Giampaolo Galli, economist, former director general of Confindustria and currently a Pd deputy, tries to bring the bizarre ideas circulating in Parliament back to reality, fighting a battle not for the defense of particular interests, but against demagoguery and for a mature culture of the market , its functioning and the negative effects of the distortion of rules that the rest of the world quietly adopts.
“At the end of the day – says Galli – things are simpler than one would like to believe. In fact, Parliament wants to abolish compound interest by creating significant distortions. Suppose, in fact, that a bank lends a company 1000 Euros at an annual interest rate of 10%. At the end of the year, if the company wants to continue to keep the loan, it would have to pay 100 euros in interest. If he does not pay them, his debt to the bank would rise to 1100 Euros and therefore at the end of the second year he would have to pay 110 Euros in interest. In the third year, again in the case of capitalization of interest, the company would have to pay 121 euros. Now the cancellation of article 31 of the Guidi decree on competitiveness prevents the correct calculation of compound interest, giving an increasing advantage over time to companies that do not pay annually compared to those that do."
To be even clearer, examples can be given to calculate compound interest. To simplify the mathematical formula that underlies the calculation and give empirical evidence of the profound difference that exists between those who regularly pay interest and those who instead capitalise, an exemplary calculation can be made explicit in the following way: the company that does not pay the interest year by year, in the second year he will have to pay 210 (i.e. the 100 of the first year plus 110 of the second), in the third year he will have to pay 331 (i.e. the 100 plus 110 of the second year, plus 121 of the third). In this way it is clearly perceived that those who pay regularly year after year will have paid 300 Euros of interest in three years, while those who capitalize should pay 331. Therefore it is distorting to abolish by law these 31 Euros of difference between those who pay regularly and those who capitalize. It does not make economic sense and indeed discriminates between companies.
The interest-on-interest controversy is old enough, why is it coming back now? “It all started with the 2014 stability law where a paragraph, 629, was inserted with the intention of prohibiting the calculation of compound interest. But the rule was written in such an imprecise way that it was in fact unenforceable. At this point, Article 31 of the Guidi decree sought to bring clarity to the entire matter by prohibiting the calculation of interest on quarterly capitalisation, but allowing the calculation of compound interest on periods longer than one year, as is the case all over the world. But the Senate abolished the art. 31 and it would be good for the Chamber to remedy this error. Unfortunately, the poor economic culture and this kind of "Manzoni's squeals" which are nothing if not petty demagoguery, row against the possibility of finding a coherent norm with what happens in the rest of the world."
So what can happen now? “I hope things are evaluated correctly without the usual anti-banking hoopla which in fact leads to nothing effective. On the one hand, in fact, in the current system there would be an undue advantage for companies that do not pay interest annually with the result on the other hand of pushing the banks to make fewer and fewer credit openings on the current account, preferring to resort to other types of operations , such as fixed-term credit, which therefore oblige the debtor at the end of the established period to pay the amount borrowed, including interest". In short, a result opposite to what one would like to pursue. After all, the great Raffaele Mattioli, president of the Comit, said that a bank can also wait for the return of the loaned capital, but in no case can it do without collecting the annually due interest.
