The need for Europe to move from diagnosis to the implementation of reforms, in order to strengthen its competitiveness and resilience in a new global environment, was highlighted by the Minister of National Economy and Finance and president of the Eurogroup Kyriakos Pierrakakis.
Speaking in Frankfurt, in a discussion with the president of the Deutsche Bundesbank Joachim Nagel, in the context of the 4th Financial Markets Conference of the German central bank, on the topic “Opportunities for Europe in a new global order”, he stressed that Europe largely knows what it must do, but the critical issue is to accelerate the implementation of the changes.
At the center of his intervention he placed the Capital Markets Union, the Banking and Energy Union, the strengthening of productivity and the shaping of a European strategy for technology, linking reforms with the new challenges in energy, defense and bond markets.
At the same time, he spoke in favor of simplifying European rules, clarifying that this does not mean deregulation, but a reduction of bureaucracy and easier implementation of the rules. He also highlighted the digital euro as a key tool of European financial sovereignty, while placing particular emphasis on the need for Europe to strengthen its own capabilities without turning to insularity, arguing that its strength must be based on openness.
The full statement by Kyriakos Pierrakakis follows:
Europe’s challenge is implementing reforms, not diagnosis
“First of all, allow me to say that it is a real pleasure and honor to be with you in this discussion, especially here, at the Bundesbank, with Joachim Nagel, whom I deeply appreciate and respect.
As for your question, the challenge is implementation, not diagnosis.
Enrico Letta, who was here earlier, has drafted an excellent report. Mario Draghi has also drafted an excellent report. We know, broadly speaking, what we need to do.
The challenge for today’s generation of policymakers is to implement the series of reforms and policies that we have been discussing in Europe for a very long time.
I am often asked — and, in a strange way, especially in Germany — what advice Greece can give or what policy recipe it can propose, based on what it experienced during the lost decade of the crisis. My answer is that there are usually no ready-made recipes. I do not particularly like this approach.
In politics there is only inspiration. If, however, there is one common element between the Greek and the European experience, I would say it is this: in Greece we discussed specific reforms for decades.
It was self-evident, we knew what we had to do. We knew that we needed reforms in the labor market and the pension system, that we had to put our public finances in order, tackle tax evasion and move forward with reforms in education and health.
When there is something obvious that you know you have to do, but you have not done it for a very long time, especially in periods of uncertainty, then you can reap what I would call, if you allow me the term, an "obviousness dividend."
For Europe, these obvious things are the Capital Markets Union, the Banking Union, the Energy Union — if I may characterize it as such —, strengthening our productivity and, above all, shaping a specific policy or a specific doctrine for technology, which will serve as a compass in our discussions within the new geopolitical environment.
Because, quite simply, the framework has changed. The era of geopolitical innocence is over for Europe. We are faced with two wars unfolding simultaneously and affecting us directly.
We are facing an energy crisis. We are facing challenges in the bond markets. All these require specific responses in the short term.
At the same time, however, we must also deliver results on the reform front. Therefore, at this moment, there is only one answer: implementation”.
Europe is moving forward, but it needs to accelerate
“I believe that we are moving forward and producing results. It is not a question that can be answered with a "yes" or a "no." Because, if the question is whether we have achieved 100% of what needs to be done, then obviously the answer is that we have not reached 100%.
The issue is how much distance we can cover. To use sporting terminology, at this moment we are covering distance.
This applies especially with regard to the Savings and Investments Union, the initiatives of the Irish Presidency on issues of market integration and supervision MISP (Market Integration and Supervision Package), the discussions that took place following the initiative of a group of E6 countries specifically on MISP, as well as the political timetable set by the Presidency in order to achieve a concrete result.
There is progress in practice. The challenge is whether we can move forward simultaneously on all fronts. Because it is not only about MISP.
It is also about banks, the Banking Union and banking integration in Europe — and, especially here, at the Bundesbank, I believe I must underline this. It is also about energy, about technology, about productivity. And of course about defense.
Because, especially with regard to defense, it is interesting that finance ministers are now broadening the scope of the issues they discuss. We are becoming, in a way, what in English they call "jacks of all trades" (handymen), meaning that we are called upon to deal with many different fields. But this is necessary.
Because, at the end of the day, decisions on defense, energy and technology affect our budgets and affect our economic policies. Reforms must move forward simultaneously. Therefore, the answer is yes, change is taking place. The challenge is not simply to say "let’s do it." It is to do it at a faster pace”.
Simplification does not mean deregulation – Europe can reduce bureaucracy
“If you ask European businesses, I think 61% answer that additional bureaucracy is an obstacle to their investments. Therefore, we all agree on this. In Greece we had a very interesting experience in this field, as the president also knows.
The idea was to map all the transactions of a citizen or a business with the state: from the birth of a child to the loss of a loved one and from the establishment of a company to the end of its operation. We mapped all these life events and the steps each of them required. And in all these steps, there were requirements stemming from both European and Greek legislation.
In Estonia, for example, which is a fully digitized state, many of these procedures are completed in a single step. You enter the platform and are served by the state. In Greece, when a child was born, five different steps were required.
When you lost someone close to you, more than ten steps were required in different public services. So imagine the corresponding bureaucracy for businesses. That is why we simultaneously launched the simplification and digitization of procedures.
For a federal system like Germany’s, the challenge is broader because of the governance structure itself. I would say, however, that Europe needs to carry out a corresponding exercise. This very logic lies at the core of the 28th regime.
The idea is to have a simpler framework of rules, which will function as a basis so that procedures move faster throughout Europe: from facilitating cross-border mergers and acquisitions to, quite simply, the everyday activity of a citizen or an employee in Europe. Much has been done in individual national markets and in certain member states. I believe that Greece has taken significant steps in this area.
