The German government's long campaign to impose stricter fiscal discipline on euro area countries has not been bloodless. It has cost the citizens of Europe and beyond a great deal. Less income and less employment than expected months ago, risk of recession (now certain for Italy) with depressive effects also on the United States economy and, therefore, on the world economy.
Now, with last week's Brussels summit, the German Chancellor got what she wanted: stricter parameters for public budgets with commissioning for defaulting governments. But the campaign does not seem over yet because Angela Merkel was keen to declare, at the conclusion of the summit, that "a step forward was taken but the road is still long ... there is no immediate solution to the crisis". And yesterday you once again wanted to underline your position, which is already known, against increasing the endowment of the ESM, the state-saving fund that will take the place of the current EFSF. Obviously, the markets have taken note of it. The exchange rate between the euro and the dollar fell to its lowest level in the last two months. The spread between 10-year BTPs and Bunds on Monday widened to over 470 points, yesterday it closed at 461. It was below 200 in June.
Thus a country like Italy, officially appreciated by the European Council in its communiqué of 9 December for its measures to contain the public deficit, today finds itself having to pay much more for the placement of its Treasury bonds than when, before the In the summer, the deficit was greater, a balanced budget was not foreseen in the Constitution and there was a government that certainly did not offer the guarantees of the current one.
Why does the German government want to prolong this senseless situation not only for Italy but also for Europe? The fact is that it continues to count on the sanction of the spreads expressed by the market as a stimulus to put the accounts in order, to make sure that we are really moving towards compliance with the Stability Pact as strengthened by the European Council of 9 December which envisages a lowering of the threshold for excessive deficits. But pulling too hard can be counterproductive. Because the crisis of confidence that has attacked the euro does not come from public deficits but from the ability to repay the debt that has been put into question, because of Greece, by Germany itself. And this crisis is not resolved, but worsens, loading public debts with higher interest and forcing the adoption of further restrictive measures which further worsen the economy's prospects. What speculators like the most, and which attracts them like bees to honey, is the start of a perverse spiral between recession and public deficits. An outlet in the costly and protracted campaign to impose German discipline on Europe that would ultimately be disastrous for Germany itself.
