Mrs Merkel, in giving Berlusconi a good shout-out together with her colleague Sarkozy, has introduced, certainly not by chance, a new element by asking Italy to proceed rapidly, not only to contain the deficit and to re-launch development, but also a rapid debt relief. To the burden that Berlusconi has to face is added a new element on which the debate has so far been kept somewhat on the sidelines, apart from the proposals by Giuliano Amato and Pellegrino Capaldo for a patrimonial of 300 or 400 billion euros, which however is considered impracticable by most economists as well as, obviously, by all politicians.
It is unlikely that the Council of Ministers will be able to talk about it today, there is already so much iron on the fire that there will not be time to address such a complex subject. There are already many measures to strengthen the credibility of the objective of a balanced budget in 2013, and those, however complementary, necessary to strengthen development, and there is no harmony within the Government on their adoption that Berlusconi will have to I'm throwing all my remaining authority into something decent, so debt-relief actions will surely be postponed.
In fact, the two levels should not be confused. To improve the country's growth potential, it will be necessary to cut expenses, starting with those of politics, reform pensions and apply the recipes of the newly appointed Governor of the Bank of Italy Ignazio Visco presented in Parliament on 30 August. Already in this way the markets would probably show greater confidence in Italian debt leading to a reduction in the spread with the German bund. But this is not enough. The almost 1900 trillion of Italian debt, equal to 120 percent of GDP, must be reduced rapidly. As? The most recent proposal is the one presented by Andrea Monorchio, former accountant general of the State, and by prof. Guido Salerno Aletta.
“It is a matter of Italianising our debt – says Monorchio – thus removing it from the pressures of international finance. Naturally, the prerequisite for being able to attack the debt is to arrive with certainty at a balanced budget by reforming pensions, perhaps imposing more efficiency in healthcare, and above all reducing the costs of politics by eliminating too many levels of government and cutting of the army of bagmen and advisers who hang around politicians.” But by what means would it be possible to Italianize and reduce the debt? ” The first – explains prof. Salerno – is a system of the Cash & Kind type and consists of paying all public expenditure of a significant amount with a percentage between 5 and 10 percent in securities, perhaps at a lower rate than that currently imposed by the market. This has already partially happened in the past and has not given rise to major inconveniences, helping to lighten both the interest load and the Treasury's pressure on the market.”
But even more relevant is a second proposal. It consists in asking citizens who own property for a loan (voluntary or forced, the options are open) equal to approximately 10 percent of the value of the property. The provision of funds could be made by the citizens at the banks by putting a limited mortgage on the value of the property itself. In turn, the banks could discount these mortgages secured by citizens' properties at the ECB and thus obtain a rate close to the discount rate.
“In short, the State finances itself at much lower rates and also transfers foreign debt into domestic debt. If this operation is done with skill - concludes Monorchio - the saving of the cost of debt which now weighs on the public budget by almost 80 billion euros a year, would allow us to reduce our debt to 60 percent in twenty years, as requested from Europe. Citizens would still have negotiable government bonds, which have a yield, albeit modest, and which in any case will be repaid on maturity. So it's not a question of a tax that, once paid, never comes back, but of a way to use private real estate assets to guarantee our public debt, thus obtaining more confidence on the markets and with the community authorities”.
It is a proposal that should be evaluated in all its technical aspects. But the Government appears distracted. He probably thinks above all about how to save the spaces of power and management of politics. It doesn't abolish the provinces, it doesn't sell public companies, especially local ones, it doesn't reduce the number of parliamentarians and their related bagmen. It is clear that a proposal like that of Monorchio and Salerno can only be taken into consideration after the political system has given sufficient guarantees that it wants to eliminate the excess operating costs that are strangling the country.
