With these words, former ECB President and former Prime Minister of Italy, Mario Draghi, kicked off his keynote address at the 36th MIPIM, held at the Palais des Festivals. Addressing an audience of over 600 people in an auditorium so full that not a pin could fall, he stated: “However, I know that interest rates will not return to pre-pandemic levels for a long time. Governments will need to invest substantial amounts in infrastructure projects, which will keep inflation elevated for years to come.”
Regarded as one of the most influential bankers to have led the ECB, Mario Draghi was praised by Nobel-winning economist Paul Krugman, who is famous for his “whatever it takes” mantra. In his speech, Draghi reflected briefly on the 2008 Global Financial Crisis and compared the recovery timelines of the U.S. and the EU, highlighting two key factors: the massive amounts of dollars the U.S. government invested directly (seven times more than in Europe), and the technological superiority of the U.S. over other nations. Additionally, the wage reductions in Europe led to diminished consumption and a collapse in the housing credit market. This stood in stark contrast to the U.S., where mortgage loans had already returned to pre-crisis levels by 2010.
REAL ESTATE SECURITIES
Speaking about the commercial real estate market, Draghi noted that although it wasn’t a priority at the time, he commented: “Many European banks were 'infected' by investing in U.S. products that offered higher returns. This effectively killed the securitization market in Europe, as the region lacked the culture of implementing projects through Commercial Mortgage-Backed Securities (CMBS). Today, this has changed. Europe is not only repositioning itself in regard to this institution, but a significant portion of lending now comes from the private sector. There are funds and insurance companies with liquidity, actively seeking higher returns. They offer all types of lending with greater flexibility than the banking system can provide. The key difference is that private lenders are not regulated by frameworks like Basel III, because banks must protect not only shareholders but primarily depositors. A bank’s bankruptcy would have widespread economic consequences. In contrast, a private lender answers only to the shareholder, not to society.”
DEMOGRAPHICS
It’s clear that demographic trends are unfavorable, but this is not necessarily catastrophic. Looking at Japan provides a relevant example. Particularly in the commercial real estate market, this trend leads to price increases for both office space and residential properties. Spaces have adapted quickly to these new realities, and tourism has also emerged as an alternative investment in real estate. “We all believed that after the pandemic, the need for vacations would subside within one or two years at most, but the ongoing global increase in demand continues to prove us wrong.”
ENERGY AND ENVIRONMENT
On the issue of de-carbonization, Draghi emphasized that Europe must complete the transition it began, aiming to become an energy producer. This is the only way to achieve energy independence, as Europe lacks sufficient domestic resources and relies on imports of oil and natural gas. However, the benefits of clean energy production must reach consumers. This can happen if the pricing model is reformed, which currently burdens costs disproportionately due to the involvement of natural gas in the energy mix. Additionally, significant investment in energy networks is required. As for data centers—among the largest energy consumers—along with the growing demand from Artificial Intelligence, these needs could be met by 2040 through renewable energy sources combined with small nuclear units located near data centers.
"Have faith in Europe," Draghi concluded, receiving a standing ovation as he finished his address to the packed central auditorium of the Palais des Festivals in Cannes, the venue for the annual MIPIM real estate exhibition.
