What will the Draghi government do on debt, banks and mutual banks
The speech by Marco Bindelli, vice president and managing director for relations with the Credito Cooperativo and the Parent Companies of Banco Marchigiano-Credito Cooperativo (Ccb group)
After the first one concluded positively, the second phase of consultations is underway which makes Mario Draghi's oath for the formation of the new government increasingly likely within this week.
As rightly observed by Gianfranco Polillo in Start , it is difficult to imagine that the policies of the new government could be assimilated to those of prof. Mario Monti, both because the current scenario and the required political objectives are different, and because, in fact, Draghi has already set out, in (perhaps) not suspicious times, a sort of government program.
The reference is to the intervention that the former president of the ECB saw published on March 25, 2020 in the online edition of the Financial Times and with which he announced the ways in which the States would have to face the Coronavirus crisis with a consequent significant increase. public debt.
This is the translation of the main passages of the Financial Times in which Draghi seems to hypothesize a government policy completely opposite to that of Monti and which, probably, in some respects frightened even the current president of the ECB, Christine Lagarde, who was forced to intervene to warn his predecessor that the public debt cannot be written off.
“ The answer we will have to give to this crisis will have to involve a significant increase in public debt. The loss of income in the private sector, and all the debts that will be incurred to compensate for it, must be absorbed, in whole or in part, by public budgets. Much higher levels of public debt will become a permanent feature of our economies and will go hand in hand with private debt cancellation measures. … The role of the state is precisely that of using the budget to protect citizens and the economy from shocks that the private sector is not responsible for and cannot absorb. States have always done this during national emergencies. The wars – the most relevant precedent – were financed by the increase in public debt. Some companies may be able to absorb the crisis for a short period of time by borrowing in order to keep their people in business, but the losses they would accumulate in this way risk compromising their ability to invest in the future. Furthermore, if the virus outbreak and related lockdowns persist longer, these companies could realistically remain in business only to the extent that the debt accumulated to keep employees working so far was canceled. There are two hypotheses: either governments compensate directly the expenses of those who get into debt, or they will compensate the guarantees of the insolvent. Between the two, provided that moral hazard can be contained, the first hypothesis is better for the economy, while the second will probably be less onerous for the budgets. If jobs and productive capacity are to be protected, governments in both cases will have to absorb much of the loss of income caused by the closure of the country. Public debts will grow, but the alternative – the permanent destruction of productive capacity and therefore of the tax base – would be much more damaging to the economy and, ultimately, to the credibility of governments. Furthermore, it should be remembered that in light of current levels and probable future levels of interest rates, the increase in public debt will not involve service costs. From a certain point of view, Europe is well equipped to deal with this extraordinary crisis: it has a granular financial structure, capable of channeling funds to every branch of the economy that needs it. The public sector is strong and capable of giving a rapid political response. And speed is essential to be effective. Faced with the unpredictability of circumstances, a change of mentality is necessary, like that operated in times of war. The crisis we are facing is not cyclical, the loss of earnings is not the fault of any of those who are suffering from it. Hesitating now can have irreversible consequences: let us remember the suffering of Europeans during the 1920s as a reminder. The speed at which private balance sheets are deteriorating – due to the inevitable and desirable closure of many countries – must be dealt with just as quickly in deploying public finances, mobilizing banks and supporting each other. as Europeans, to address this which is obviously a common cause ”.
Also during that speech, the prime minister in charge made a clear (and in some respects unexpected) reference to the need on the part of banks to provide immediate liquidity to families, small businesses and artisans induced into difficulty by the health emergency. , that is to those subjects who represent the reference customers of the cooperative credit banks (Bcc).
Right here on Start , it was possible to appreciate the interest shown by Draghi towards small companies and, consequently, towards the mutual banks. At the same time, the hope was expressed that the authoritative intervention could induce the governmental and regulatory authorities to intervene, on the one hand, for the removal of those constraints that require the mutual banks to be classified among significant entities for having compulsorily joined a group cooperative banking and, on the other hand, to completely suspend the effects of the accounting rules (IFRS9) that govern bank financial statements.
After 11 months, apart from the commitment, which was not followed up, expressed by Giuseppe Conte during the Confcooperative meeting and despite the appeals to the Bank of Italy to intervene to remove the aforementioned and paradoxical constraints , no changes legislation has now intervened.
With the formation of the new super-government (as it is interpreted by most of the political forces that will have to support it) it is plausible, however, to expect the long-awaited turning point from cooperative credit. And not only for the reasons already highlighted in this Magazine commenting on Draghi's intervention in the Financial Times , but for some political combinations that would seem to favor those regulatory changes in favor of the mutual banks, which, it should be remembered once again, need to be brought back to the less significant banks and see their parent companies correctly fulfill their role and function, at least through the issuance of the Mise decree (Ministry of Economic Development) which regulates the controls aimed at verifying that the exercise of those functions of the parent company are consistent with the mutual aims of the mutual banks.
It should be noted, as highlighted by this editorial staff, that Salvini's League, which has already given full support to the future government , appears to be fundamental for holding in Parliament and is probably the political force that more than any other has fought to make changes regulations in favor of the mutual banks, especially through Senator Alberto Bagnai. See, in the past, the Motion presented (perhaps a bit hastily) in the Chamber and Senate on 2 May 2018 with which the Government was asked to suspend the terms for the establishment of cooperative banking groups (Gbc) or the regulatory changes to the law of reform aimed at strengthening cooperative credit and confirming the territorial nature of the mutual banks contained in the “Milleproroghe” decree of 2018 approved in accordance with the M5S.
The same M5S, although not firmly convinced of supporting the new government that will be formed shortly and with which he will find himself again alongside Salvini, as well as having always shown unity of purpose with the League for the protection of the BCCs, has constantly shown interest for cooperative banks and still continues to deal with them through some of its parliamentarians; see, for example, the Hon. Carla Ruocco, president of the parliamentary commission of inquiry into the banking and financial system and Senator Felicia Gaudiano, active in recent weeks in an attempt to improve the regulatory framework of cooperative credit.
Antonio Tajani, both personally and on behalf of Forza Italia, together with numerous exponents of the Brothers of Italy (currently the only party to have declared that it does not vote for trust), have spoken out on several occasions in favor of cooperative credit and demonstrated willing to make regulatory changes to the reform law.
In short, Draghi, who has declared since last March that he wants to favor small businesses and families and, consequently, small banks, seems to be able to count on a very large group of parliamentarians in favor of those regulatory changes that are by now un postponable for the protection of the Bcc the correct implementation of the reform law. It remains to be seen whether the former president of the ECB will be able to convince, if required, the only political force that has never expressly pronounced itself in favor of the BCC and to which, moreover, the 2016 reform must be attributed. we intend to modify, that is the "old" PD, now broken down into PD, Leu and Italia Viva.
Obviously, if one intends to give credibility to Draghi's words spoken through the prestigious English business newspaper, the persuasive capacity towards his former colleagues at the Bank of Italy and the ECB must be taken for granted.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/che-cosa-fara-il-governo-draghi-su-debito-banche-e-bcc/ on Tue, 09 Feb 2021 10:01:58 +0000.