The reform of the Stability Pact is pro-cyclical and punitive of investments. Rinaldi’s speech which highlights the disastrous critical points
The European Parliament approved, by a large majority, the reform of the Stability and Growth Pact and what resulted is much worse than the previous one. In detail, the preventive arm measure was approved with 367 votes in favour, 161 against and 69 abstentions. That of the corrective arm passed with 368 in favor, 166 against and 64 abstentions. Finally, the budgetary frameworks directive was approved with 359 votes in favour, 166 against and 61 abstentions. Only three Italian deputies (and one, we are convinced, by mistake) had the courage to vote in favor of a decision that severely penalizes our country.
Italy will not be able to have a deficit higher than 1%, therefore no possibility of financing investments, except under limited conditions, and no growth. No policy, for example, for education. A disaster for our country and no one, not even in the PD, wanted responsibility for it. The pact passed through the vote of foreigners and Renzian/Calendian liberals, and not even all of them.
Here is the speech by Antonio Maria Rinaldi, who followed the entire procedure in the commission and knows it well:
To change Europe with deeds and not words, it is first necessary to radically modify the Treaties, starting with economic governance.
But the new version of the Pact, instead of promoting a real investment policy, proposes reforms still animated by punitive objectives and a highly pro-cyclical framework dictated only by respect for the deficit/GDP ratio and by short-sighted obsolete budget constraints and conditionality which, together with the rules on State Aid and an imperfect ECB statute, does not remove the limits of the previous one in the slightest, on the contrary it amplifies them.
Can the ambitious and onerous objectives on defense, energy independence and digital technology in the coming years be reasonably achieved with the spending limits that this new Stability Pact will also impose on the States?
Instead of conceiving a truly sustainable and easily applicable one, the Trilogue resulted in an even more strongly pro-cyclical regulatory monster, worse than Commissioner Gentiloni's proposal of April 2023, impossible to comply with and which will not lead to any hoped-for growth.
If the Treaties are not modified first, starting from the annex to art. 126 of Lisbon, Protocol n°12, art. 1 which sets the convergence coefficients of 3% and 60%, no stability pact will be able to generate growth , as if the so-called monetary statute present in the TFEU in articles 123, 124 and 125 will not be addressed.
The reduction of the debt-to-GDP ratio must occur mainly not with a real cut in primary current spending and with an increase in taxation, i.e. with an exclusive reduction of the deficit, but by stimulating growth, with expansionary policies with a high multiplier coefficient . Doesn't this room know John Maynard Keynes? Time is up, but only in the buildings of the European institutions has no one noticed?
This Pact will accentuate asymmetries, social injustices, divergences and discord between the European peoples and will not allow the growth that we all hope for and will condemn us to an inexorable decline, relegating us to last among all the world economies.
Here is the speech in Parliament
A small note: parliament voted for a measure that was sharply criticized by Mario Draghi in his recent speech, because it is pro-cyclical and severely punishes incomes. But German prejudices and the superficiality of everyone else, who always think they are the smartest, got the better of them.
We will pay the consequences.
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The article The reform of the Stability Pact is pro-cyclical and punitive of investments. Rinaldi's speech highlighting the disastrous critical points comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-riforma-del-patto-di-stabilita-e-prociclica-e-punitiva-degli-investimenti-lintervento-di-rinaldi-che-evidenzia-i-disastrosi-punti-critici/ on Tue, 23 Apr 2024 20:08:29 +0000.