Recovery Fund: new debt and means of European blackmail

The Recovery Fund, if it ever will be, will not be what our rulers currently describe it, that is, as a salvific element, good for the electroal campaign, but it will be an extremely negative element for two simple reasons:

  • it will be an element of blackmail by the Commission;
  • it will be a further element of debt that will put us. rebus sic stantibus, closer to the imposition of the troika.

There is a direct, subtle link between the reform of the ESM, with assessment of the sustainability of the national debt and automatic sending in default, if this condition is no longer considered as such by the Commission, intervention of the ESM and the imposition of the Troika, with relative cancellation of the democracy, the possibility of a national government and the expropriation of every power of the democratically elected parliament, at that point reduced to a mere organ only of apparent legitimation and executor of the technocratic policies and of pure austerity and destruction decided elsewhere. What we will see will be devastating cuts to our social services, the pension system, health care, on the Greek model, but multiplied several times.

This direct path towards poverty and the dictatorship of the troika is expressed, with the usual disarming lucidity, by Giuseppe Liturri on Startmag . We offer you an extract.

The Minister, when he points out that “there is an important and positive aspect in the way this Recovery Fund works: that is, the money will be advanced by individual countries and if the objective has not been reached, European funds will not arrive. And I think that the whole country in the coming months will be there to say: please, we must meet the deadline ”, we have the impression that he scores a sensational own goal . It confirms that the financial support of the EU will arrive very late – this is nothing new for those who know the time that passes between the commitment of an expense and its actual payment – and will expose our country to perennial blackmail by the Commission. Just think of those 3 months of "exhaustive discussion" at Council level before releasing payments, if even only one Member State has doubts about the beneficiary State's compliance with the conditions.

Let's overlook the "fiscal space" that will be generated, according to the minister, as a result of the reforms and the alleged absence of progressiveness of the flat tax – when there are mountains of studies that explain how it can be obtained – and we emphasize the emphasis on " the European Union will issue 750 billion plus billions of Sure, therefore one trillion Eurobonds that will be used to finance common expenses […] In this sense, we will perhaps be able to make this new way of functioning of the European Union structural, not limiting everything to effects of the pandemic. This is the dream ”. Too bad that this dream risks remaining so because, precisely the last slide of the guidelines, verbatim states that:

  1. The Program must be compatible with the Government's public finance objectives.
  2. In any case, reducing the debt ratio will require a significant improvement in the primary budget balance in the coming years.
  3. From an accounting point of view, the subsidies envisaged by the RRF should not constitute a greater deficit and gross debt of the PA
  4. Conversely, the loans will contribute to net debt and gross debt accumulation. The main benefit will come from the lower rate paid on the loans.

Point 1 clearly tells us that we cannot borrow "ad libitum" with the EU, precisely considering that most of the financial assistance arriving from Brussels is composed of loans (Rrf up to 127 billion, Sure 28 billion and, most likely, Mes 36 billion) which, despite having relatively low rates, will still have to be repaid. Not to mention the higher contributions or taxes that we will still have to pay after 2028 to repay the subsidies. A balance must therefore be found between these debts and the deficit that will be allowed to our government. To this end, it will be decisive to understand how much expenditure already included in the current legislation and consequently in the deficit already authorized, will be financed with this new instrument. If, as we fear, in the trend balances (i.e. under current legislation) there are few measures that fall within the perimeter of eligible expenses outlined by Brussels, then the government will necessarily have to pass new spending laws, thus increasing the expected deficit, which will thus be financed. from loans and subsidies from the Recovery Fund rather than from trivial BTPs issued on the market. This is a decisive keystone, little highlighted in the analyzes of these days.

Soon the EU will require that our country start on a path of return of the debt / GDP ratio with a primary surplus in the order of at least 3/4% of the annual GDP. A "Greek cure" whose harmful effects are already known. The Commission bases its positive judgment on the sustainability of our debt precisely on the achievement of these massive primary surpluses . When it becomes clear that this path will be impracticable, the loss of access to markets, the use of an emergency assistance tool such as the Mes and the installation of the Troika in Rome, will be a chain of consequential and inevitable events.

So the problem goes far beyond the folkloristic list of 557 projects presented, containing everything and its exact opposite. Here the freedom and savings of the Italians are endangered, with a lightness of which only Conte and the guitarist Gualtieri are capable. Moreover, it has been seen that the MEF does not have the character to oppose the modification of the MES in a destructive sense. If there is no rapid change of government, at any cost, there will be very little left of a free and democratic Italy.

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The article Recovery Fund: new debt and means of European blackmail comes from .

This is a machine translation of a post published on Scenari Economici at the URL on Tue, 15 Sep 2020 11:02:33 +0000.