Good morning, Dr. Nardo. Could you tell us what your work at the European Commission entails?
I work on financial systems, specifically on convergence in the capital markets. As you know, a series of measures have been implemented at the European level to ensure banking union. Now, the European Commission is committed to achieving capital markets union as well, recognizing that the banking and financial sectors are closely interconnected and mutually dependent.
I am responsible for developing indicators to monitor the creation of the capital markets and the convergence of Member States toward a single market. The group I work with has been extensively involved in banking union, developing part of the impact assessments for EU directives on banking union (e.g., deposit guarantee schemes, Single Resolution Fund). Part of the group works with macroeconomic forecasting models and contributes to the recommendations that the EU issues to individual countries under the Macroeconomic Imbalance Procedure (MIP). It also contributes to estimating the “deficit” required by the Stability Pact.
Could you describe the activities of the Joint Research Center?
The Joint Research Centre is responsible for providing scientific and technical support for the design, development, implementation, and monitoring of European Union policies. The Joint Research Centre is a Directorate-General of the European Commission, comprising seven research institutes located in five European Union Member States (Belgium, Germany, Italy, the Netherlands, and Spain). It has a staff of approximately 3,000 people and serves as a reference center for scientific and technological issues within the Union. Close to the policy-making circles, the Joint Research Center acts in the common interest of the Member States, without being tied to private or national interests. Among other things, we focus on the environment and sustainability, energy, citizen protection and safety, health and consumer protection, standards, infrastructure (including digital infrastructure), nuclear research (risks associated with the handling and storage of radioactive material), and much more.
I invite you to visit our Joint Research Centre website
Speaking of the appeal of the Veneto economy, what aspects do you think characterize the Veneto economy and are most attractive to other European economies?
Certainly, the dynamism and entrepreneurial spirit of the Veneto region are very positive factors, as is its focus on exports. Of course, there are significant challenges to face. First and foremost, the globalization of markets (which will increase with the free trade agreement with the U.S.) and the resulting rise in competitive pressure. Certainly, the tax burden, the time and costs of bureaucracy constitute a problem that the Venetians cannot resolve because it falls under national jurisdiction, but the region’s productive structure remains partly outdated: relatively small and technologically underdeveloped firms (technological readiness—access to and use of new technologies—ranks 208th out of 258 European regions) operating in sectors that are already highly competitive (primarily manufacturing—fashion and furniture). with a low propensity for innovation: approximately 1% of regional GDP compared to the Italian average of 1.25% and the German average of 2.9%, ranking 151st out of 258 as of 2010).
The Veneto region is also characterized by a social landscape marked by high youth unemployment (27.6% compared to 42.7% in Italy but 7.7% in Germany) and high female unemployment (9.8% compared to 13.8% in Italy and 4.6% in Germany), but above all by low educational attainment: we rank third from the bottom in terms of the percentage of the workforce with a university education, at just 16.7%—according to 2013 OECD data—while the German average is 28.4% (only Puglia and Sardinia fare worse than Veneto; if we look at all European regions, Veneto ranks 211th out of 258).
Veneto-based companies compete with German firms in the business world; they vie for contracts in the European and global markets, yet Germany is also our leading foreign partner. In your opinion, what is the relationship between Veneto-based and German companies?
From what I can gather from aggregate indices (Regional Competitiveness), economic and productivity parameters are similar (GDP per capita—at purchasing power parity—is higher in Veneto than in the northeastern regions of Germany), as is infrastructure (roads, airports, railways), and the healthcare system is excellent (linked to productivity). What makes the difference in competitiveness are essentially the “institutions” (perceived corruption, legality and effectiveness of public administration, management of public power, efficiency/effectiveness of the legal system, protection of rights, transparency, etc.), macroeconomic conditions (public deficit and debt, which in turn affect the tax burden), education and continuing training, and female and youth unemployment; however, the most significant factor is a lower level of technological adoption (broadband, internet use, and e-commerce).
Returning to the Financial and Economic Analysis Unit that you represent here, how can your work help entrepreneurs in the Veneto region?
The group I work in does not deal specifically with regional issues, although financing for SMEs is one of the topics we are currently working on. The help we can provide is indirect: by studying the local situation and comparing it with other local contexts, both in Italy and across Europe, we are able to derive general insights that help monitor existing policies or design new ones. The European Commission pays particular attention to regions, their development, and the contribution they make toward achieving national targets.
