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In Il Sole 24 Ore, front page dazzles on Mes and Recovery Fund

3 years ago babelfish

In Il Sole 24 Ore, front page dazzles on Mes and Recovery Fund

Mes and Recovery Fund: errors and confusions of the well-known political scientist Sergio Fabbrini, professor at Luiss, on Sole 24 Ore

Sunday is the day of important editorials, of those that like people who like them. Those who know they know and who love to find confirmation of their certainties in those editorials.

We are sorry to disappoint them but today one of their favorites, the prestigious Professor Sergio Fabbrini , director of the Department of Political Sciences at Luiss Guido Carli University, raises not a few perplexities not only on the ground of opinions (and this is normal) but also on that of facts (and this shouldn't happen).

After making a difference between the Mes and the Next Generation EU – the first instrument of a past era managed with an intergovernmental method in which the fate of Greek children made German minister Wolfgang Schauble lose sleep, and the second instrument of the new era federal government in which solidarity triumphs – Fabbrini concludes, his goodness, that in any case the Mes reform must be approved even if it retains all its defects and no one will use it. The existence of the elusive ESM parachute loan of € 68 billion in favor of the Single Resolution Fund is enough for the professor to justify its existence.

On this point, let us note that – net of all the considerations on the pro-cyclical effects of the preventive surveillance on the public debt of the 19 member states – it is difficult to justify the existence of a bandwagon, whose 186 employees cost 33 each year. million, with a credit capacity of 500 billion to lend, who knows when, 68. Wouldn't it be first put into liquidation, returning 14 billion of paid-up capital to Italy? In any case, in the event of a serious banking crisis, there would be a tsunami, in comparison with which those 68 billion would be foam on the shoreline and the States would have to put their hands on their portfolios anyway.

In any case, " scurdammoce or 'passed " because today there is the EU Next Generation " whose 750 billion will not derive from financial transfers of individual EU member states (as in the Mes), but from European debt guaranteed by new resources own European ones ".

According to Fabbrini, " these latter will not derive" from the pockets of Dutch or Austrian taxpayers "(as some insist), but from European debt guaranteed by European institutions (and by all European citizens). With NG-EU, fiscal sovereignty is not transferred from the States to the EU, but the EU is equipped with a (limited) autonomous fiscal capacity with which to promote policies of common interest (while the States retain their fiscal sovereignty to support policies of national interest) ".

Here, the professor will forgive us, but inaccuracies (we love euphemisms) abound:

  1. Let us overlook the probable oversight constituted by the confusion between the Board of Governors and the Board of Directors of the Mes (in the first there are the finance ministers, in the second there are senior officials of the ministry).
  2. It is factually incorrect to say that the resources of the ESM derive from financial transfers by the Member States, since they derive from issuance of debt securities on the market. The difference between Ngeu and Mes is the capital pledged to allow the issuance of triple A bonds by these institutions. The NGEU is based on an expansion of the EU budget up to 2% of the Gross National Income (from the previous 1.4% ceiling) which is the guarantee for the markets. So not paid-up capital but a promise to pay it in the coming years to repay the debt, through higher contributions to the EU budget. The Mes is instead based on a capital actually paid up ( 80 billion and 625 that can be called up in the short term ) which makes it possible to borrow for a total of 500 billion (of which 90 have already been disbursed and 410 still payable). They are facts, not opinions.
  3. Perhaps Fabbrini escapes that " European debt guaranteed by European institutions " will have to be repaid by European citizens who, unfortunately for him and for all of us, do not live on Mars but on planet Earth. Proof of this is that the Decision on Own Resources , to be approved unanimously by the Council with a special legislative procedure, has been the subject of heated discussions with the European Parliament which must in any case be consulted pursuant to article 311 TFEU. However, this Decision has not yet been adopted because the veto of Poland and Hungary hangs on it, blackmailed with the adoption by qualified majority of a Regulation that has nothing to do with the rule of law. And those resources are taxes and contributions paid by European citizens to the EU budget to repay the debts contracted with the NgEU. Purely and simply.
  4. Finally, that debt issued by the NgEU is identical to that issued by the ESM from the point of view of the responsibility of the Member States. There is no joint and several liability, but individual and separate of each State ( several but not joint guarantee ). In fact, the ESM sees the Member States respond within the limit of the capital subscribed by each, just as in the NgEU the States respond within the limit of the commitment to contribute to the EU budget (2% of the National Income). It's nice to dream, but unfortunately the reality is different.

The finale has interesting implications:

" If the approval of the ESM reform (which does not imply its use) allows for the commitment (of other national governments) to make NG-EU permanent, then the game is worth the candle". In short, the Mes reflects the intergovernmental logic, the NG-EU the federal one. The two logics are destined to coexist. Alliances must be built to strengthen the second and weaken the first. Our Parliament could approve the ESM reform, accompanying the vote with a critical statement against its intergovernmental logic and a commitment to transform NG-EU into the precursor of fiscal union. Good compromises generally open up new perspectives ”.

We observe that:

  1. Fabbrini recognizes that NGEU is an exceptional instrument destined to end in 2023. This is very different from the Bicc (instrument for competitiveness and convergence) which was being discussed before the Covid crisis and which was then canceled.
  2. Unfortunately for us, the professor re-proposes the suicidal negotiation logic that has seen us approve the worst atrocities in Europe in the last 8 years (at least): now approve the ESM reform as a counterpart of a "commitment". And what if this commitment was not respected, as happened with the bail-in, which should have been approved together with the rest of the Banking Union? Who do we take it with? Shall we send him to Brussels to demand that that commitment be respected?

Fabbrini very conveniently connects the two instruments, omitting however that the reform of the Mes and the additional budget (NGEU or Bicc, if you prefer) were part of the "package logic" on which the President Giuseppe Conte had committed himself at the Euro Summit of 21 June 2019 .

Either he takes them home together (without it sounding like our approval) or he is disregarding his commitments with the country and with Parliament. Tertium non datur.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/sul-sole-24-ore-abbagli-in-prima-pagina-su-mes-e-recovery-fund/ on Sun, 06 Dec 2020 19:19:13 +0000.