Here are the real effects of the ESM reform
The ESM reform will remove the control of the EU economy from the Commission and entrust it to the German hawk Klaus Regling. The in-depth analysis by Tino Oldani for Italia Oggi
The divisive points of the Mes reform, which is being discussed in parliament today, testing the strength of the government of Giuseppe Conte, are not few. However, there is a key point, which has so far remained in the shadows, which deserves attention and concerns the role of Klaus Regling, German, general manager of the bailout fund. Key point, highlighted by two unsuspected sources of sovereignty: the hearing of the economist Giampaolo Galli, which took place a year ago , and the report on the ESM reform prepared by the Senate Studies Office. Says Galli: «The ongoing reform decisively shifts the axis of economic power in the Eurozone from the European Commission to the Mes. Not surprisingly, in her speeches to the European Parliament, the new President of the Commission, Ursula Von der Leyen, basically avoided talking about the governance of the eurozone. In particular, he said nothing about the Commission's proposal to create a European Monetary Fund and a Eurozone Finance Minister with a budget capable of performing macroeconomic stabilization functions. Von der Leyen's silence is explained by the consideration that this set of issues had already been addressed and resolved by the Eurogroup and the Eurosummit of last June, in the sense of giving a secondary role to the Commission. In particular, the Mes is becoming what the Commission's initial intentions should have been the IMF ”.
That the ESM, thanks to the reform, can become an equal rank of the EU Commission in economic governance, an aspect of enormous importance when it comes to examining the sustainability of the debt of a single eurozone country and compliance with the parameters of the stability pact, it is a hypothesis also proposed by the Senate Studies Office. Page 16: «The most important modification for the granting of support appears to be that for which the director general of the ESM should support the Commission and the ECB in the assessment of the request for support presented by a Member State. On the basis of these assessments, it would always be up to the Director General to draft a proposal for approval by the Board of Governors and to prepare a proposal for financial assistance, including the financial terms and conditions, and the choice of instruments, which must then be adopted by the Board of Governors ”.
But who wants to make Regling one of the most powerful men in Europe? And why? Confirmed in 2017 at the helm of the Mes for a second five years, Regling, 70, is an economist who has built a reputation as an efficient, hawkish super bureaucrat in all stages of his career: first at the IMF, then at the Ministry of Finance of Berlin, then in the team of German negotiators who dealt with the drafting of the Maastricht Treaty and, subsequently, the regulatory basis for the birth of the euro. A career that brought him one step away from the ECB presidency, which he aspired to, but was overtaken by Mario Draghi. As a consolation, Angela Merkel imposed him at the helm of the Mes, relying on his rigid ordoliberalism.
When, not yet thirty, he started working at the IMF dealing with programs dedicated to Africa, Regling had immediately proved his vocation for austerity, granting loans only in exchange for severe cuts in public spending and drastic privatizations. An ordoliberal recipe that years later he also applied in Greece, when he was entrusted by the EU Commission with the role of director of the "rescue" of the Greek economy. In order to obtain the repayment of the loans granted to the Athens government, he did not hesitate to cut public salaries and health care and asked the Minister of Finance to suspend the payment of pensions. A social massacre.
Subsequently rendered practically inactive by the monetary policy of Mario Draghi, who bypassing the statute of the ECB launched Quantitative easing, thus making the use of the Mes by the states in difficulty useless, Regling returned to the crest of the wave immediately after the appointment of Christine Lagarde at the helm of the ECB. The Coronavirus pandemic was still to come, and the re-launch of the Regling hawk looked like a German revenge to end Draghi's accommodative monetary policy, and consequently put the most indebted countries in line, Italy in head. For the need, in fact, Angela Merkel and Emmanuel Macron, with the Meseberg agreement, agreed on some changes in European economic governance. Among these, the reform of the Mes (demanded by Merkel), the launch of a European budget and a European Minister of Finance (requested by Macron).
It goes without saying that Macron's requests have remained a dead letter so far. Instead, the ESM reform has made progress. And if it does, Regling will become a peer of the ECB. An interlocutor not inclined to settle with Italy. On 23 March, when at the beginning of the pandemic Italy promoted Eurobonds, Merkeldisse: «There is already the Mes». And Regling added: "Italy and Spain must get on their knees." A real kapo.
Article published on ItaliaOggi
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-i-veri-effetti-della-riforma-del-mes/ on Sat, 12 Dec 2020 06:04:54 +0000.