once fully operational, would translate into a 1.5 percent increase in European GDP.” On ECB policy, Panetta said, “In the coming months, monetary policy must remain flexible and pragmatic.” Panetta noted that “the return of inflation to the 2 percent target marks significant progress, but the situation remains exposed to multiple risks. In this context, it will be crucial to continue to assess the outlook and risks to price stability on an ongoing basis.”