Stock exchanges at maximum, economic situation in acceleration. The populist movements are retreating. And, above all, the dialogue between France and Germany has been unblocked, which is the necessary premise for restarting the European Union. There is no shortage of difficulties but in this setting they are less scary. Or not? “Optimism is good medicine. But the euphoria is not justified. Indeed, a little prudence is not out of place”. To curb is Mario Noera, professor of Law and Economics of Financial Markets at Bocconi, convinced that the future of the Eurozone is still hanging in the balance. Waiting for the German elections but, above all, for the confrontation in the ECB, "the only truly European institution": between now and 2019, when Mario Draghi's mandate expires, the future of the Eurozone will be decided. His interview with FIRSTonline.
Why so much caution? The French electoral test has shown that the points of contact are more numerous and profound than those of conflict. First of all, the Franco-German axis can work again.
“But to make an axis it takes two. It seems to me that Angela Merkel has already rejected the prospect of Eurobonds and other initiatives already advanced by Macron. And I don't think that before the vote in Germany in October, initiatives in the opposite direction can mature, also judging by the mood of the German electorate, far from inclined to a change from what emerges from the electoral tests and polls”.
Is the propulsive thrust arriving from Paris therefore likely to be short-lived?
"I'm afraid so. Proof of the facts, in the absence of a European side, Macron will only be able to practice a policy of fiscal adjustments imposed by the deficit accompanied by reforms on the labor market. Perhaps in different ways it will be the re-edition of the policies implemented in recent years on German impetus, those that have failed in Greece and have certainly not given good results in Italy”.
What could be the consequences?
“I fear that the honeymoon will be short-lived, also because Macron will have a weak majority to practice such a policy. His margins for maneuver are narrow: in short, I don't see many reasons to rejoice ”.
The alternative?
“In the absence of a turnaround in economic policy, recourse to monetary policy will continue, ie to the action of the European Central Bank, despite the pressure against Frankfurt's expansive policy pending the end of the Quantitative Easing purchases. In short, we are heading towards a stalemate destined to last until the German elections. Then, in the event of Martin Schultz's improbable affirmation, Berlin could revise its approach".
The real battlefield promises to be the ECB. What will happen at the end of Qe? And how will we get there? In the Dutch Parliament on Wednesday Draghi was subjected to a sort of trial. On Thursday, his deputy, Victor Constancio, warned that a restrictive turn risks having dramatic effects for everyone.
“The ECB had the merit of sparing Europe a very serious crisis. But in the eyes of a part of Germany there is a counter-indication that Schaeuble indicates with the frankness that distinguishes him: the purchases of securities have neutralized the most powerful weapon of pressure to guide the choices of the States. It's Draghi's fault, it's the thesis, the spread weapon no longer works. This is the main reason for Berlin's hostility towards Draghi: his policy has dealt a mortal blow to German strategy. In other words: first settle the accounts, then we can move forward on the road to mutualisation".
Put like this, a clash seems inevitable. How will it end?
“We have to prepare for a difficult and conflicting two-year period between now and 2019, the year in which Draghi's successor is chosen. We start a long confrontation up to a critical point in the hope that a turning point will emerge. Without forgetting the growing difficulties of the international situation from Brexit to the developments that Trump's policy will take sooner or later".
In this context it is difficult to imagine an Italian turning point. Or not?
“I would say impossible. Italy has essentially done its homework in recent years. If you look at the primary surplus, only Germany has done more than us. But the experience since the 1s, since Italy closed its accounts with a surplus before interest in the order of 2-XNUMX percentage points, shows that this recipe is insufficient to solve the problems. We are like a company with good profitability but which closes in the red due to the weight of financial charges”.
What is a possible therapy?
“In such a situation, a creditor bank proposes to restructure the debt while safeguarding the means of production that allow the company to sustain profitability. Instead, in the absence of a European policy, the attempt at Italian recovery takes place at the expense of investments, a circumstance which in turn causes a fall in productivity”.
Stepmother Europe, then.
“But Europe is necessary. Italy needs Europe more than anyone else. And I believe that the anti-euro rhetoric is now waning even if the populist wave, in such a situation, can still grow. The possible therapy remains the one suggested by Mario Monti at the time: separating investments from the calculation of expenditure parameters”.
On the contrary, a tightening is looming with the next stability law.
“This too is part of the conflict between different visions of Europe. Like the banking issue. The credit crisis in Italy is, net of possible unlawful conduct, a consequence of the economic crisis. The phenomenon has been remedied with capital increases that have required gigantic efforts. But if the economy doesn't restart, sooner or later the problem will come back”.
In short, once the party is over, there's nothing to be happy about.
