Does the Sun heat up with a new austere rigor?
The proposal of the economist Marcello Messori on the Sole 24 Ore commented by Giuseppe Liturri
We know that the Recovery Fund will bring modest additional growth to our country. However, we do not know how much growth will be subtracted from the grand return of the Stability Pact, scheduled for 2023.
The debate on its possible reform will certainly intensify in the coming months.
Today Professor Marcello Messori speaks in Il Sole 24 Ore with a proposal that leaves unchanged, indeed aggravates them, doubts about the recessive potential of European rules, whether old or reformed.
Ultimately, a total commissioner of the country's budget policy.
"… centralized rules are inevitable, but they must not impose rigid rates of reduction of public budget imbalances with respect to GDP to be achieved in predefined periods of time, because these rules would compromise growth and thus end up exacerbating the problem of public debt …"
In short, the economist Messori is well aware of the damage that those rules have produced at the beginning of the last decade and explores the possibilities of reform.
“… The objective is, however, to identify new centralized EU fiscal rules that offer a good compromise between the rigor required by the long-term stability of the area and adaptability to national specificities. To achieve this goal, the simplest way is often to associate the rule with an institutional space of discretion; and the following proposal takes exactly this path … "
But we are still inside the old conceptual framework of "stability" which requires "rigor". And if these are the premises, the rest is all in that old and dangerous rut. Not to mention the "discretion" that we remember well as it was used by the Commission during the autumn of 2018, threatening Italy with an infringement procedure for an additional 0.4% deficit / GDP and creating constant tension on the markets , capable of disciplining a government initially reluctant to adapt.
“ The old Stability and Growth Pact could be replaced by a fiscal rule consisting of two elements. The first element consists of long-term sustainability tests, to which the European Commission submits the public debt of each Member State annually. The methodology of these tests, decided in a transparent way by the European institutions, should be based on scenarios with alternative future monetary policy trends. If the results did not indicate sustainability problems for the public debt of a given country, the application of the second element of the new tax rule would be limited to recommending the continuation of the policies in place "
But what would happen if the sustainability test failed?
“… The European Commission and the country in question would be obliged to agree on a series of annual primary surpluses (corrected for the cyclical phase) of the relative national public budget. These surpluses should be compatible both with adequate macroeconomic growth rates and with gradual but substantial corrections of excessive public debt … "
You should go back to making primary leftovers. Yes, the very ones that have prevented us from growing for 25 years. And these surpluses should have the virtue of making us grow and reduce public debt. In short, we are always there: Messori still believes in expansive austerity. But the worst is yet to come …
"… Should an agreement not be reached, the country would remain subject to the old fiscal rules of the Stability and Growth Pact as defined by the European regulations and directives of 2011-2013 (Six Pack, Two Pack) …"
In other words: either we accept to make the primary leftovers they say in Brussels or they impose them on us using the old tools of torture from the beginning of the last decade. But there is a way out, which seems so much like falling from the pan into the fire …
"… If the agreement reached does not allow to keep growth and budget adjustments together, the Commission would have the burden of agreeing and financing – without increasing the national debt – those additional investments (public or private) and those reforms in the country. able to overcome the incompatibility … "
It would be the generous EU that would finance us the investments capable of keeping goat and cabbage together. Brilliant! How could you not have thought about it before? M this obviously has a cost:
“… This proposal requires the European Commission to contract, on behalf of the EU, new debt which will be covered with additional own resources in the European multiannual budget. Therefore, it gives substance to the thesis that RF is a first, but irreversible, step towards a fiscal unification of the EU. On the other hand, it is essential that the new tax rule be protected against opportunistic behavior by the beneficiary countries of European transfers. Therefore, if it hinders or does not implement those investments and reforms agreed and financed at European level, the country would fall under the old tax rule "
In short, a permanent Recovery fund under the watchful eye of the Commission. Whoever does not do what they say falls under the cleaver of the old rules. A blackmail in effective permanent operation.
"… Furthermore, if the primary surplus (corrected for the cyclical phase) underlying the agreement were not realized ex post, the country would prove unable to correct its excessive public debt and would therefore be forced to enter the traditional program European aid which is managed by the European Stability Mechanism and which includes macroeconomic conditionalities … "
And if anyone really wants to be smart, there is always the ESM with its macroeconomic adjustment program. Not bad for a menu. Only Herod and the sacrifice of the firstborn are missing.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/il-sole-si-scalda-con-un-nuovo-austero-rigorismo/ on Wed, 26 May 2021 10:18:02 +0000.