The financial crisis in Europe has eased and the situation appears to have improved. However, if Italy is to restore a growth perspective, there are problems that need to be tackled together and with extreme urgency. The government's objective in view of the six-month Italian presidency of the EU is to outline a framework of radical, but shareable and understandable reforms. These are the words of Prof. Vincenzo Visco who spoke to the Finance Commission of the Chamber of Deputies.
Visco proposes various and fundamental points to bring to the attention of the government: from the excessive liquidity implemented by the European Central Bank to the banking union; from the reversal of the economic policies adopted so far to the settlement of the national debt and the problem of tax competition between European countries.
“The enormous liquidity created by the monetary policy of the Fed and the other central banks and more recently the withdrawal of capital from some newly industrialized countries – explained the professor – have contributed to determining a partial convergence of interest rates in the euro area with the reduction of spreads, as well as a sustained growth of the European stock exchanges between 25 and 30%”.
However, difficulties remain and significant risks are still present. For example, the interventions to support countries in difficulty have resulted in the ESM, the ECB and the IMF providing loans and buying debt from countries such as Greece, Ireland, Portugal, Cyprus, Spain and Italy; moreover, the ECB and the national central banks have granted significant loans to the national banks of the various countries in crisis. “Consequently, if further debt restructuring interventions of these countries were to become necessary (which is not impossible in Greece or Cyprus) there would be immediate capital losses for the institutions that intervened in support of these countries, and therefore ultimately for the taxpayers of the countries directly or indirectly involved, which would be very indigestible especially for Germany".
The solution proposed by Visco is therefore a process of securitization of bank loans which could be provided as collateral to the ECB to obtain the necessary liquidity.
The banking union has been delayed over time as regards its entry into force, and moreover, according to Visco, it lacks the two fundamental characteristics of a real banking union: deposit insurance, and a centralized fund for the recapitalization of banks in crisis, necessary given the insufficiency of the ESM. “If the basic objective of a European banking union should be to break the vicious circle that has arisen between banks and the sovereign debts of the various countries, the policy followed in practice in recent years has gone in the opposite direction, as there has been a process of renationalization of sovereign debts massively purchased by national banks and used as collateral to obtain financing from the ECB”.
The increase in the money supply, therefore, did not benefit the real economy, but served to provide the banking system with liquidity and to avoid the collapse of the entire payment system which would have had catastrophic consequences for the economy of all the world. “On the other hand, public interventions to support demand would have been necessary – commented Visco – which, on the other hand, were rather lacking in all countries”.
The economic theories on the so-called "expansive contraction", also widespread in Italy, according to which a reduction in public spending (possibly accompanied by a reduction in taxes) causes an increase in growth, appear uncertain and not concrete. For which the professor suggests discussing the economic, political, and even juridical logic of the choices made in recent years, with the aim of promoting, albeit gradually, an inversion of the policies adopted so far.
Then there remains the problem of reconciling the repayment of debts with the economic recovery of the countries of the euro area. "In this perspective, since July 2010 - Visco said - I have put forward a proposal which in its final version envisages that the national debt of each country in the euro area, exceeding 60% of its GDP, be placed in a special fund which should issue 25-30 year bonds with the joint guarantee of the participating countries. The financing of the Fund would be ensured through the transfer of a share of the national tax revenue proportional to the share of the debt transferred".
It should be emphasized that the bonds issued by the Fund, while enjoying a collective guarantee, would not properly be Eurobonds because each country would have to independently finance its share of the debt until it was exhausted.
There is also the crux of tax competition between countries which causes revenue losses relating to income produced by the more mobile factors of production (profits, interest, etc.) which are inevitably compensated by the less mobile ones (labour, real estate). given the existing budgetary constraints. It is a process in which each country tries to behave as a potential tax haven towards the others, triggering a downward competitive process. "It would be in our country's interest - he concluded - to forcefully address the problem of limiting harmful tax competition in Europe and to ask for the start of a process of harmonization of corporate and tax matters relating to joint-stock companies".
