“The outcome of the English referendum reinforces the sensation that unpleasant events, full of serious consequences for all citizens, are accumulating on Europe's head, and which we cannot stop for now. We can do it, but we need a new commitment from governments and the ruling classes to give a new direction to events". Fabrizio Saccomanni, former general manager of the Bank of Italy and minister of the economy of the Letta government, is disappointed with the direction that Europe is taking. He is concerned about the unwillingness to react that he sees in various countries. But he is not pessimistic. There is a way to consolidate the advantages brought by the EU. It takes lucidity and courage to implement it. Here is his interview with FIRSTonline.
The financial markets experienced a black day on Friday. Is this the beginning of a new serious international crisis?
“The reactions of the stock exchanges and exchange rates had been foreseen and the monetary instruments were prepared to deal with them. It is an emotional reaction which on the one hand reacts to the uncertainty that the British Referendum, moreover with an unexpected outcome, spreads on the markets, and on the other leaves a wide gap of indeterminacy on the possible future of the entire European construction. If doubts about the future of the Euro and of Europe as a whole spread among investors, then it is obvious that few will want to take positions in our currency or make investments in our countries”.
Many traders think that the worst consequences in the short term are for Great Britain.
“Great Britain is a country that has a robust trade deficit which is compensated by the receipts of capital that arrive from all over the world and which are managed by the banks of the City. The devaluation of the pound will therefore not be able to give a great boost to exports because local manufacturing is modest in size, while it could damage the inflow of capital given that a weak currency constantly at risk of devaluation is certainly not attractive to investors. But what is most worrying are the medium-long term consequences”.
More from a political point of view or from an economic point of view?
“The greatest concern is the risk of political contagion in the rest of Europe. Next year there will be elections in France and Germany. And then there are countries like Spain or the Netherlands which could be tempted to follow the English path and try to recover autonomy in the management of their currency and the state budget in the belief that in this way it is possible to quickly emerge from the crisis and satisfy pressing social needs. But a wrong and dangerous idea. We have already seen in the past what it means to try to manage the development of one's country through the continuous devaluation of the exchange rate, that is to the detriment of one's neighbors who would certainly be forced to react. Devaluating and getting into debt can provide some relief in the short term, but then, and this is getting closer and closer, the problems come home to roost. The greater debt would lead to higher interest payments, inflation would harm the poorest classes and those with fixed incomes, there would be no credit either for private individuals or for productive investments. Not to mention that from a political point of view, the return of nationalisms could act as a detonator for even more serious conflicts”.
It cannot be denied that Europe has made many mistakes in managing the crisis and that the Brussels institutions do not meet with much consensus among the citizens of all countries.
“At the moment there is considerable disaffection with Europe in public opinion, often pushed by politicians who do not want to assume their responsibilities. The advantages that European integration has brought to all countries in terms of market expansion and opportunities are underestimated. For Italy, for example, the benefit in terms of interest rate reductions that came with joining the Euro was enormous. Then whether we have used it well or badly is a different matter. As far as crisis management is concerned, it is certain that there have been mistakes and delays. Alongside recovery, there has been a lack of a growth strategy capable of giving European citizens a sense of the direction in which they wanted to go. The European authorities have not been able to manage the phenomenon of immigration in order to broaden the reception but also satisfy the needs of security and protection of their citizens. We have not been able to develop a growth strategy based on innovative ideas regarding training, research and innovation, the mobility of people from one job to another. Even the Juncker plan, in addition to being modest in size, in fact does not innovate in the method of selecting investments that remain linked to national projects. No progress has been made to build intra-European networks to develop a single energy market etc”.
So we are faced with a dramatic crossroads. Either a progressive disarticulation of the European construction begins and there is a return to a fragmentation into countries or even regions within countries (think of Scotland), or a decisive step forward is taken towards the construction of a real federal government equipped of truly incisive fiscal powers and external representation.
“There are no other alternatives. Going back is the most disruptive and highly risky way for the citizens themselves. Must go on. I am aware that the political situation in various countries is not favorable for giving a decisive push towards federalism. However, it would be appropriate to start giving some clear signals on the direction we want to take, perhaps starting to manage the issue of migrants with European funds, raised on the markets directly from Brussels".
Europe has its responsibilities. There is an excess of regulation that sometimes borders on the ridiculous, such as the length of carrots. But even Great Britain in recent years has acted more as a brake than as a stimulus towards the evolution of a European construction that is more functional to the citizens' needs for growth and freedom.
“The EU is certainly in crisis. However, sometimes faults are attributed to it that it does not have. For example, in many cases it must be said that the Commission only has the power to make proposals and that the decisions are then adopted by the heads of government and that often these are protectionist measures, that is, they tend to defend European products from extra-Community competition. As far as England is concerned, I am rather angry with our English friends who in recent years have always hindered the creation of structures capable of managing and controlling markets which must be free, of course, but equipped with rules and controls, which ensure a correct and transparent functioning. Great Britain has always been very ambiguous, especially careful not to accept rules that could damage their financial system. The result of this myopia is now there for all to see. English, first".
