The “irreversible” Euro that Draghi wants is against the Treaties and the Germans are telling us Nein

Mario Draghi, in the Chambers , made an interesting speech. It confirms the economic policy approach we described after the appointment , but suggests things are a little more mature than we imagined after the consultations .

What Draghi doesn't care – Let's start with what he least cares about. Mountain tourism, which he himself killed by keeping him in lockdown : empty words ("we know their reasons, we are aware of their enormous sacrifice and we thank them"), followed by empty promises ("we are committed to doing everything so that they can return , as soon as possible, in the recognition of their rights, to the normality of their occupations "), seasoned with a pat on the back even vaguely mocking (" it is certain that it will start again, because we are Italy ", in reply to the Chamber ). Companies, which "will have to change, even radically" and for which he intends to "support the internationalization process" and "enhance the tax credit for consultancy costs relating to the listing" (that is, smaller companies and / or addressed to domestic demand, who cares). “Our young people”, forced to emigrate due to… the lack of “effective gender equality”. Planet Earth, honored with a quote from Pope Francis that couldn't be more gretin. Let's move on.

The declaration of intent – The depth of the speech grows, there where Draghi tackles topics that he really cares about. Summary (as already in Rimini ) in an abstract :

“[1] This government was born in the wake of our country's belonging, as a founding member, to the European Union, and as a protagonist of the Atlantic Alliance, in the wake of the great Western democracies, in defense of their inalienable principles and values. [2] Supporting this government means sharing the irreversibility of the choice of the euro, [3] it means sharing the perspective of an increasingly integrated European Union that will arrive at a common public budget capable of supporting countries in times of recession ”.

First born [1]. He will add: "we are following with concern" what is happening "around China"; yes, we want to "fuel" a dialogue with Russia, but pointing out that "citizens' rights are often violated" there; while we do not seem to care about the rights of Turkish citizens given that, with Ankara, we want to "start a dialogue" as a "NATO partner and ally". As for the main European ally in NATO, Great Britain, Draghi does not mention it in his speech but will later let it be known that he is looking at the “ British model ” on vaccines. In short, with the US "our relations and our collaboration will only intensify". Nothing quaestio .

Then the EU framework [3]: “the prospect of an increasingly integrated European Union that will arrive at a common public budget capable of supporting countries in times of recession”; an apparent federalist profession of faith, but then (and with the clarification of Bagnai), the Court of Auditors will specify that a common European budget "could happen one day" … in two thousand and thirteen . The same contradiction in the passage in which Draghi points to the prospect of a "new Pact for migration and asylum", as well as "a European return policy"; but, then, in the reply to the Senate he will specify that "the opposition with the states of northern and eastern Europe remains". It is no coincidence that he concludes the speech with the description of "a growing push towards the construction, in Europe, of networks of privileged bilateral and plurilateral relations", which suggests that we also equip ourselves accordingly: from time to time with France and Germany, Spain, Greece, Malta, Cyprus. We repeat it: 'privileged bilateral and plurilateral', that is, not multilateral through the mythical Federation. Ad impossibilia nemo tenetur .

Between the two passages, Draghi talks about the Euro [2]: “supporting this government means sharing the irreversibility of the choice of the euro”. What does it mean? What is the Euro that we would have "irreversibly" chosen? Some say it is an interpolation (Draghi would have had an immediate controversial reason for inserting these words). But we prefer to think that this is not the case: that it is a central passage, the explanation of which must be sought later in the text.

Expansive monetary and fiscal policies – In fact, that's where Draghi says he wants "expansive monetary and fiscal policies": a shocking statement and the heart of the whole speech. Let's start with 'fiscal policies'. Draghi praises the Recovery Fund , but also specifies that "the amount of additional loans that we will request will have to be modulated on the basis of public finance objectives"; which means reducing the fund to macroeconomic insignificance: to a totemic symbol, at most. The list, indicated by Draghi, of the reforms leading to the granting of funds from the Recovery Fund is significant: all very slow to be implemented. For taxes, he gives the example of a study commission established in 1962 and which gave birth to the law in 1971, nine years later; for the school, he wishes to “review the design of the school path”; for the public administration in general, it wants “investments in connectivity and continuous updating”; for the health system, it even proposes “an all-out comparison”. For justice, he wants to "increase efficiency", then adding to the Chamber "a reasonable duration" and to the Court of Auditors that the control must be "rapid" … things that would require the rewriting of the Codes. On "transparency and simplification", he goes as far as the manifest absurdity of defending the "ex ante and ex post evaluation of the policies on natural capital", the Prefects, the Superintendencies, the Anac. Obviously, it's not a 'Do it Soon!' . And Draghi also says it: "the quality of decisions counts, the courage of visions counts, the days do not count, the time of power can be wasted even in the sole concern of preserving it", we need an "all-round vision that takes time and competence ". Campa horse.

