Home Economy Draghi is betting on the bookmaker on Europe's biggest stimulus: economics

Draghi is betting on the bookmaker on Europe’s biggest stimulus: economics


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Mario Draghi is using his position as Italian prime minister to do one thing he could never have thought of as head of the European Central Bank: massive fiscal stimulus.

During his first few months in power, he was on track to run through more than 70 billion euros ($ 84 billion) to support the economy. Combined with the stimulus measures approved by the previous government, the figure adds more than 170 billion euros to protect the country’s families and businesses from the pandemic.

The government said that would push the budget deficit this year to 11.8% of output, which it says is the biggest stimulus effort in Europe.

Draghi is acting in the belief that Europe’s economies will be stronger in the long term if financial and monetary institutions work together to bring them back to health as soon as possible.

While that would mean huge increases in debt in the short term, the alternative could be a cycle of a half measure and anemia expansion will set Italy and the European Union on. lagging far behind the US and China.

“Draghi himself said it was a bet,” said Veronica De Romanis, professor of European Economics at Luiss University in Rome. “But that’s the only chance we have, the alternative is austerity.”

That overall strategy is the boldest manifestation of a major shift in European fiscal philosophy since the austerity response to the sovereignty crisis a decade ago.

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