Professor Amilcare Puviani wrote in his 1903 work, "Theory of financial illusion" (translated into German from 1960), with reference to the public budget that "the budget says much more or much less, as you like. It remains an impenetrable Sphinx to the great masses of the Chamber, to those masses who vote for laws, who vote for expenses, who vote for revenues"
What is certain is that when Professor Puviani wrote all of this, he did not imagine that the "impenetrable Sphinx" would have moved, after more than a century, from ministerial bureaucracies to today's yellow-green government. Government which, as of December 13, has yet to prepare the budget to be submitted to the Chambers and to the European Commission: bodies for some time still astonished by the "impenetrable Sphinx which says as much or as little as it likes". Just think of the changing composition of the maneuver depending on whether the Sphinx is addressing "the people not to be betrayed" who are promised more spending or the European Commission which too should not be betrayed by equally promising less spending.
In the face of such a Sphinx, it is striking that, on the occasion of Savings Day on 31 October last, the Governor of the Bank of Italy Ignazio Visco denounced both uncertainty about the orientation of fiscal policies contributes to the increase in the risk premium on government bonds, whether such an increase in the risk premium on public debt produces capital losses which in particular worsen the financial position of banks holders of around 40-45 per cent of the stock of Italian public debt. But the Sphinx remained mute and impenetrable about it.
Later, in the Bank of Italy's report on financial stability at the end of November, it was once again underlined both that the process of strengthening banks' balance sheets is held back by tensions on the Italian sovereign debt market, and that the decline in the quotations of government bonds has determined a reduction in capital and liquidity reserves and an increase in the cost of wholesale funding, and finally that the sharp decline in intermediaries' share prices caused a marked increase in the cost of capital. The report concluded that, if the tensions in the government bond market were to continue, the repercussions on banks could be significant, especially for some medium and small-sized intermediaries.
Add that it continues the decline in bond funding and that in the next two years bank bonds for 110 billion will mature and that the weight of bonds on Italian banks' funding is 10,2 per cent, compared to 13,7 and 16,4 per cent for German intermediaries and French, respectively. These are data which, in the opinion of the writer, attest to a reduced investor confidence in the capital stability of Italian banks burdened by the stock of public debt they hold on their balance sheets, compared to German and French intermediaries. Not surprisingly, French public debt is still below 100 percent of GDP (a percentage that Italy reached in 1990 and has since grown to 130 percent) and the spread with the German Bund is in the order of fifty basis points: one fifth or one sixth of the Italian one.
In the month of July I wrote on Firstonline that the Sphinx's indifference to the trend of the spread and public debt as a percentage of GDP risked leading to a situation of no return which would have required bringing gold to the homeland to Italian savers. Today the Sphinx's indifference to the highest spread in Europe and its effects on the stability of the banking system, the love for the managing state shown in the Alitalia case, the misplaced temptation to bring Cassa depositi e prestiti to behave like the IRI at the time of the bank bailouts, the never-concealed threat to strong powers identified with the banks, the hunger for jobs to fill, make me ask the following question: if, denying the oracles of the Sphinx, a new crisis of the real economy associated with that of sovereign debt, this time it will be the banking industry called upon to bring gold to the country with the consolidation of the stock of sovereign debt that the banks hold on their balance sheets, with the consequent and inevitable nationalization of the banking system itself? Nothing new, it's happened before.
