Closer euro area integration ‘pays off,’ says Italy’s finance minister

Italian Finance Minister Pier Carlo Padoan smiles.

European leaders can build trust and fight populist threats by touting the economic benefits of closer integration, Italian Finance Minister Pier Carlo Padoan said Thursday.

In a CNBC Facebook Live interview at the World Bank and International Monetary Fund’s Spring Meetings 2018 in Washington, Padoan said strengthening euro area reforms would build more trust across the bloc.

“Integration pays off in terms of improving living standards, improving job opportunities, improving welfare,” Padoan said. “This must be much strengthened, and also dealing with poverty and those that are left behind in the integration process.”

Padoan said countries like Italy are “doing their homework” when it comes to reducing risk in the euro area in areas like non-performing loans and debt reduction. Italy is currently stuck in political gridlock as its parties have been unable to form a government more than one month after national elections.

“Italy has been implementing reforms over the recent past and these are already producing tangible results, but also asking for Europe, which looks at stability, rigor, but also growth and jobs,” Padoan said.

The focus when it comes to euro area reforms, he said, is to balance risk-sharing with risk-reduction.

“Now we need to make some steps forward in risk-sharing institutions such as fiscal backstop and, looking forward, the European Stability Mechanism.”

Padoan said European leaders will have a wide set of proposals to examine when they convene at the euro summit in June.

“Leaders will have a very rich agenda in front of them, which includes completing the banking union but also adding a fiscal dimension to the institutional mechanism and providing more job creation to [the] cyclical mechanism,” he said.

Padoan participated in an on-stage panel discussion focusing on euro area reforms at the IMF alongside Eurogroup President Mario Centeno, German Finance Minister Olaf Scholz and former U.S. Treasury Secretary Jack Lew.

Portugal’s Centeno also struck an optimistic tone about achieving reforms at the June euro summit in a Facebook Live interview following the panel.

“There are good reasons to think that up to June we will be able to detail the roadmap we have in front of us completing the banking union, reinforcing the role of the European Stability Mechanism in crisis management,” Centeno said.

Centeno said European leaders need to find common ground and invest political capital in reforms now, before the next crisis strikes.

“We know that the next crisis will come,” he said. “We have to make sure that it arrives later than sooner but you need to be prepared.”