On the occasion of appointment as Secretary of the Treasury di Giovanni Tria, up to now dean of the Faculty of Economics of the University of Rome Tor Vergata and president of the National School of Administration, we re-propose a long speech signed by the same Professor on FIRSTonline on 6 March 2017.
In the article, entitled "Overcoming the taboo of monetizing the deficit to save the euro”, the new minister summarizes his critical positions on the general system of European economic policy, however clarifying that his ideas have nothing Eurosceptic about. In particular, Tria argues that to relaunch the euro and the EU it is necessary to put in place a major public investment programme, much more ambitious than the so-called "Juncker Plan". The program, according to the Professor, should go deficit funded through new fiscal stimulus covered by money creation (in this sense Tria speaks of "monetarization of a part of the deficit"), in order to reactivate internal demand without raising public debts, which would create further distrust of their sustainability.
Tria writes:
A large part of the Eurozone and certainly Italy needs a fiscal stimulus of much larger dimensions than those under discussion in the rosiest of interpretations of flexibility. It is necessary that the "whatever it takes" is extended from monetary policy to fiscal policy. Fiscal stimulus must, however, consist of substantial public deficit investment programs.
Alongside the generation of new deficits, Tria argues, it would be necessary to maintain a structural primary surplus through the control of current expenditure, thus embarking on the path of constant debt reduction.
In short, the aim would be to bring down the debt/GDP ratio acting on both the numerator and the denominator, i.e. reducing nominal debt through the primary surplus (net of monetary financing) and at the same time stimulating real GDP growth through the leverage of public investment.
Tria therefore prevents the protests of the Maastricht orthodox by emphasizing that precisely to save the single currency it is necessary to rethink its rules:
It is hoped that the objections to this policy will not be reduced to the observation that the current rules do not allow it, because by now it is established that the current rules, without a "whatever it takes" that is applied simultaneously to fiscal as well as monetary policy, they lead to European dissolution and only fuel proposals, of various kinds, to abandon the euro.
Read the full article by Professor Tria.
