Ratify the Mes?
What the Mes del Mes says and what is the direction of travel of the Meloni government. Giuseppe Liturri's analysis
It may have been a coincidence, but on Thursday 3 November, exactly a few hours before President Giorgia Meloni crossed the threshold of the Brussels buildings to meet the heads of the EU institutions, a brief but incisive speech appeared on the Mes website. The aim was to propose it as a centralized and common tool for stabilizing the fiscal policies of the Member States. Put simply, those with problems can always draw on ESM loans under certain conditions. An instrument that would reveal its usefulness precisely during crises, when expansionary fiscal policies are necessary but not all states have the possibility to implement and finance them.
The message appears clear. Aimed at those who, even in the new government, speak of a common European debt . The tool already exists, it is quick and ready to use and, according to the authors who avoid naming names, it is right up our alley. It is called the European Stability Mechanism and has been around for about 10 years.
The reasoning developed by Nicola Giammarioli and Martin Rey , the first secretary general and the second economist of the Mes, is very linear and lucid and, if analyzed from the point of view of our European partners, it makes no sense.
According to them, now is the right moment to introduce an instrument that intervenes to improve and stabilize the fiscal capacity of the Member States. Precisely because the process of reviewing the framework of European fiscal rules is underway, this process must be completed by the availability of such an instrument, which could also help unravel the tangle of negotiations on a reform that appears to be particularly tangled.
It is a fact that the latest external shocks – from the pandemic, to the war in Ukraine, to climate change – have required the availability of tools to mitigate their impact and monetary and fiscal policy cannot always provide an adequate response. Then the Mes could intervene with its loans. By obtaining an immediate stabilizing effect and, in any case, by not encouraging any type of "moral hazard" in the beneficiaries (a definition used for behavior in the name of doing as we please, so much there is aid from the Mes), because those loans however, they will have to be returned and the eligibility criteria – such as the debt sustainability analysis and the budgetary rules – are in any case stringent.
It will be up to the Mes and the Commission, in collaboration with the ECB, to evaluate the existence of the conditions for the intervention of the fund. Whose introduction and management within the institution based in Luxembourg, does not require particular complex formalities. Everything is already there: paid-up capital, guarantees, administrative structure. There is no need to ask the Member States for further payments.
It is essential to link this fund to the fiscal rules under revision. In fact, it would play an anti-cyclical role and would be an effective complement to the rules under discussion today. During periods of growth it would encourage prudent fiscal policies and during times of crisis it would provide stability, helping states that struggle to find fiscal space, despite having behaved prudently in the past. In fact, even if the budgetary rules allow for expansionary policies during times of crisis, it is not certain that the States are able to finance them. Here comes the Mes with its fund.
Furthermore, there must be perfect synchronicity and alignment between the fiscal rules and the stabilization fund. In fact, it makes no sense to suspend them if there is no fiscal space available or, conversely, to ensure that the rules are so stringent as to prevent the use of those funds, even if available. Mes rules and fund must act as an accordion. The former must leave room for the latter. This is why – the authors conclude – it is now the time to discuss and introduce it. From an economic point of view, it would serve to neutralize the impact of increasingly probable exogenous shocks. From a political point of view, it would help to effectively address and solve the reform of some key aspects of the European fiscal rules.
We take the liberty of hypothesizing that this position – disclosed with suspicious timing – is shared by many EU governments and, for this reason, should arouse due attention from the Italian government. Attention that we did not seem to grasp in the press conference on Friday 4 November, when President Meloni declared that “ the Mes was not the subject of discussions yesterday and we have not yet opened this dossier ”, referring to the talks that took place in Brussels. We heard even less alarm in the words of Minister Giancarlo Giorgetti, when he added that “ we and Germany are in good company, we are the only countries that have not approved it. We patiently await the decision of the Karlsruhe Court which we respect very much and which has already repeatedly intervened on European rules ”.
It is true that ratifying the reform of the ESM Treaty is obviously not the same as requesting loans. But it must be reiterated that the new text contains the discipline for not only placing the country under commission but reducing it to the conditions of a failed state . Let us leave aside the non-secondary formal aspect that the reform of the Treaty must only be "ratified" by Parliament for entry into force, while the Italian government, through a plenipotentiary minister, has already signed it on 27 January 2021. But hiding behind Karlsruhe – which in 2012 had intervened after the Treaty had already been ratified, setting conditions that gave rise to a legal opprobrium according to which a Treaty with a different text is in force in Germany – could prove to be insufficient. Indeed, it is conceivable that a substantial go-ahead would come from the German Court, with the usual stakes already set in 2012, and then the Italian government would be left alone and certainly cannot improvise an answer.
The warning salvo fired on Thursday should serve to prepare much more robust protections, because asking the second manufacturing power in Europe to follow the fate of Greece, Portugal, Ireland, Cyprus and Spain (only for bad banks), would undermine the foundations of this government.
Of the two, one: either this parliamentary majority does not ratify the Treaty, exposing itself to a very harsh conflict with the European institutions, or it accepts the ratification, charging for this enormous sacrifice with adequate compensation on other dossiers, starting with the Stability Pact which , first, it would help us keep the Mes loans at a safe distance.
The time has come for tough negotiations and we will understand if the free ride is really over for our European partners, used to seeing us prone, subordinate and fearful of interrupting the European "dream".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ratificare-il-mes/ on Sun, 13 Nov 2022 08:04:07 +0000.