But then, where is the European turning point? There is not. The Eurolyrics’ reality bath continues
Two very different articles, by former minister Tria and the “red princess” Reichlin, reveal pieces of reality. For both Gualtieri numbers are written on water, for both only the ECB keeps us afloat. But then the prospects diverge: Tria does not know what to hope for, Reichlin furiously wants the Troika and, possibly, the restructuring of the BTP
In the same days in which the President of the Republic, almost living on the planet Pluto, compliments the government for the "great commitment to reform" and because "it fights the virus with rigor and unity" and places it in the shelter of its mantle with the argument that “The real enemy, of each and every one, is the virus; that the one responsible for grief, suffering, sacrifice, renunciation, restrictions on normal life is the virus "… down here, on planet Earth, two remarkable articles remind us of a" reality bath ": the first of the former Minister of Economy and Finance Giovanni Tria, the second of the Red Princess of the left in Loden, Lucrezia Reichlin.
For both, it is a question of acknowledging that Gualtieri's numbers are written on water: for Tria, the Nadef painting is “highly obsolete and does not reflect the problems we will face”; for Reichlin “the numbers on which the update note of the economic and financial document is based are no longer realistic. In all likelihood, 2020 will close with a growth in gross domestic product below -10 percent with consequences on the deficit and debt ”.
For both, the immediate present is dominated by the ECB: for Tria, "there are currently no liquidity problems for our Treasury" and "Italy and the other European countries, especially those on the southern shore, still hold only for the reason that all European rules have been suspended ”, meaning both the fiscal rules of Brussels ( Stability Pact , Fiscal Compact , …), and the ECB's ban on monetary financing to States; for Reichlin, up to now there has been based on “immediate intervention with national instruments, financed in debt but with favorable rates guaranteed by the intervention of the ECB”.
Starting from this common premise, the perspectives of the two are radically separated. Tria proclaims : "free all" and "each for himself". The problem of "the accumulation of sovereign debts and their prospective sustainability" lies with the individual member states, not the EU. Because, "the narrative of a decisive external aid consisting in the imminent arrival of financial aid represented by abundant European funds is missing", the idea of a Europe that provides to "massively finance coordinated European programs, helping to financially weaker countries to participate with national investments ”. On the contrary, "the bank counter approach … according to which the idea of a Europe that controls the national projects to be financed remains", in the sense that, "the ESM is a loan, but that most of the other European funds under discussion ". Precisely for this reason "the history of the Recovery Fund … fades to centrality" and the problem is reduced to choosing, on the basis of criteria of mere convenience of conditions and rate, "between alternative credit conditions, that is, between market and European ". For Tria, all that remains is to “get safe, issuing debt on the markets” as hard as I can, and then avoid squandering them: “Now everything is back in the hands of national governments and their ability to have a strategy and above all to implement it”.
On the contrary, the deductions of Reichlin : Recovery Fund and Mes are central. "ECB has found the consensus to intervene in a timely manner and with purchases of government bonds unbalanced in favor of Italy because the budgetary authorities, both federal and national, have accepted" a "European package", "monetary and fiscal", which “It involves clear programs for the Recovery Fund and a health plan to be financed immediately with the Mes”. The ECB's intervention “depends on the coherence of the monetary and fiscal package and on the ability of the countries most at risk, such as Italy, to implement it and act accordingly”; in other words, without this package the ECB would not have intervened, as it "has no legitimacy to intervene in an unlimited way without the support of the budgetary authority". Ergo, "the position of Italy regarding the ESM, or that of Spain which says it does not want to draw on loans from the Recovery Fund , is very dangerous".
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The problems with Reichlin's interpretation are innumerable.
[1] The first is obvious: the ECB's proclaimed dependence on governments, which the Red Princess modestly defines as "de facto coordination – even if not formalized – between monetary policy and fiscal policy". She also gives an example, the limited purchase program of government bonds conducted by the ECB in 2010-2011 and known as the ECBSMP, which had no effect, according to her, "because the ECB intervention was accompanied by heated political conflicts"; afterwards Draghi was able to save the Euro in 2012 only "as legitimized by an agreement between Germany and France". The economist Francesco Saraceno replied that the problem with that purchase program was precisely that it was limited and that, then, “in 2012 Draghi would have made that speech anyway. The survival of the euro was at stake ”; but Saraceno's answer does not appear convincing: it would be necessary for him to explain why the intervention of 2010-2011 was not unlimited… and he cannot do it because the reason was precisely in the then missing German consensus. More convincing was Mario Monti , in 2019, pursued by a brilliant Claudio Borghi:
"The central bank is independent, however, if you are the president of the European Central Bank and you have been there for a few months, you want to run the risk that, the day after your statement or your act, the German chancellor will say: 'this thing is negative, is it not in line with the treaty '? Yes, they are independent but central bankers are also men ”.
Monti added:
"Draghi could not have made that declaration (so much so that he did not make it a month before, two months before, three months before, when it would have been necessary), if the Italian government of the time had not done two things : first, take very decisive action (certainly with sacrifices) within the country, to put the financial situation back on track; why can you imagine if the president of the Italian ECB had announced a more expansive policy, when the situation in his country was not put right. Would they let him do it? No. Second, the one who made Merkel and the prime ministers of Holland and Finland (i.e. the hawks) change their minds, who previously considered blasphemous, impossible, contrary to the treaties an ECB intervention on government bonds, was the Italian government to followed by a game of pressure and negotiations ”.