The creation of the Single Digital Public Portal in Greece, gov.gr, according to a poll I saw, is considered the second most popular reform in the country’s history after the creation of the National Health System. So, when you start from an environment with intense bureaucracy and begin to simplify and digitize procedures, you reduce administrative burdens for businesses, make everyday life easier for citizens and, as it turns out, this is an extremely popular reform.
There is, therefore, a lesson from the Greek experience. However, a significant part of these rules came from the European level. The question, therefore, is whether we can proceed with the same simplification at the European level as well. Can we simplify the rules?
Part of the discussion on banks concerns precisely simplification and there is broad agreement among the member states that we must move in this direction. Simplification does not mean deregulation. It simply means making the rules easier to implement and more functional. On this front I believe there will be progress.
But there is also one more key lesson, with which I would like to conclude. It is not about technology.
We created in Greece a Ministry of Digital Governance, but the key lesson is that the digital state is not about digitization itself. It is about serving the citizen and creating a public administration centered on the citizen.
In no country in Europe was public administration designed from the outset with the citizen at the center. There is, of course, the exception of Estonia. More generally, however, states were never designed as unified systems. They were shaped gradually, through the accumulation of rules in different policy areas, and that is why we ended up with this enormous volume of rules.
So, when we simplify these rules, make them more functional and then digitize them, using technology as a tool.
If we begin to think in this way in public finances, health and education, the possibilities for the citizen are enormous. It is a very positive reform, around which political forces from across the spectrum can converge, and I believe that Europe must implement it.
It is a reform that can truly be put into practice, provided that we approach it with the logic of an engineer: identify the problem, simplify the process and design the solution”.
The digital euro at the core of European financial sovereignty
“Overall, I believe that the key word is resilience. When we talk about the digital transition and digital payments, we usually think in terms of European sovereignty. And sovereignty is, by definition, an existential issue for us as Europeans.
We need to develop a European understanding of sovereignty in the financial system. The digital euro is a project that will lead us in this direction. We must strengthen the relevant infrastructure and adopt this logic.
In reality, Europe has chosen an intermediate path in relation to China and the US. In the US, the choice was not to create a digital dollar. Innovation is developing around the dollar, through stablecoins and the digitization of the system.
China, on the other hand, chose the full digitization of its currency, without however allowing the development of private innovation around it. Europe is attempting to combine both. The digital euro is the central project, while at the same time we have the MiCA regulation, which allows the development of private innovation and payment solutions around the core of the public infrastructure.
I believe that this dual approach is the optimal one. However, the key element of the strategy is and must remain the digital euro. But from the moment we are talking about the resilience of the financial sector, the discussion inevitably also acquires a technological dimension.
In the field of technology we must comprehensively redefine the way we perceive sovereignty. Whether we are talking about defense, energy, technology or payments.
And here there is an important distinction: sovereignty does not mean autonomy. Autonomy is only one of the two dimensions of sovereignty. The other is control.
We created the European project by ceding certain elements of our autonomy in order to gain greater control in other fields. Does this in practice make us less sovereign? No. In reality, through this process we gain greater capacity for action.
Especially in technology, we must develop a strategy that will prevent relations of asymmetric interdependence with the US and China and strengthen our own capabilities in the sectors where we can and where it is necessary to do so. In certain sectors, such as the financial one, we must maintain a core of ownership, autonomy and control.
In other sectors we must be more flexible. We must recognize where we have real capabilities and make strategic investments where we have European businesses and research centers that are close to the cutting edge of technological development, instead of attempting to invest indiscriminately across the entire spectrum of technologies.
I believe that this discussion and this strategy will determine Europe’s future in the coming decades and will have a long-term impact”.
Strength through openness, not through insularity
“In reality — and this is the subject of the main discussion — we must be able to make choices.
Making choices means that your resources are finite and your priorities specific. Therefore, you must be able to identify the sectors in which you will invest.
In the sectors in which you do not invest, you follow a different approach: you regulate intelligently and make very specific decisions about the way in which you will move, especially with regard to critical supply chains.
First you map your capabilities and your weaknesses. You must look honestly at yourself in the mirror. Then, you diversify sources of supply in the sectors where this is critical and, when it comes to a sector of vital importance for national security, you develop European capabilities.
However, the choice to develop European capabilities should, in my view, be the last resort, precisely because our resources are finite. We must choose very carefully the sectors in which we will do this.
In critical raw materials, for example, the discussion is broader. But if we talk today about technology and technological supply chains, we essentially have three choices.
We invest in the sectors in which we have a comparative advantage. We regulate intelligently the sectors in which we lag behind and exercise our sovereignty so as to maintain the necessary control. And, between these two, there is the option of creating a European advantage where none exists today.
In technology we have achieved this with Airbus and with Galileo. But in the vast majority of sectors in which we attempted something similar, we failed. That is why we must choose very carefully the fields in which we will attempt to create an advantage that we do not currently possess.
At the same time, diversification must be a real and sincere strategy. And I will conclude with one final point: I believe in strength through openness, not in strength through insularity.
There is, in fact, a story from ancient Greece, which I also mentioned at ECOFIN a few months ago. It is the story of the Oracle of Delphi during the Persian invasion and of Themistocles. The oracle said that the "wooden walls" would save the city. The conservative view of the time interpreted the oracle literally, considering that it referred to large wooden fortifications that would stop the Persian army.
Themistocles, however, had the insight to understand that the "wooden walls" were the ships and that Athens could draw strength through openness. I think there is a lesson in this story: with this logic he won the Battle of Salamis.
You win when you are open. And this is particularly important for the European trade strategy. Trade accounts for about 50% of our GDP. Europe, therefore, must follow a strategy that remains open, flexible, adaptive and fast.
It is, ultimately, a matter of mindset. And I believe that we can acquire it”.