Instead, it will soon be on two specific reforms : “the certainty of the rules and public investment plans”, which is fine; and then "the competition", to be read as a new blow to the back of the national tourism industry, as Fubini has already warned ("without a bid for bathing concessions, we at Recovery do not see a euro, no bank transfers"), Barbera ("Europe cannot understand what it is allowed to pay in Italy to beach, ski or spa operators") and the Lega (Salvini, which has the golden share of the majority, argues against the lockdown that kills tourism and does not name the competition). Draghi himself considers, yes, the two reforms as a scalp to be brought to Brussels, to serve as an accompaniment to the task called Recovery Plan , but we doubt he can believe that they will be enough for the Dutch and the Germans. In short, Draghi seems to attribute little weight to the Recovery Fund .

If this is true, then what remains of the so-called "expansive monetary and fiscal policies"? Well, the monetary part remains. Draghi repeated it to the Court of Auditors:

"At current levels, it is not the interest rates that determine the sustainability of the public debt but it is the growth rate of a country … the state is able to make significant investments with the only constraint that they are done well: that is, that they increase the growth of the country and, therefore, also contribute to the sustainability of our public debt ".

In short, the Euro that we would have “irreversibly” chosen is a Euro made up of “expansive monetary and fiscal policies” dictated by governments. But the Treaties forbid all of this. And not a pen that has stood up to underline how all this clashes with the sacred 'independence of the ECB'; of course, one could answer that Draghi's is not a provision but a simple prediction, yet it sounds peremptory, we would say dispositive: it admits no objections. Therefore, the Euro of which Draghi speaks is not the Euro of the Treaties, on the contrary it is contrary to the Treaties. Therefore, Draghi wants to ignore the Treaties or even change them. What if the Germans tell us no?

The unspoken of Draghi – So far the saying of Draghi. Then there is the unspoken, which the parliamentary debate has made up for. Prima Bagnai , in the Senate, invites him to oppose the reintroduction of the Stability Pact, for the excellent reason that, even if Draghi obtained monetization from the ECB, Rome itself could not benefit from it if it were simultaneously forced to austerity; then, he reminds him of the state of Italian foreign accounts "exceptionally favorable, which will thus relieve it of the painful task of managing external imbalances by destroying internal demand"; finally, he reminds him of the Dutch decision to postpone any decision on the Recovery Fund until after their elections and the formation of the new government, ie the Greek Kalends. Following Borghi , in the Chamber, reminds him to stop wasting time with the Recovery Fund , in line with the proclaimed insistence on expansive monetary policy; then he invites him not to ask Parliament for the ratification of Conte and Gualtieri's New Mes Treaty . All things that Draghi didn't say, but he could have said.

In fact, these additions introduced by Bagnai and Borghi can also be found in the interview with an authorized interpreter of Draghi, Cottarelli, granted to Fabio Dragoni. After a splendid “now we need to make more deficits”, he defines the reintroduction of the Stability Pact as “unrealistic”; he affirms that "we must avoid a restrictive monetary policy" and excludes that inflation in the Eurozone exceeds "stably 2 per cent"; finally he defines the ESM as “certainly not essential”, weakly defends the Recovery Fund and does not deny the Dutch delay. Even Boeri and Perotti (well commented by Liturri ) say the Recovery Fund is unrealistic, while Zingales defines it as “microscopic”. Only Fubini lingers to worry about his delays. In short, the Euro contrary to the Treaties that we would have "irreversibly" chosen is popular in Italy and is very popular.

Brussels response – Too bad Brussels doesn't like it at all. As shown by the harsh reply to Draghi, entrusted to Commissioner Gentiloni , who warns: "in the coming weeks we will decide if and how to prolong the freezing of the Pact, while in the coming months we will start a crucial reflection on how to recalibrate it", where we like to note how the the fact of fixing its reintroduction before having decided if and how to change it increases the negotiating strength of Northern Europe. The commissioner continues to warn that, on that table of the reform of the Stability Pact, Draghi's personal authority is not enough, if not accompanied by a policy "more focused on structural reforms and less inattentive to the dynamics of the debt, financial instability, waste of public money ”, from“ policies of gradual repayment of debt ”. He denies the Dutch delay. Then, remember that the purchases by the ECB are "extraordinary" and "in perspective" destined to end and this for the good reason that inflation will return ("we will come out of lockdowns , the wave of demand compressed in these long months will return to grow and become impetuous, bringing back trillions of savings hitherto frozen into the real economy "). Finally, in a Wagnerian crescendo, he brings out the Mes which is not excluded "come back in the dance". In short, Gentiloni's intervention is aimed at saying the opposite of what Draghi said in Parliament, to make him the counterpoint.

