THEescalation in Ukraine it has plunged the European economy back into a climate of considerable uncertainty. European stocks, between profit-taking and outright fear of war, lost about 2% last week. «Concern had already caused damage to the markets, now the escalation of tensions risks having serious effects on the recovery. To date, no one is even able to make precise forecasts on Russia's attitude towards gas supplies», he observes from Paris Fabrizio Pagani, chief economist of the investment company Muzinich, professor at Sciences Po and president of the think tank "M&M" (Minima Moralia) and former head of the Technical Secretariat of the MEF.
How are markets pricing in tension?
“Energy prices are already skyrocketing. We also risk a new one blaze on raw materials and on metals. Russia is also a producer of rare metals, which are essential for some sectors of industry. The risk is also that of finding the prices of agricultural commodities, such as wheat, even more inflated. There are also objective difficulties in quantifying the effects of Western, American and European sanctions. A real collapse of trade with Russia cannot be ruled out».
Is there a link between war scenarios and the management of the Italian public debt? Could the spread with a war at 2.500 km scare us again?
«I would distinguish between greater volatility expected in the coming weeks and a more general scenario that comes instead from monetary policies of normalization and interest rate increases. In any case, Italy is not a problem for today's markets. With growth estimated at 4% we have a good protective umbrella. Even in the medium term, if we were able to maintain growth around 2%, accompanied by inflation around the ECB's target, there would be no problems with the sustainability of our debt".
As long as Mario Draghi is at Palazzo Chigi, we sleep peacefully.
«Yes, but the continuity of policies is essential for a large country. If we continue to follow those of the Draghi government there will be no problems on this front".
It must be said that the GDP is partly inflated also by the current inflationary contingency. However, on the corporate side this dynamic, especially on the energy front, could be very dangerous.
«Current prices have already incorporated, at least in part, geopolitical tensions. Leaving aside the energy question, it is a two-sided inflation, different in the individual economies of the world. In the USA there is a dynamic linked to internal demand which has been strongly sustained in the last two years, in other places it is linked more to the supply side and to the many bottlenecks that have arisen. The wage dynamics are also different, in Europe, contrary to the USA and Great Britain, it doesn't seem to me that there are still pressures on this front. On the other hand, the ECB continues to reassure us that from next year inflation will return to 2%».
In a recent interview, the new chief economist of the German Finance Ministry seems to have somewhat extinguished enthusiasm for a broad reform of European public finance parameters. Will Italy choose the path of a common front with France?
«The joint editorial by Macron and Draghi in the Financial Times it is the starting point. But it is difficult to think of a new European course without a central role for Germany. The crisis in Ukraine is also putting back on the agenda the need to rediscover the strength for new steps in European integration. Perhaps good reasons will come from the East to seek a far-sighted agreement for the revision of the Stability Pact".
This war is unjustifiable, but Putin's behavior towards Ukraine and US is even more unjustifiable.
Apparently the pandemic wasn't enough for us