It is known that in the electoral campaign everyone pulls the blanket on their side and it is difficult to orientate. Therefore, a few reliable friends are precious, so as not to be fooled. Luckily for me, the innkeeper near the house knows how to do the accounts (and how!) and it would be ungenerous not to make them available to everyone.
In a moment of freedom, the innkeeper sits down at my table and tells me that he has seen Berlusconi on TV, at Gruber's, who, in his opinion, was still saying inaccurate things about the spread, blessed spread! He begins to write on the yellow sheet: (0,0575 – 0,0280) = 0,0295. And therefore: 0,0295 x 2.000 billion = 59 billion. He then explains to me that 0,0575 was the spread when Monti was called to save Italy while 0,0280 is the value of the spread these days and, therefore, 0,0295 is how much Italy is starting to save in interest on its public debt. Therefore, he tells me, multiplying 0,0295 by 2.000 billion (roughly the size of our national public debt) results in savings of 59 billion euros when fully operational.
The breadth of those figures, equal to a financial mega, stuns me. I object that that spread refers to ten-year BTPs but this type of bond represents only a small part of the Italian public debt and, furthermore, it takes time for the benefits to manifest themselves with the new issues. And he replies that, even if they weren't exactly 59, it is still a question of a few tens of billions of euros in savings.
But, I reply: maybe it's not all thanks to Monti. And he, well documented: it is true that the European Central Bank (ECB) played an important role, with its injections of liquidity and the announcement last July of potentially unlimited interventions in support of countries under speculative attack. However, he continues, there are two considerations. First, those interventions by the ECB would not have taken place if an important country like Italy had not now proved to be reliable in the eyes of strong European partners. And, to support Monti's credit in this, he reminds me of the smiles Merkel and Sarkozy exchanged when, in a press conference in October 2011, a journalist asked them if Berlusconi was reliable. Second, he always says, we must also look at Spain, the other major Euro country under attack: while previously Spain paid interest rates on ten-year bonds at least 0,5 percentage points higher than the Italian ones, in the summer fiery autumn of 2011, Italian rates had risen to almost a percentage point above the Spanish ones and it was only after Monti's arrival that the Italian rates returned well below the Iberian ones. In a very witty way he points out to me that the ECB effect was the same for Italy and Spain. Therefore, he concludes, the credibility restored to Italy by Monti was decisive for lowering Italian interest rates both directly - the comparison with Spain - and indirectly, by convincing the strong Euro partners who, with the recovered reliability of Italy, the green light could have been given to the interventions of the ECB.
Finding those arguments convincing, for the sake of debate, I try to cast some shadows on the projects enunciated by Monti for the future, now that he has "gone into politics". In particular, I object that perhaps Monti is not very credible when he announces that, if he wins the elections, the tax incidence will drop by at least 1 percentage point, he who has only increased taxes in his first year in government. The innkeeper doesn't give up. First he told me that the tax burden had continued to grow (e.g. from 40,5 to 41% in 2002 and from 42,6 to 43% in 2009) with the last two governments Berlusconi who, he reminds me, had always promised to reduce it. Then he takes the pen back and writes again on the yellow sheet: (0,0280 – 0,0100) = 0,0180. And again: 0,0180 x 2.000 billion = 36 billion. He explains to me that 0,0100 was the level of the spread before Italy entered the eye of the speculation storm. In his opinion, if Monti were confirmed at the helm of the country, the effect of Italy's regained international credibility would become permanent and, therefore, it is imagined that interest rates would fall further, ensuring other large savings in interest on the public debt and thus contributing to finance the tax cuts that Italians, and also his trattoria, badly need. Finally, he points out to me that if the spread returns to pre-crisis levels, the banks will return to disburse mortgages and that dangerous negative spiral in house prices will stop.
I get up staggering not because of the wine, which I haven't drunk, but because of the economics lesson the innkeeper has given me. At his place you eat well, the prices are reasonable and the environment is welcoming. What if this recipe that he served up on the yellow sheet was also the right one?
