THE LAST GERMAN MOVE / Without the signature of the Mes Italy Italy will no longer have aid from the ECB



Italy, thanks to the Conte government, will enter – or rather, will enter – in the Mes to not be refused the purchases of BTP by the European Central Bank. It is a reversal of perspective: so far the opponents of the external bond have opposed the Mes relying on the purchases of the ECB. There is the ECB, so we don’t need the Mes. But what if the ECB were to stop them? The scenario is Italy’s entry into the Mes as a counterpart to purchases: our country should enter the European Stability Mechanism to allow the continuation of unlimited purchases. With Alessandro Mangia, full professor of constitutional law at the Cattolica of Milan, let’s start with the haste that Christine Lagarde put yesterday to the Commission. The president of the ECB has asked to quickly approve the 2021 financial statements and the recovery fund. How to say, hurry up, because the game cannot continue.

A sort of “hurry up” came from Lagarde with the Recovery Fund. Is it so decisive?

Well, decisive for whom? We must distinguish. There are better placed countries and worse made countries. We, of course, are among the worst. If you think that just a week ago Visco announced a 13% drop in GDP, you have the measure of the situation.

Objection: what do we need loans from Recovery Fund and Mes if the ECB is doing overtime?


Strictly it should not be of any use. The ECB is doing what the Bank of Italy would have done before the 1981 Ciampi-Andreatta divorce. Which is what all the world’s central banks are doing. Except that he has to do it secretly, covering himself behind smoke screens. According to the newspaper report, this activity should have been carried out under the Omt (Outright Monetary Transactions) program label, for individual countries in crisis, and only after activation of the Mes. And therefore only after being subjected to enhanced surveillance and macro adjustment, pursuant to the Mes Treaty and Reg. 472.

Well. What if we put the vulgar aside?

The ECB has been forced to anticipate the times: buy everything it has to buy and then someone expects to enter the Mes as a counterpart. Hence the concentric pressures.

Large, very large. Starting with the social partners like Confindustria.

They do not understand the implications that the MES will have on the Italian banking system and on their future financing possibilities. Best wishes to them.

And then there are the pressures of some parties.


Especially of some party that, in Mes activated, hopes to continue to govern Italy on behalf of third parties, as it is doing now. But also of the Mes officials, who give interviews from salespeople promising discounts on loans that nobody wants, apart from the party of the external bond.

What impression does the comparison make on the Treaty?

Mes’s now seems to be a teleshopping: the more you wait, the lower the price to enter. But more than the officials of the Mes, who since 2013 have done nothing apart from intermediating on the Luxembourg square in a condition of absolute immunity from any jurisdiction, it amazes those who make it an advocate, fostering renewals of the national health system with term financing and halter conditions.

So far, the Frankfurt initiative rests exclusively on Italy’s importance for the eurozone, on our being “too big to fail”. And instead?

And yet the ECB, while doing everything a central bank should do, has its problems. In Germany and not only in Germany the annoyance towards Pepp is very strong, given that it is a circumvention if not a violation of the Treaties. So much so that the debate on whether to leave the euro zone in order not to see the Union transformed into a transfer Union is on the agenda. Other than Hamilton moment.

In fact, yesterday Stiglitz in an interview with Everyday occurrence he said that “if the stability pact returns (…) it will be a disaster for the eurozone”.

It is so. It wouldn’t last six months. That Lagarde tells us that in the ECB a recession from 5% to one of 12% in the euro area is expected for this year, with a central hypothesis of 8%, should say it all about the prospects of tightness.

Fup to now the Mes was used to activate the Omt program. Can the scheme be reversed so easily? Or sign the treaty, or stop buying?

It is clear that here we are outside the Omt hypothesis and in unexplored terrain. If we call it an anticipated OMT, it is perhaps better understood. What if the ECB, or rather the Bank of Italy on ECB mandate, stops buying on the secondary market overnight, as has happened in the past? It is clear that we are in a situation where the classic discourses on central bank independence are reversed. Today to defend is not the independence of the ECB from governments, but the independence of governments from the ECB.

In light of this, the yes / no dialectic Mes (with entry into European conditionalities) and reliance on the ECB, appears to be a non-existent problem: it would be solved at the start.

The conditionalities there they have always been, there are, and there will be, until action is taken on the current discipline. And it won’t be Regling’s interviews or the tweets of some of our local commentators to get them out of the way. If anything, two things are surprising.

Tell us.

That there is no mention of suspending or derogating from Reg. 472 which requires enhanced surveillance and macro adjustment. And that, with such favorable market conditions, the Treasury does not take advantage of the situation to finance itself. That they put themselves on the market 15 bln with a request for 100 it is singular, isn’t it? It almost seems that you want to stay with the case drained to be able to say that you can not take 36 billion and end up in the hands of the troika.

On June 5, Greece said no to the medical Mes.

Even if the Mes is now being offered at negative rates on the seven-year loan, nobody wants it, and those who took it like Spain wanted to get out ahead of time. This should say something.

In short, you only want it in Italy.

You want it only in Italy and only from someone. I wonder why. It seems to me a very political and very little economic fact.

What would be the consequences for our banks?

With a recession announced by Bankitalia of at least 13%, do you have any idea where the NPL will go in the coming months? And the difficulties of financing companies? Other than 2011. And with a public debt downgraded by the presence of privileged creditors, where will the value of the public debt they have in their belly go?

Meanwhile, you can rely on ECB purchases to avoid a sudden downgrade …

But these sooner or later these purchases will end. So? Not to mention the fact that on August 5 there will be a showdown before the Karlsruhe Court on the selective purchases of the ECB. And it’s no mystery that in the ECB, prepare for the worst. The truth is that leaving the euro in Germany is by no means as taboo as we are. Just read the Faz or the Bild to get an idea.

Don’t you think that the “reform” via EU / ECB of this post-Covid Italy goes perfectly hand in hand with a reduction of parliamentarians and a proportional system?

That reform was a tribute paid by the Democratic Party to M5s for being able to go to power less than a year ago. Now the roles have reversed, the 5 stars no longer exist politically and only serve as a mass of maneuver for the Democratic Party in exchange for an extension of the legislature. The problem we have had for almost thirty years is that of a parliamentary republic with no more parties, forced to be governed by the presidency of the republic and the judiciary.

In such a framework, what do you expect?

At a minimum, the assault of the categories that will open in January 2021, when the first loans from Europe will come under the sort of Recovery Fund. Everyone needs money, and therefore it is a time of great opportunities that will open the worst festival. All in search of tips and missing hands, as at the time of financial affairs thirty years ago.

With what difference?

With the difference that the country is now much poorer and more disjointed. And without political class. So much so that instead of turning to parties, we turn to task forces.

Are Germany and Holland wrong to distrust Italy?

It doesn’t surprise me if you think about what I just told you. Nor am I surprised that they push for a commissioner of the country via Mes. But that will benefit them, as in any self-respecting extraction economy.

(Federico Ferraù)


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