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Priorities for the new European Commission: policies for growth, employment, and competition

Rome, 12/11/2019, National Roundtable

The new European Commission is working within a context marked by greater uncertainty and the pursuit of new inter-institutional balances. On the one hand, the United Kingdom’s exit will reduce the EU’s global political importance while, on the other, many countries are seeing their traditional party and political majority structures weakening.

Therefore, widespread expectations are for a leap in quality in the management of priority concerns, with particular emphasis on banking (a topic that, after the common agricultural policy could offer new terrain for European convergence), as well as decisive action within a narrow timeframe.

The banking sector is in a period of deep transformation and is concerned over its future. Indeed, at the present moment investments in the sector call for premiums to cover the exceptionally high exposure to a range of risk factors and constraints that include:

  • a constantly changing regulatory framework that generates uncertainty about stockholders’ investment returns and that is marked, for example, by rising wealth taxes and the complexity of governing banking crises;
  • profits are penalized by a macroeconomic scenario burdened by exceptionally low taxation, but also by an obvious excess of productive capacity (mainly owing to social and historic reasons);
  • the need for a speedy and radical digital transition due to potential competition from major digital economy giants calls for large-scale investments that, in the above-described context and in the light of regulatory and social constraints, have a hard time finding clear short-term returns;
  • the demographic evolution, particularly in Italy, will influence the number and types of citizens/customers (2019 will probably set a negative birth rate record, concomitant with a steady rise in the number of over-90s).

The debate foregrounded the advisability of accelerating completion of the banking union by means of a homogeneous legislative framework and by changing the ways of managing bank crises through the promotion of European “safe assets”. An important contribution could also come from the evolution of banking work force management (contracts) consistent with ongoing sector transformations in terms of both functions and processes.

Finally, it is important that the Commission focus on the priorities that it has set for itself, i.e. financial market sustainability and the promotion of European digital champions, not least through specific regulations.