All the financial instability that the developed world is still struggling to get out of begins on August 9, 2007. It is since then that the explosion of the crisis, initially called subprime (an epithet that refers to a segment of mortgages for a few hundred billion dollars and which smacks more of prank than of catastrophe). That day interbank rates rise – the European overnight jumps from 4 to 4,6% – because the confidence among banks to lend money is vanishing. the sudden ones, massive central bank interventions to give liquidity to the interbank buffer the situation but do not resolve it. For months there was talk of turbulence (turmoil) but the reality was worse: since then nothing has been as before.
To describe most of the past few years it is more realistic to speak of a period of crisis punctuated by brief spells of financial stability, rather than stability occasionally interrupted by financial crises. As in a mad vortex, the crisis starts by major financial institutions in the United States but immediately hits heavily too banking systems in Europe. Then, in 2008, the vortex returns to the New World to break down Lehman Brothers and touch the peak of the banking crisis. Prompt rescue interventions by governments plug the gap, but they are not enough.
Thus, the vortex beats hard on the real economy destroying businesses and jobs on both sides of the Atlantic. While the emerging countries continue to grow on the margins of the whirlwind and the recovery, addicted to ultra-expansive monetary and fiscal policies, seems to have started even in the rich ones, in 2010 we realize that the recovery is too weak and the blows of the whirlwind have opened dangerous holes in public finances. At first the problem seems limited to some small peripheral countries of the Eurozone but then the vortex rebounds towards the larger EU countries and crashes again on the United States, which suffers the shame of the downgrading to sovereign debtor no longer above all suspicion .
The situation is becoming more and more complex with the convulsive whirlwind slamming everywhere, also calling into question the future of the euro. The innovative capabilities of the Draghi-led ECB make it possible to overcome the most critical phase in 2012 but the Eurozone economy is too weak to emerge from the stagnation and the construction of the Community institutions is still lagging behind. Also thanks to much more aggressive monetary and fiscal policies than in Europe, the United States seem to have regained growth but even this appears at times uncertain, to the point that the Tapering, announced at the beginning of 2013, only began to produce timid increases in the federal funds rate at the end of 2015.
In the meantime, misdeeds continue to emerge by major international financial institutions and the default of the Greece, for which the cute term was coined Grexit. Not to mention the winds of war blowing in areas not far from Europe and in other areas of the world or the clear signs of slowdown of the Chinese economy which have caused strong shocks of financial instability. To return to Europe, as if that weren't enough, in June 2016 there Brexit it has once again increased uncertainty and exacerbated financial volatility. And, overseas again, the Trump presidency it casts shadows on the free trade and economic and financial globalization that had shaped the world economy in recent decades. Initially the financial markets gave confidence, but the uncertainties of the Trump administration could change the scenario.
We are a long way from the era of the Great Moderation, when Bernanke argued that the world economy had entered a new era of prosperity. Only ten years have passed on the calendar but we are in another context, full of uncertainties about the future. And almost everyone wonders when this nightmare that has lasted for too many years will end. The vortex stops when the calm occurs or when the rules of the game say stop. A global leadership equal to the situation should establish the stop, scramble immediately to seriously re-regulate finance - so that it is no longer destabilizing - to negotiate plans for the recovery from global imbalances and excess debt, in which all parties assume a share of the burden and to prepare stimulus policies, especially by the less indebted countries, which restart the engines of the economy avoiding a prolonged phase of stagnation. This is the chance for the orderly transition from an American-driven world structure to a multipolar one. But, with Trump, the American leadership itself is shaken from within and, without widespread political consensus, globalization (and not just finance) is in serious danger of going haywire.
A decade after the beginning of the Great Crisis 2007-09, the economic recovery that has been underway for some time in the United States is also consolidating in Europe. Finally, there are some signs of recovery also in Italian and this will contribute to reducing the serious social hardship and, by reducing NPLs, to stabilize our banking system. But What will happen when the ECB starts raising interest rates? The financial fragilities soothed by the balm of Quantitative Easing will re-emerge.
In Italy, certainly, the never-resolved question of stabilizing will reappear the public debt/GDP ratio and bring it back to values not so much in line with the Maastricht Treaty (below 60%) but at least in a more comfortable zone (around 80%). Admonished by Brexit and Trump, the chancelleries of Berlin and Paris today seem aware that there is no risk of dispersing the essential good of the common European market. So, we will have maybe more tolerance from Brussels and Frankfurt. But will we have a suitable political and institutional context to really make the Bel Paese re-emerge from these ten complicated years?
