Rinaldi: the problems of the Recovery Fund and the “Plan B”, which remains the Extrema Ratio. (and the newspaper balls)

After the vote on the regulation of the Recovery Fund Antonio Maria Rinaldi made a direct Facebook to explain both the problems, and the vote that took place on the regulation of the fund, to then delve into his position on the euro.

Here are the key points of the intervention:

• the regulation, in its current form, is not good because it still contains too many references to rules that are linked to austerity, to the "European Semesters" etc.
• the League had always abstained. He voted in favor only after, in the conversation between Salvini and Draghi, he ensured that in the next revision of the European budget constraints, made necessary by the economic crisis, he will fight against the imposition of austerity. It was a credit opening;
• on the Euro, as always, the title of the sheet does not correspond to the content of the article (which obviously no one has read because no one wants to pay the Sheet to read it …). Rinaldi didn't really eat a pipe;
• the "Plan B" of 2015 was an academic study, but, beware, it does not mean that the "Plan B" solution is not yet valid. It is simply the "Extrema ratio", if the other solutions fail. Indeed, the presence of the final solution made it possible to start a discussion that ultimately led to QE and PEPP. Nothing has changed at all, even in the balls of the press propina….

Here is Rinaldi's video, then the text of the speech to the European Parliament.

Text of the speech.

Thank you President,

exactly one year after the start of the COVID-19 pandemic, we finally find ourselves voting for the tool that should strongly support our economies.

However, I regret having to underline that the conditionalities inserted, if not applied flexibly enough, could create problems for the Member States who decide to activate the Recovery and Resilience Facility , either in the form of a grant or a loan.

The basic problem of the RRF Regulation is that it incorporates compliance with the recommendations of the Country Report of the years 2019/20, therefore prior to Covid-19, and this crystallizes the criteria for calculating the Output-gap contained in the CAM (COMMONLY AGREED METHODOLOGY) which, on the other hand, appears to be the subject of criticism from many member countries. Following this pattern, the suspended Stability and Growth Pact would re-propose itself in all its pro-cyclical vigor .

On the basis of a reasonable modification of the CAM methodology, it is therefore possible to leave member countries greater room for maneuver , without the current serious risk of generating hysteresis in excess unemployment and amplifying the fall in domestic demand.

It is equally important to point out the constraints on growth due to the agenda of the Next Generation EU, which due to the type of investments planned not calibrated on the real needs posed by the fall-out of the pandemic, will not promote the hoped-for growth , but strong disputes with the Commission EU and among member countries about the level of fiscal consolidation inevitably corresponding to the due financing of the interventions rigidly outlined in the NGEU.

The crisis generated by the However, the pandemic can be an excellent opportunity to finally reformulate all the economic governance on which the single market is founded.

The question raised by President Lagarde should also be underlined , who states that no debt cancellation is possible as it is prohibited by the Treaties; the same cannot be said of making the renewals of those government bonds purchased under the PEPP program perpetual "de facto" by the ECB , naturally always using the Capital-Key criterion . It would be a question of “freezing indefinitely” “good” debt , just to use the definition that Mario Draghi attributed to the debt contracted to support growth.

It is a question of political will only and not of technical impossibility. We are living in a historical moment in which we must have the courage and strength to modify with the help of all the rules conceived over 30 years ago and now inadequate to the needs of growth and social cohesion in the world in which we live.

History will judge our work by what we will be able to accomplish today, not tomorrow! Thank you.

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The Rinaldi article : the problems of the Recovery Fund and the “Plan B”, which remains the Extrema Ratio. (and the newspaper balls) comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/rinaldi-i-problemi-del-recovery-fund-ed-il-piano-b-che-resta-lextrema-ratio-e-le-palle-dei-giornali/ on Wed, 10 Feb 2021 09:12:43 +0000.