What (not) is said about the Sure loan requested by the Ministry of Economy. The in-depth study by Giuseppe Liturri
Since Saturday afternoon he has struggled to make his way through the news relevant to the future of our country, a fact that is unprecedented in the recent history of Italy. An event of absolute gravity, unfortunately overwhelmed by a smokescreen that has been at work, in a truly suspicious way since Sunday, to comment on nothing: 5 parliamentarians who, having the right, requested the indemnity of € 600 paid by 'INPS.
This story was enough to overshadow an event that has precedents in the loans requested by Italy from the Bundesbank and the IMF between 1974 and 1976, on the occasion of the first oil crisis. Or, even earlier, in 1964 on the occasion of another balance of payments crisis.
If ever this smokescreen proves insufficient, the triumphalistic and omissive tones with which the government measures to face the crisis are announced, in comparison with which, the blurry images of the Luce newsreels of the 30s defeatist proclamations appear.
We had not yet recovered from the amazement for the 100 billion of the "August" decree (which perhaps will arrive in the Official Gazette after August 15th) touted to unified networks – which however are only 25, as they add up to 20 in March and 55 in April – when the joint press release by the Minister of Economy Roberto Gualtieri and Labor , Nunzia Catalfo, announced the formal request to the EU for the "activation" of the "instrument" Sure to finance the expenses in support of the anti-unemployment mechanisms. Typically the redundancy fund, financed up to 18 weeks by the decrees of March and May and for another 18 by the decree announced in these days.
The press release speaks of a request "to be able to access Sure's resources in the amount of 28.5 billion" . Incredibly, nowhere in the release does the word "loan" appear, as if it were manna from heaven. On the contrary, to generate in the reader the conviction that it is precisely a heavenly gift, the title speaks of a “ positive example of solidarity between the Member States ”. Even more misleading is the choice of the word " instrument ": evidently the dictionary in use in via XX Settembre provides that it is a synonym for " loan ".
Verbal devices worthy of the magician Silvan. So let's arm ourselves with patience and reiterate to the reader that this is a loan granted by the EU for the purpose described above for a total of 100 billion in favor of the 27 Member States. Since the first three major beneficiaries will not be able to exceed 60 billion, it is reasonable to assume that Italy can receive between 20 and 25 billion, at the end of a discretionary allocation between the requesting countries, which however have already submitted requests slightly higher than the total available. But since the Commission does not have this amount, in order to allow the EU to collect them, by issuing triple A bonds on the market, Italy has already provided guarantees for 3.3 billion. Other than solidarity.
This loan will finance expenses already committed by the State in its budget, therefore already included in the balances of the authorization for the higher debt that Parliament has voted on several times. Therefore it constitutes an alternative financing instrument to the issuance of public securities. It does not finance new expenses. With a huge difference: the State finds that amount on the markets in a few weeks and has no destination restrictions, the Commission will take months to collect that sum and then lend it in installments to the beneficiaries, then it will be necessary to send mountains of papers to Brussels to report everything . As a demonstration, between May and June, the Treasury made gross issues of 130 billion. Instead, the Commission announced the Sure settlement in late March, published it in late May, then began issuing bonds in September. 5 months have already passed and still nothing is visible. The Financial Times recently reported estimates that the Commission will issue 1/3 Sure bonds in 2020 and 2/3 in 2021 . So it is not clear how it is possible for our country to receive the entire sum requested by this year. The precedents of the EU regarding the issuance of securities are of modest amount and the organization of such operations requires incompressible technical times for those who are not a large issuer like Italy.
The cost of these loans is not yet known. In fact, Regulation 672/2020 which governs its functioning provides that all conditions are decided by the Council on a proposal from the Commission on the basis of a prior discussion with the requesting State and verification of the existence of eligible expenses.
How much cheaper can these conditions be compared to those that have emerged today from Italy on the markets, by issuing bonds purchased by the ECB? We remind you that the interest paid on those securities goes back to the Treasury in the form of dividends and taxes paid by the Bank of Italy.
To complete the embarrassing picture, there is the issue of the status of de facto privileged creditor (while the MES is by statute) of the EU. No country would ever dream of making a selective default against a supranational issuer, the privilege is already incorporated without the need to write it.
It is a sad moment for our country, caught between omissions and good loans for countries at the last resort. We believed, mistakenly, that the eurozone would protect us from borrowing like those of the 1970s, justified by the constraint of insufficient foreign reserves to pay for the imbalance in the balance of payments. Today we have a country with a largely positive current account balance with foreign countries, we have abundant private savings, but we resort to 70s-style solutions. There is something wrong, but unfortunately the focus is elsewhere.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-fuffa-e-verita-sul-prestito-europeo-sure-allitalia-per-coprire-spese-gia-stanziate/ on Tue, 11 Aug 2020 04:35:25 +0000.