Say yes to the 36 billion ESM to invest in the health system and thus overcome the ideological prejudices that risk damaging Italy. The request, addressed to the Government and Parliament, is contained in a manifesto signed by 26 economists (including Ernesto Auci, president of FIRSTonline). Authoritative signatures - from Innocenzo Cipolletta to Lorenzo Bini Smaghi, from Marcello Messori to Pier Carlo Padoan, Franco Bassanini, Micossi, Macchiati, Pera and others - intend to draw the attention of public opinion and put pressure on that part of the majority - or rather , of the 5 Star Movement – still against the use of the State-saving fund for reasons that no longer have anything to do with the current situation, since the methods of accessing the MES have been radically changed. The appeal also responds to the three arguments most used by those who oppose the use of the Fund.
Here is the complete text and the complete list of economists and commentators who have promoted it.
“Too much has been said and written inaccuracies on European funds and the ESM in particular. The European Union is making a great effort of solidarity, also because all countries have understood that they benefit from the recovery and prosperity of the others. Brussels has prepared an extensive intervention program to help member countries cope with the Coronavirus crisis. Each program has specific objectives and the disbursement of funds is linked to specific conditions and controls. For example, the resources of the Next Generation US (500 billion in grants and 250 billion in loans) will have to be used to carry out profound reforms in all countries, capable of increasing resistance and economic and social resilience to extreme events (not just health), as part of a common project European Union and under the supervision of the Commission. However, the NGEU funds will not be available until the development plans have been drawn up and the reforms that will accompany them or at least their start have been defined. Reforms also of the "development model", with new impetus to green new deal, the ecological and digital transition, the fight against inequalities, as well as overcoming productivity bottlenecks to resume long-term sustainable growth.
Interventions for health, in a broad sense, which are urgent and require funds that can be spent immediately, can be financed by borrowing on one's own account, at the current market rate, or using the ESM, at which a special credit line, called ESM Pandemic Crisis Support. Contrary to what was envisaged for the "ordinary" credit lines of the ESM - intended for Eurozone countries that are unable to refinance themselves on the market at bearable rates and conditioned on the acceptance of a "macroeconomic adjustment programme" - the funds of the Pandemic Crisis Support must be used to support the direct and indirect financing of health care costs and for the costs due to the prevention and treatment of diseases caused by Covid-19. This is the only condition, which replaces any other, in addition of course to the one that the money must be returned on expiry. These conditions cannot be changed after the disbursement of the funds, as per the agreement reached between the member countries of the ESM (and it should also be clear from the logic, according to which it makes no sense for a creditor to tighten the conditions at the time of repayment).
Having clarified the issue of conditions, the choice between using and not using ESM funding should look only at convenience: Is it more expensive to borrow money from the ESM or to issue national debt of the same amount? If Italy were to use the entire credit line (about 36 billion) on the 10-year maturity, given the extremely low rate, we would have savings of about 500 million a year for 10 yearsa non-negligible figure. However, some objections survive among Italian political forces, both government and opposition, based on the following arguments.
1) No other country, except perhaps Cyprus, is currently considering applying. The answer to this objection is that no other country has a spread as high as ours: on the 178-year basis we are at 95 basis points, while Spain and Portugal have dropped to 30. Greece has a spread close to ours, but has no reason to access the ESM because this year it has almost no need to resort to the market and the existing debt benefits from very long maturities (40 and even XNUMX years) precisely because it was contracted with the ESM (or with its predecessor, the ESFS).
2) ESM credits are privileged and therefore tend to increase the cost of the rest of the debt. Conversely, the credit of an international institution is a sign of trust in a country and even tends to have a catalytic effect of private investment. Especially since the ESM, like the International Monetary Fund, is a stable investor; it does not pour its securities on the market in the event of a crisis. Finally, even the securities purchased by the ECB with the various Quantitative Easing programs represent senior debt, because the ECB would not participate in a possible debt restructuring of a country in crisis and the securities held by the European system of central banks represent a share of the Italian GDP (17%) much higher than that represented by the ESM-health, i.e. 2% if it were used to the maximum.
3) There would be a negative stigma effect on Italyespecially if no other major country applies. It can be observed that with the use of the ESM little or nothing would change in investors' perception of Italy: on the contrary, the stigma could even be reduced if access to the ESM were interpreted as the fact that the Italian government makes its choices in a pragmatic way and not on the basis of ideological prejudices.
Finally, the ESM is not a trap that will affect the future of our children and grandchildren. Which, however, already have a (public) debt on their shoulders that travels towards 160% of GDP. The Italian government has done a good job so far at the negotiating tables, obtaining results that in many ways exceeded expectations. He can't throw his work overboard by forgoing the use of painstakingly negotiated lines of credit risking agreeing with those northern countries who are skeptical of Italy's ability to make good use of EU funds, while it should take into account that diversifying sources of financing is a rule to be followed by any wise debtor”.
The signatories of the appeal:
Albert Pera
Rocco Cangelosi
Salvatore Toriello
Vincent Camporini
Virgil Dastoli
Alfredo Macchiati
Andrea Boyani
Cesare Valli
Claudius DeVincenti
Enrico Giovannini
Ernesto Auci
Ferdinando Nelli Feroci
Franco Bassanini
Stephen Micossi
Giampiero Massolo
Giampaolo Galli
Gian Luigi Tosato
Joseph Pennisi
Glory Bartoli
Innocent Cipolletta
Lorenzo Bini Smaghi
Marcellus Messori
Maurice Melani
Michael Bagella
Piercarlo Padoan
Riccardo Patern ò
Riccardo Perissich
