On 30 November, Irene Tinagli (Member of the European Parliament and Chair of the Economic & Monetary Affairs Committee) held a lecture on ‘The investment challenge on the EU: How can EU public policy help mobilising public and private resources?’. The lecture was the third event of the new FBF Women in Finance series, which aims to highlight successful women across different areas of finance – public service, academia, and private sector. The lecture was chaired by Elena Carletti (Professor of Finance, Bocconi University).
Irene Tinagli highlighted the investment challenges, looking beyond the Next Generation EU recovery plan, for the European Union to meet its ambitious goals and tackle the climate, digital and social issues ahead.
While the Autumn 2021 Economic Forecast published by the Commission paints a positive picture for investments in the EU forecasting a growth of 7.5% in 2021, 4.9% in 2022 and 4.1% in 2023 and an aggregate debt-to-GDP ratio to start declining in 2023, Irene Tinagli insists “we shouldn’t be too over optimistic believing that this kind of scenario will stay like this forever”.
Ms. Tinagli recalled that the ECB’s pandemic emergency purchase programme (PEPP) will end in spring 2022, and that in general the monetary support and the margin of manoeuver for many governments in the EU are getting more and more constraint with half of the member states having a debt higher than 60%, and an average public debt level around 100%.
For Irene Tinagli, the problem is that “this potential adverse scenario will come at a time where the European Union needs investments to meet its goals in terms of environmental and digital transitions, social cohesion and fights against inequalities”. The Commission estimated that the EU will need to invest approximately 600 bn euros per year to reach its objectives, with 470 bn euros per year to be dedicated to the ecological transition and 125 bn euros per year for the digital transition. Member states are currently planning investments plans of 127 bn euros over six years for the digital transition, far from the estimated 125 bn per year needed.
It is therefore vital for the EU to address these investment gaps by leveraging the private and public investments and making sure the European financial market is prepared for the challenge. Furthermore, European finance depending a lot on our banking system, it is key to relaunch the development of our banking union and capital markets union.
Moving towards a true single banking market through cross-border restructuring is not only crucial to meet tomorrow’s challenges but also, if not above all, a matter of strategic autonomy for the EU. Irene Tinagli calls for genuine pan-european banking groups for the banking industry to operate more effectively, raise their profitability thanks to scale effects, and better face the foreign competition coming from the United States.
With acquisitions of EU companies by US firms almost three times bigger than the other way around, the obstacles in our capital market regulation are salient and actions need to be taken on this regard too.
Ultimately, Ms. Tinagli outlined the need for a vision while building the European infrastructures. For Elena Carletti, who was chairing the lecture, it is indeed important to turn towards the future to be competitive and not build, as the banking union before and most of the financial regulation, in reaction to something that happened in the past.
During the Q&A session, when asked about the role women can have when in top positions in the banking and finance sector, Irene Tinagli shared her work and the need to have gender balance in the recruitment processes. In this respect, the next event revolves around gender quotas on boards with Sylvie Goulard (Deputy Governor, Banque de France) and Renée Adams (Professor of Finance at Said Business School, Oxford University).
The recording of the event is available here.