Towards a Single Currency

Sun, 14 Sep 2008 20:12:44 +0000
Num. 8

The deputy chairman of the European Investment Bank gives his views in a speech at the University of Ferrara.
We shall shortly be living through a momentous change, certainly the most important in the history of European economics since the birth of the Community: monetary union.
The European Investment Bank finds itself at the centre of the continent's economic revolution: in fact the Bank has already floated sixteen "Euro-tributary" issues destined to flow into the Euro. In simple terms, these are bond issues in various currencies - the most recent to the tune of three thousand billion lire, the largest issue ever in Italian currency - that can be converted into Euro as from 1 January 1999. This is the best confirmation of how the EIB, but above all the financial markets, have always believed in the feasibility of a single currency.

For forty years the EIB has been contributing to the balanced development and the socio-economic integration and cohesion of the European Union through the granting of financing for investment projects in the member states and, within the framework of the Community's policy of co-operation, in non-member countries. The bank's activities are aimed at precise objectives: the promotion of infrastructures; support for small and medium-sized businesses with a view to creating more jobs; the development and improvement of the social services sector with a special eye to health and education.
The EIB has also played a fundamental role in the financing of the Trans European Networks, the infrastructures considered a priority by the various European institutions because they represent the path to closer and more efficient relations among European countries: roads, motorways, high speed railways, energy transmission plants and telecommunications.
Besides this, the EIB has also been able to broaden the scope of its activities in support of the European economy thanks to the EIF, the European Investment Fund. Set up in 1994 in the form of a partnership between the EIB, the European Commission and eighty credit institutions from within the Union, its objective is to make investment available to large infrastructures while providing small and medium-sized businesses with adequate systems of guarantees to enable them to make that first step, often a very difficult one, which is initial access to credit.

Thanks to their flexibility and adaptability to the global economic context, it is precisely these small to medium-sized concerns that have been pinpointed as the only sector capable of generating significant and lasting employment and therefore of efficiently combating the scourge of unemployment. In Europe, unemployment figures have reached 19 million. This is why the EBI has determined, with the aid of instruments of risk capital financing for new businesses, to stimulate investment in projects with a significant input in terms of technology, the environment, and employment.
The entry into the risk capital for business sector is, in short, a species of financial antidote that the EIB has brought to bear, overcoming its traditional role as a simple supplier of loans, but this must nevertheless be followed by sound initiatives on the part of the small and medium-sized businesses themselves. The fundamental problem affecting these last is the fact that they have no capital of their own: effectively speaking, they invest to repay accumulated debts. In Europe only 20 percent of the financial relations of small to medium-sized businesses is equity, as against a figure of sixty percent for the same sector in America. But the responsibility for this situation should not be attributed exclusively to the business community.

Italy's economic structure has not in point of fact been able to lay the groundwork for a greater economic democracy; and the realization of models useful for the development of the production base, from technology to business culture, has also been asphyxiated by the burdensome presence of monopolies and State-owned companies. But all these resources put at the disposal of the small to medium-sized businesses risk being underexploited - and the potential flywheel effect on employment risks being reduced - if this sector too is not rapidly equipped with adequate legislation with regard to corporate governance.

Hence the need to extend the reform of corporate governance to family businesses whose immediate objectives do not include going public. And there is an equally urgent need to restructure the corporate banking services, to encourage greater specialization on the part of the banks and to widen the range of opportunities offered to small, high risk operations.