The harsh message from Brussels was also delivered through the Financial Times : in the EU, "the ghosts of the past crisis have resurfaced, governments are not spending enough to support the recovery", "political coverage for further national stimulus throughout the area is missing" euro ”, Brussels has already shown itself generous with the Recovery Fund and Rome does not ask for more. The Germans are telling us no.

Escalation – In the course of Draghi, the arguments for a reply are ready. Presented by Lucrezia Reichlin (who we already knew on the Atlantic as Europhanatic), with an article published on Sunday: "in the United States nearly 2 trillion dollars of fiscal stimulus have been approved … it is inevitable that it will end up producing a global imbalance that will see a European trade surplus in the face of a US deficit… this will trigger tensions between Europe and the United States ”. It is not to us – the Reichlin is saying to the Germans – it is not to us that you are saying Nein , but to the USA and your business; therefore, it is for your interest that – we quote – “the extraordinary support to the economy will have to continue. The resources of the Recovery Plan cannot be enough. Nation states will have to continue to take the lion's share… This suggests avoiding the reintroduction of tax rules too soon; it implies coordinated action by the ECB with governments to ensure that indebted countries like ours are not forced to withdraw the stimulus prematurely; it requires convincing Germany not to return to a balanced budget in the near future ”.

Of course – continues the Reichlin – it is a "complex discussion" of "a difficult path", "it is not clear if the time is ripe for a reform in the short term", "the setbacks and conflicts should not be underestimated" … and there there would be more, since it is no less than ignoring or changing the Treaties. But, all the same, if the Germans continue to say no to us… well then we will have to “go beyond the asphyxiated debate Europe yes, Europe no” and “enter into the merits of the options”. I mean, some options that would be left to us … when the Germans have told us the last Nein .

Two options – These options are not many, but two. The first, that Draghi do as Monti; but it is impracticable due to the excellent state of Italian foreign accounts and consequent conflict with the US and, in fact, Draghi wants the opposite, as we have seen. So, only the second option remains: that the Germans (& Nordic satellites) go their own way, making their € nord revalued and finally letting us return to live, with our € sud or directly with the Lira. To this, we believe, the deputy Borghi referred, when in the Chamber he invited Draghi to seize "the honor and the possibility of redeeming us" from "a servitude that for centuries has been inflicted on our people and that was redeemed by the blood of our ancestors ". An opportunity that exists today, undoubtedly. Draghi, even if he saw it thus, would not say it. But he said something: he mentioned Cavour. Draghi had already spoken about the latter once, in 2017, dedicating a little speech to him : “in Cavour it was always clear that the relationship with Europe would be fertile, if the country had learned to progress and grow even on its own. Otherwise, his own independence would have been compromised ”. Here.

Cavour who freed us from the 'Germans', of course. But Cavour is also the ally of the French and something is moving in those parts: Alain Minc swears that, with Draghi, “from the point of view of France everything is perfect, I think that the agreement with Macron will be total”; at the same time the liaison officer between Salvini and Le Pen (the excellent Vincenzo Sofo) left the League. But it is not clear what they understood us, in Paris, in all this story: Minc himself still rambles about Recovery Fund and sees Salvini "love Europe and the euro". In the meantime, however, there is ever more terrifying evidence (latest Eurostat ) of the abyss into which French foreign trade has plunged: evidences that we know are meticulously compulsory in Berlin. This, in the fourth year of Macrone's reign and in the pre-eve of the presidential elections of April 2022: potentially capable of opening the doors of the Elysée to a president who is not sympathetic to the IV Reich. Who knows whether the new chancellor in Berlin, the one who will come after the German general elections in September 2021, will make one plus one. And pronounce the last Nein .

The post The “irreversible” Euro that Draghi wants is against the Treaties and the Germans are telling us Nein appeared first on Atlantico Quotidiano .

This is a machine translation from Italian language of a post published on Atlantico Quotidiano at the URL on Tue, 23 Feb 2021 05:03:00 +0000.