Governments around the world have a hard time understanding the markets and often send confused and contradictory signals with the only effect of further increasing the hysteria of financial operators who flee frightened by any investment that may appear even hypothetically risky. A short circuit is being created which pushes finance more and more towards the abyss of default and the real economy towards stagnation or even recession.
The situation is certainly difficult, but if we don't panic, if the heads of government adopt rational behaviour, if they do not perch themselves on the defense of abstract theoretical principles or even worse on safeguarding their own personal prestige, the crisis can be quickly brought back under control and a new phase of recovery and development can begin. However, it will take time to complete the restoration but at least it will be possible to have a clear idea of the direction of travel and the goal to be reached. Otherwise we risk, as happened after the Wall Street crash of 29, that the wrong policies of governments and central banks drag the world towards a long and dramatic recession. First, we need to clarify what the markets want. Surely no one is asking countries with higher debt to cut it immediately and drastically. But big investors would like to see important measures capable of restarting growth based not on an increase in public spending but on the reorganization of the State in order to give confidence to the entrepreneurial forces to induce them to invest and grow. In other words, it is necessary to keep public expenditure under control aiming at a balanced budget, but to reorganize it internally in order to eliminate waste and inefficiencies and perhaps tax tax evaders and the rich a little more and wage-earners and businesses.
For Italy, this means that it is completely useless (and would even be harmful) to discuss measures such as an extraordinary property tax of 300 or 400 billion euros or even that, as has been done so far, bet all the cards on an increase in the taxation to eliminate the deficit, because without some convincing measures to relaunch development, these measures are not enough to change the opinion of investors and restore confidence.
But before talking about the Italian case, which in any case is at the moment the epicenter of the Euro crisis, we need to see what the international authorities should do to facilitate a détente on the markets. Unfortunately, in recent times summit after summit with the most varied compositions of ministers and central bankers has followed one another at close intervals, which however usually close with nothing done, throwing operators even more into uncertainty. The markets have shown that they appreciate more collaboration between the authorities of various states and more operational coordination. Last week's announcement by central banks around the world that they were willing to provide US dollar liquidity to banks, as well as last night's G20 announcement to provide all needed liquidity to the financial system, were welcomed.
So today the priority is to reassure the financial system and therefore savers, that no bank will fail due to lack of liquidity, which as Mediobanca CEO Nagel said two days ago, is the only real reason why banks they can go into crisis. Further steps in this direction would be needed by the ECB which continues to keep interest rates unnecessarily high when they are practically at zero all over the world. Above all, the European central bank should restore the medium-term financing operations of the banking system at fixed rates in order to relieve the system of the anxiety of having to refinance on the market on a weekly basis, without knowing if it will be possible to find the necessary money and at what price. Then we need to implement the European rescue fund both in terms of operations and as a financial endowment.
Finally, Greece. A pledge from both Europe and the IMF to lend a helping hand has been announced several times. Certainly the Greeks have so far only done a small part of what they promised and it is right that the creditors are breathing down their necks. But in any case it should be made clear that the Greek debt, even if it were to suffer some reduction, would not put any European bank at risk. In fact, these are losses that can be absorbed over a certain number of years without serious shocks. And so it would be good for politicians and bankers to stop launching exaggerated alarms on the soundness of European banks.
Finally there is sick Italy. We suffer from a particular credibility deficit, as Prof. Quadro Curzio in an interview on Firstonline. However, the laboriously launched maneuvers in July and August put the public finances on a path that tends towards balance in 2013. If the final objective is still uncertain, this depends on how the GDP will go and therefore to make it more solid and credible it is necessary to make a a real maneuver to support development, however, based on all those reforms which, as they say, come at no cost: liberalisations, privatisations, legislative simplifications or cuts in waste and modifications to pensions which can give a revenue which can be used to favor young people and disadvantaged categories of workers. Technically these are things that have already been known and studied for some time. But they won't be easy to do because they touch the power of large interest corporations, first of all that of the political caste which exercises its power above all through both national and local public companies. There remains the problem of the reputation of the Government and in particular of the Prime Minister and our Minister of the Economy. Today the credibility of these gentlemen is so low that even when they manage to do good things they don't pierce the curtain of jokes about Italy that dominate newspapers and TVs all over the world.
In short, they are in a negative spiral, so much so that communication also contributes to "maximizing the damage" by making us look worse than we actually are, thanks to a respectable production system and the desire to do something of many entrepreneurs. To recover you really need to have a wing shot and above all show greater management skills and greater seriousness.
