The governor of the Bank of Italy stated on Wednesday that the eurozone must increase investment and establish a common budget to enhance growth and strengthen its economy.

“The idea that economic and monetary union can work without a centralised fiscal capacity is simply an illusion,” Fabio Panetta said at a conference in the coastal town of Rimini.

Italy, which has the eurozone's second-highest debt-to-GDP ratio and faces high borrowing costs, would greatly benefit from a more unified approach to budget policy and debt issuance, Reuters reports.

Panetta added in his speech that economic governance in the 20-nation bloc will remain imbalanced without a “common fiscal capacity,” stressing the need for significant strategic investments.

Furthermore, the Bank of Italy governor criticised the austerity measures implemented by numerous European Union countries in response to the 2010-2012 debt crisis, calling them a mistake that deepened recessions and led to “economic and political fractures between member states.”

Panetta, a member of the European Central Bank's Governing Council, stated that it is now crucial for the EU to build on its unified approach to the COVID pandemic, during which the European Commission provided billions of euros in grants and low-interest loans to member states.

The central bank governor went on to add that boosting growth in the EU is “indispensable,” highlighting that over the past 20 years, the EU's productivity and share of global output have significantly declined compared to the United States.

Panetta also stated that Italy has a “crucial” need to reduce its debt and should achieve this through a combination of fiscal consolidation and growth-boosting structural reforms.

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