The Recovery Fund: for now a black hole, which is not certain will materialize
Italian politics is hypnotized by the billion theorists of the Recovery Fund, or rather Next Generation EU, as defined by the commission. The main part of these funds should derive from the RRF, Resilience and Recovery Facility, the instrument that should constitute a large part of the financial contribution to the individual states.
We remember, which is rarely said, that, in theory, not even a penny of this money is non-repayable. Indeed:
- two thirds are non-renewable loans, to be repaid by 2056, unlike BTPs;
- for a third of funds financed by "own means" of the European Commission, that is taxes that will fall either on European citizens, such as that on non-recycled plastic or on states, which will then pass them on to citizens, such as the reduction of the quota of customs duties due to the states.
So the announced great expansionary maneuver does not exist because, in the end, everything boils down to a zero-sum maneuver: so much goes out, so much enters, a consequence of the founding Treaty of the Union which explicitly prohibits financing through the European Central Bank. It cannot happen as in the United Kingdom, or in Japan, where the central bank intervenes and covers the debt: every euro spent must be repaid, directly or indirectly, by citizens and this thanks to Article 123 TFEU which prevents intervention. , in theory even financial, directed by the ECB:
Having said this, however, no one notes that the so-called "own means", the incremental taxes imposed by the Commission to finance the RRF, are, at the moment, far from certain: in fact, the approval of this measure requires the approval of all national parliaments, one by one. At present, only five out of 27 parliaments have approved the fiscal part. Obviously there are political problems, especially in the states of Northern Europe, Denmark, the Netherlands, Sweden and Finland, which even during the discussion had shown themselves more reluctant to reach an agreement on the tax side. Especially the Netherlands, in the grip of a government crisis and upcoming elections, it is absolutely not certain that they will approve the RRF. Moreover, the Hague would pay a substantial part of the resulting taxation, without having an equal stimulus. Why should he approve it?
What will happen at this point? At least there will be new negotiations, with a further postponement of the Recovery Fund and a presumable reduction of the only truly interesting part of this financial instrument, at least for Italy and the Mediterranean countries. What will happen then to the sea of words spent by our political class and the hopes scattered with both hands, but without strong foundations? Draghi should also ask himself this question.
Thanks to our Telegram channel you can stay updated on the publication of new articles of Economic Scenarios.
The article The Recovery Fund: for now a black hole, which is not certain will materialize, comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-recovery-fund-per-ora-un-buco-nero-che-non-e-certo-si-materializzera/ on Wed, 17 Feb 2021 07:34:52 +0000.