A bargain the cost of securities for the Sure?
Loans of the Sure? A deal for the EU and investors. Liturri's analysis
Yesterday the European Commission announced the fifth issue of bonds with the Sure program , to finance the additional expenses of layoffs and other subsidies to self-employed workers, caused by the containment measures of the epidemic.
Italy has received a further 3.9 billion which, added to the previous disbursements, bring the amount received so far by our country to 25 billion.
In detail, the Commission issued a bond with a maturity of 2036 (15 years) at a rate of 0.23% with a premium of 33 basis points on the German Bund of the same duration.
This rate will be passed on to the debtor countries with the addition of expenses and commissions, estimated at around 0.20%. So a finite rate for our country equal to about 0.43%. The BTP with the same maturity, again yesterday quoted on the market around 1%, and the last auction in January had registered a "monster" request of 105 billion, satisfied for only 10 billion at a rate of 0.99%.
What's wrong? A lot, we would say everything.
- The enormous slowness of the EU reaction. It took almost a year, from the announcement at the beginning of April 2020, to organize a loan, however weighed down by a considerable burden of bureaucracy and controls, which will bring our country an insignificant sum compared to the cash needs manifested in the peaks of the crisis . Sums that the Italian Treasury is able to collect on the markets within a few weeks. If the fate of our workers had been linked to the timeliness of the payments from Brussels, we would have had barricades on the street by now. Moreover, in order for the Commission to collect those sums on the markets, and then lend them to the Member States, the latter had to provide substantial guarantees (€ 3.2 billion for the Italian share). The picture is completed by the abundant liquidity in the coffers of the Mef: 102 billion as of February 28th. The Brussels loans have only served to fuel the pounding propaganda in favor of the shaky EU institutions.
- The specific convenience of the operation. On the one hand, the markets rejoice because they receive a higher return of 33 basis points for a security at risk comparable to that of the German Bund. On the other hand, we pay a rate that is only apparently lower than that of the BTP with the same maturity: it would be enough to calculate the value of the guarantee given and the load of checks and bureaucracy that that loan drags behind, to quickly clear the difference between 0.99% of the BTP and 0.43% paid to the EU.
It is hard to find a minimum of economic rationality in all this. But perhaps the mistake is precisely in looking for it.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/un-affarone-il-costo-dei-titoli-per-il-sure/ on Wed, 17 Mar 2021 12:10:18 +0000.