The diagnosis is clear: “At the heart of the crisis today there are growing doubts on the part of international investors on the cohesion of governments in directing the reform of European governance, and on the ability to ensure the very stability of the monetary union”. The prognosis is equally punctual: "In the immediate future what is needed above all are converging demonstrations on the unshakable will to preserve the single currency".
Il Governor of the Bank of Italy Ignazio Visco in his first Final Remarks to the participants' Assembly he chose a dry style, concentrating attention on issues that fall within his closest competence (politics, monetary, supervisory and banking system) with a broader focus on Europe in the belief that some of the problems, including Italian ones, can find a solution only at European level, even if, of course, there is no shortage of severe reminders of the things that we have not done for so many years and which now need to be completed after the promising start of the recovery decisions adopted by the Government Mountains
The crisis is like a dragon with a thousand heads. When you cut one, you don't have time to breathe a sigh of relief before another one appears, even more terrible and fearsome than the first. This is due to the delays and inadequacy of the decisions taken in European politics, so that even when individual states implement rigorous policies for the consolidation of public finances and structural reforms capable of increasing the competitiveness of the economic system in the medium term, the confidence of operators are late in manifesting themselves, thus risking frustrating the efforts made. Referring indirectly to Italy, for example, Visco clearly states that the current yield differentials on government bonds (the spreads) do not seem to take into account what has been done, thus fueling further imbalances, putting financial stability at risk and ultimately creating serious obstacles on the road to growth. But the Governor goes further by stating that if governments, the European authorities and the ECB itself were to positively assess the progress made by countries in difficulty both in terms of financial consolidation and structural reforms, they should make an active commitment to correctly orient market valuations. And this analysis is in full harmony with what Mario Monti said today at a conference in Brussels.
It is not a matter of easing budgetary rigor, as unfortunately many Italian politicians are asking, causing serious damage to our fragile credibility, but of making some existing European instruments work better, such as the ESM bailout fund which should be able to intervene directly in the capital of banks, or creating new ones such as the European guarantee mechanism on bank deposits in order to reassure savers, prevent panic and capital flight. The immediate launch of joint and co-financed investment projects would also be important and finally the creation of a fund in which to transfer sovereign debts beyond a certain threshold to be repaid in well-defined times and ways, thus creating an initial nucleus of fiscal union which must however be based on well-defined rules, powers of control and intervention. Visco does not neglect the objection that could come from the Germans and other "virtuous" countries, according to which similar community rescue mechanisms could stimulate "the moral hazard of those who, relying on the help of others, would be led to persevere in bad policies of the past". But this can be avoided precisely by rules that require compliance with the commitments agreed on the basis of "ambitious but at the same time realistic" programs.
It is a technically complex reasoning but whose deep meaning is quite simple. Since there is no European federal state that can compensate internally for regional imbalances, on the one hand a demonstration of a strong political will based on the adoption of the measures described above is needed, and on the other the consequent immediate activation of an intervention by the Central Bank European Union to fill temporary gaps and to maintain financial stability. But time is running out: clear signals must come from the summit of heads of government scheduled for the end of June, therefore after the Greek and French elections. Further postponements could be interpreted by the markets as a new signal of the unsustainability of the Euro with the consequences that can be imagined.
Connected to this cornerstone of Community policy, Visco pays particular attention to the banking system and the Italian situation. On the banks, the Governor's analysis is very in-depth, emphasizing on the one hand the solidity of the Italian system also thanks to the strict rules applied by the Supervisory Authority on the calculation of risk-weighted assets which impose higher capital requirements on Italian banks, and on the other calling the banks themselves to the need to cut costs and to strive for greater operational efficiency also by reviewing the overabundant network of branches. Visco reserves a real censure to the bankers for the failure to streamline the corporate structure, with the consequence that the top 10 Italian banking groups have 1136 positions, including presidents and directors, when 2-300 would be enough. "These assets, costly in themselves, are not justified - says Visco - by the professional skills necessary for effective management". Finally, on the banks, the Governor speaks out against the idea that also circulates among politicians and the very active people of the web, that the banks should be nationalised. As we have already experienced in our recent past, public interventions aimed at limiting the entrepreneurial autonomy of banks involve higher intermediation costs and widespread distortions in the allocation of financial resources.
As for Italy the Governor's message is above all aimed at supporting the need to endure this period of sacrifices, strong but still less than those that a default would have imposed on us, in the certainty that only in this way will we be able to resume a path of growth and ensure jobs for all, including young people. With the introduction of the Euro we have had a decade of low rates and stable prices, which are the foundations on which to base balanced development. We didn't take advantage of it. Now we have to pay the bill with a tax burden that is certainly too high and which will therefore have to be temporary. Therefore it is necessary to move on to a decisive policy of spending cuts and the sale of public assets. On this second hypothesis, Visco appears on the one hand cautious and on the other critical of the scarce commitment that the current government also seems to put into this fundamental chapter of the overall reorganization of the public presence in the economy.
As for the structural reforms essential to raise the development potential of our economy, they must be pursued with tenacity even if by their nature, cannot give short-term results. Those already done are a good start but there is a lack of incisive interventions on education, justice and health as well as on the overall institutional structure (Municipalities, Provinces, Regions, Parliament).
Much will depend on Europe. But we will not be able to expect rescue from others, and in order to return to growth we will still have to roll up our sleeves and face the great changes that are being imposed on us by a rapidly evolving world that does not allow anyone to continue to enjoy old annuities. The goal is not very close but we must be able to see it clearly. And this task, after the technical government phase, will be up to the political forces. The current ones do not seem capable of restoring concrete hope to the country. Will new ones arise before the 2013 elections? Ernesto Auci