In the 2014–2020 period, Italy will receive a total of approximately €32.2 billion from cohesion policy funds, of which €7.6 billion is earmarked for projects in more developed regions (including Veneto), and €567.5 million is allocated to the youth employment initiative.
The DG REGIO (Regional Policy) website e and the Italian Government’s website contain information on specific programs.
The European Investment Bank is also particularly active: the Bank’s total investments in Italy during the five-year period from 2011 to 2015 exceeded €47.3 billion. Thirty-eight percent of the investments went to SMEs and mid-cap companies, while another 35% went to energy, telecommunications, and transportation
The Commission (and therefore also the JRC) can also provide regions with a forum for discussion and exchange with other local entities and facilitate the coordination of collective efforts.
What cultural shift is needed to foster greater collaboration between the regional economy of Veneto and the European economy?
Reconciling the local perspective with a more global and transnational one is essential to ensure that European policies address the needs of the real economy and society, thereby becoming more effective when implemented. For our part, we certainly need to be more attuned to local issues and must “listen” more. A major effort is underway through “public consultations” where citizens and organizations can express their views on issues that will be subject to European regulation (the consultation on financial services regulation has just concluded, where feedback was sought on cases of overly restrictive and burdensome regulation so that changes to current legislation could be studied).
Citizens and local communities are called upon to participate more actively in available European initiatives. In my view, this implies the need for: proactive local coordination (a sort of regional help desk) that identifies potentially interesting initiatives and helps entrepreneurs take advantage of them (assistance with documentation and reporting); and political coordination that integrates input from Europe into regional development policy so that European interventions act as “multipliers” of development and do not end with mere participation.
Additional Information The Banking Union is one of the four pillars of the euro’s financial policy, alongside the fiscal, economic, and political pillars.
It is a project launched by the European Union in 2010 that addresses bank supervision and resolution systems to ensure financial stability in the euro area and aims to prevent future crises in the euro area.
Globally, the Banking Union is in line with the commitments made by the EU within the G20 and under the Basel III Accords.
The Banking Union is fundamentally based on three pillars: the Single Supervisory Mechanism (SSM), which entered into force in 2013 but has been operational since November 2014, the Single Resolution Mechanism (SRM), which will enter into force in 2016, and the Single Resolution Fund (SRF), which, following a transitional phase beginning on January 1, 2015, will be fully operational by 2025.
Single Supervisory Mechanism: Supervision is entrusted to the European Central Bank (ECB) through a single supervisory mechanism (direct supervision of approximately 130 “systemically important” banks, with supervision of the remaining approximately 6,000 banks delegated to national authorities).
Single Resolution Mechanism: in the event that, despite enhanced supervision, a bank subject to the Single Supervisory Mechanism were to face serious difficulties, the Single Resolution Mechanism would allow for the efficient management of its crisis, minimizing costs to taxpayers and the real economy, and provides for the centralization of the authority to decide on the rescue or failure of a bank under the supervision of the ECB. The effectiveness of this mechanism is ensured by the creation of a dedicated fund, the Single Resolution Fund.
Furthermore, a committee composed of representatives from national authorities—the Single Resolution Board, which operates under the direction of the ECB—is tasked with overseeing the proper execution of rescue operations or the potential failure of a bank. This new body will modify the responsibilities of the existing European Banking Authority (EBA).
Single Resolution Fund (SRF): Member States have established a single “bank rescue” fund, financed through levies on credit institutions at the national level. The SRF will be financed through levies on banks, which will initially be managed at the national level and then gradually consolidated into a single European fund over a 10-year period. The costs associated with banking crises will be borne, in order, by shareholders, bondholders, and depositors for balances exceeding 100,000 euros.
Overall, private investors will be required to cover the losses of a failing bank up to an amount equal to at least 8% of the institution’s assets (bail-in). Above this threshold, the SRF will step in secondarily for an amount equal to 5% of the bank’s assets; should further resources be needed, governments may intervene through the European Stability Mechanism (ESM).
The Capital Markets Union is a set of initiatives aimed at developing non-bank lending and capital market financing in Europe, with a focus on infrastructure and SMEs. The goal is also to use the capital markets as a means to improve European integration by removing national barriers and harmonizing rules governing the free movement of capital. The idea, therefore, is that a more harmonized European capital market will broaden the range of options for accessing
credit for citizens and businesses, thereby improving and standardizing their financial inclusion, regardless of the Member State in which they reside.