"Exiting the euro is not convenient for anyone" is the title of a long interview granted before the European summit in Brussels by the former CEO of Unicredit, Alessandro Profumo. If unfortunately Italy goes bankrupt "it would happen - says Profumo answering the first question - that we leave the euro, the single currency collapses and the project of European integration suffers a brutal setback, going back a couple of generations" and the competition between countries would start again "to the sound of competitive devaluations" with the relaunch of inflation and serious repercussions on social cohesion. Furthermore, "the brutal devaluation following the abandonment of the single currency - estimates range between 40 and 50% - would cause a sharp depreciation of public and private assets, especially real estate" with recessionary effects and serious damage to families, businesses and the State.
To avert such disastrous scenarios Italy and Europe need to do their part and the Monti government gives priority, according to Profumo, to "structural reforms, from pensions to the labor market" but without losing sight of the fight tax evasion and also resorting to assets, "which cannot cover the entire adjustment but whose contribution should be more than symbolic".
Profumo then hopes that, to help bring the euro out of the crisis, the ECB will be a "lender of last resort" but "this requires a leap in the (European) integration process, from the economic to the political sphere".
As for the banks, “their main responsibility was to give life to transnational groups that made the traditional political and control structures, which remained “calibrated” on a national dimension, obsolete and inadequate. It is difficult to say whether this evolution has been, on the whole, a good thing or a bad thing: as a player personally involved, I lean towards the first hypothesis, because internationalization has increased the size of banking groups and has put them in a position to disburse credit to businesses and governments at a difficult time. Today - adds Profumo - the problem for banks is liquidity: the large banking groups collect short-term liabilities and employ longer-term assets, thus offsetting the liabilities. But if, as in this phase, the maturing liabilities precede the assets, a budget shortfall is created which obliges the institution to recapitalise”. “Since the collapse of Lehman Brothers, supervisors have focused almost exclusively on banks' capital requirements, neglecting the time lag between assets and liabilities”. Downsizing is the main risk that - in the opinion of the former number one of Unicredit - the banks run in this phase.
Preview of Limes 6/11 “To the war of the euro”