In short, Reichlin is right: the independence of the ECB is a mere slogan and his decisions depend on the liking of Germany. Monti had examined the terms of the previous German diktat, that of 2012, the Red Princess examined us those of the present German diktat.
[2] Is there a possibility that the ECB will disobey the German diktat? No, she replies: ECB cannot buy government bonds without the consent of Berlin, as “it would be dangerous for the political stability of the Union if the ECB did it unilaterally”; ergo, “thinking that the ECB tap is unconditional is dangerous”. Let us turn our thoughts to the ever-open question of Karlsruhe . Amen.
[3] The third problem lies in the consequences of an eventual Italian submission to the new German diktat: if we obey, will the ECB continue to buy government bonds? No, writes Reichlin: the purchases of the ECB “do not foresee a permanent increase in the debt financed by the issue of money. In academia there is debate as to whether this is what the ECB should do, but… it is unlikely to happen ”. Much more brazen than Tria, who realizes that "if we survive today due to the absence of rules, we must ask ourselves what the future ones will be" and "the first question is the role of the ECB which today, like the individual states, certainly appears freer, but whose future policy depends on the non-univocal interpretation of his mandate ", but he avoids throwing his gaze into the abyss and modestly wonders," but where is the European turning point then? " … Well, there isn't.
[4] And it's a big problem, because the alternative 'fiscal' instruments to ECB purchases do not seem robust: would the Recovery Fund bring us net money? No, she replies: the debt part is due and "the subsidies are not free and will be financed with European taxes in a way that is yet to be defined": which implies that, if this is defined, we will pay these taxes, so we will not these are neither 'subsidies' nor any elusive 'non-repayable'. Much more brazen than Tria, who limits himself to noting that the so-called 'subsidies' would be "very limited compared to the near future needs". The two know that Europe is a bank.
[5] Even if it doesn't bring us net money, even if it's a scrawl, will the Recovery Fund at least see the light? Reichlin makes no predictions, he merely affirms that every Italian objection “gives ammunition to those in Europe who want to blow up the historic agreement so painstakingly constructed”. But it is omissive: the Italian press understood this, as we saw on Atlantico , sinanco Tria understood it (it will end up "clashing once again with the conflict of national interests that have blocked the construction of Europe up to now").
[6] Finally, the Mes-Sanitario : it is a small thing. But Reichlin does not collect: "The good news is that the plan, Minister Speranza has it". And that's enough.
[7] Okay, Majesty, but to have this shred of money, the State would have to submit to the halter treaties, which expose it to the risk of having a Troika imposed , perhaps even without OMT, even of being ordered to restructure the BTP. "Nonsense", replies the Red Princess, "nonsense debate, incomprehensible outside the palace".
Since, however, she has been at home in the Palazzo since she was born, this debate must be understandable to her. And, if it denies the evidence, it must have its reasons. Reasons that are clear to anyone who has had the patience to follow us so far: [1] BCE is not independent but obeys Germany; [2] cannot rebel, otherwise the Germans accelerate the response from Karlsruhe; [3] will stop purchasing government bonds; [4] the Recovery Fund is a mere game of tour and [5] it is certainly never going to see the light; [6] the Mes-Sanitario is a small thing; [7] of the Troika and the restructuring of the BTP that the Mes-Sanitario brings with it, it is not permissible to speak. What remains? What remains unspoken: it remains that, when the ECB has ceased the purchases of government bonds, the only hope of keeping Italy fully in the Euro is to submit it to the Troika and possibly also to the restructuring of the BTP … that is precisely what Reichlin refuses to speak.
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It would remain for us to wonder why the Red Princess came up with such an angry article… and so distant from the Roman perspectives represented by the Tria article. The reason probably lies in the existence of alternatives to her cravings: one, the possibility that the present German diktat is a provocation made to be rejected, what ours tries to exorcise by obeying Berlin to the letter, whatever it takes , Befehlen ausführen ; two, the eventuality, not so random, that the French ECB will rebel against German power… when Paris ever wanted to; three, the certainty that Italian banks prefer the control of capital movements, rather than undergoing the restructuring of the BTP (i.e. their own bankruptcy, i.e. the mass bail-in ) and that they have also involved some part of Parliament in this preference , among those least likely to commit suicide politically. We already know that the madness proposed by Reichlin would be possible only by involving the right-wing opposition and, in this newspaper, Federico Punzi has well explained that getting involved would be an unjustifiable mistake for the right. The now extreme anger of the Italian people allows, at least, to hope that we do not have to suffer a final catwalk of men (or women) in loden.
Reichlin can, perhaps, speak for some super-bureaucrat of Italian origin nested in Brussels, the Mes, the SSM, the ECB … but not for everyone, considering the opposite position expressed by Mario Draghi in Rimini. In short, the risk, for fanatics like you, is that their time at the Palazzo has definitely passed: we wish it with all our heart.
The post So, where is the European turning point? There is not. The reality bath of the Eurolyrics continues appeared first on Atlantico Quotidiano .
This is a machine translation from Italian language of a post published on Atlantico Quotidiano at the URL http://www.atlanticoquotidiano.it/quotidiano/ma-allora-dove-la-svolta-europea-non-ce-prosegue-il-bagno-di-realta-degli-eurolirici/ on Wed, 28 Oct 2020 03:42:00 +0000.