A ghost is haunting Europe: debt. It affects governments, it seeps into bank accounts, it corrodes trust. A modern plague that “until now has only been dealt with with palliatives or plasters, case by case, in the illusion that it could be isolated. On the contrary, a system recipe is urgently needed". This is what Cinzia Alcidi says, a researcher at Cerps in Brussels, a close collaborator of Daniel Gros, one of the economists who was the first to raise the alarm about the capital "gap" of the big European banks.
What do you mean by system recipe?
In recent years, attempts have been made to address individual crisis situations without going to the root of the problem. In the meantime, the amount of debt has grown and branched out, passing from public finance to the big banks and vice versa. Today, financial stability itself is at risk. When we speak of French banks we are dealing with institutions larger than individual states.
But without sufficient capital…
In recent years the banks have grown much faster than the necessary capital endowments. Furthermore, their balance sheets have swelled with government bonds resulting from the growing indebtedness of the countries. The close link between banks and states is such that we are faced, when speaking of public debt and credit, with two sides of the same problem.
At least in this the Italian banks are better off.
The more conservative model of Italian companies has proved to be more suitable for dealing with the crisis. But in the Italian case the strict dependence on the portfolio of domestic government bonds weighs heavily. For this reason, when the crisis accelerated, the banks paid a very high price: in July, Italian banks were literally cut off from the interbank circuit. Nobody lent a euro to Italian institutions anymore, without any distinction or consideration on the state of health of the bank. Only the ECB has avoided devastating consequences.
Since then the situation has certainly not improved judging by the spread between Btp and Bund. Or not?
It's not just a financial problem. Generally, when a large company goes into debt on the capital market, a differential is applied that is at least equal to that of the country to which it belongs. In other words, Italian companies today have a "gap" of four abundant points compared to German ones.
How does it come out?
Let's say that in July the crisis entered a new phase. Markets took note that the chances of bailing out Greece were very slim. Therefore the community as a whole was put under scrutiny. In other words, the markets have targeted a country of systemic importance, with a high public debt. From this point of view, Italy is a very important element. Europe as such cannot do without Italy. But there is a but.
That?
Italy is too big to be saved by the rest of Europe. So she has to save herself. Along with the others of course.
Need another maneuver?
It is not a question of new measures, but of credibility. Before thinking of new solutions, it would be necessary to translate into deeds all that has already been announced. Lack of credibility makes the situation very difficult to handle.
In your opinion, are there any new moves in sight within the Community?
It seems to me that, as usual, attention is focused on the most imminent deadline: the vote of the German Parliament on the bailout fund on 29 September. Further, for now, do not look.
Looking forward to the next patch…
