Matteo Renzi can not want something and its opposite. It can not ask for Europe to share (at least) certain debts – with the proposal of a eurobond – and claim that Italy’s budget will be decided by Italians and not the “Brussels bureaucrats”. In fiscal union, warned Jens Weidmann, “just that change.” The implication for the president of the Bundesbank is that if Italy wants to retain full control of its public finances, let up the national debt and not reduce the deficit, must also accept the counterpart: the idea that one day the state can make default, and a country can also leave the euro when it continues to violate the rules.
The meeting in Rome
Yesterday in Rome , Weidmann has offered an Italian establishment audience exactly what is missing so much to national elites across Europe: direct access to an outside perspective on their country. And not to lose anyone the opportunity, the German central banker did not discount. He never tried to soften the angles did not refer to the way of a compromise, he never took into consideration that every coin always has two sides. In the residence of the German ambassador in Rome, Weidmann has preferred to read a speech of almost thirty pages dedicated solely to the Risks of Public Debt of the other, to the possible consequences for the banks, and especially the increasingly ingrained desire in Germany to isolate themselves from one ‘ other financial explosion as possible on the South side of the euro.
the question of the euro
“Matteo Renzi last year, presenting the budget, said that the Italian public finance policy is made Italy and that Italy does not allow it to be dictated by Brussels bureaucrats, “he noted Weidmann. He immediately reminded: “In fiscal union, each Member State will have to fulfill the requirements of the European tax authority.” Same contradiction, in his view, the Italian proposal for a European unemployment insurance: “At that point must be a European institution to control labor market rules.”
The defense of the euro project by the president of the Bundesbank was indeed the weakest he could offer. Asked about his future, he merely said: “I believe that the single currency is a political decision, not central bankers have to intervene. Certainly not imagine how it can work when a country continues not to respect its rules. It is at that point that the policy may eventually decide whether the country should exit the monetary union. ”
The German distrust
But to Weidmann the main purpose of the meeting, in Rome yesterday, it was to figure out how much worry and mistrust is widespread in Germany for Italy’s status. “In Europe, major reforms such as the Jobs Act Italian, but structural reforms are needed both at the level of individual states and in Europe – said -. Some countries have yet to be created basic facilities, such as a ‘functioning and reliable administration, some justice and faster and more efficient state apparatus as a whole. ” Hence the indictment of the German central banker on the way in which, in his opinion, real governments are abusing the opportunity provided by the European Central Bank with its purchases of government bonds.
For him there was no need to mention any country, because the message yesterday was clear enough. Even more so if launched from a capital city that spends much of its energy in Europe to win the right not to consolidate the accounts of recovery time and rest on the debt markets. “The ability to quickly reduce the structural deficit created by the very accommodating monetary policy of the ECB was not exploited,” he said. However, without specifying when, Weidmann recalled that Italy has violated European rules on the accounts. He then added: “This could become a problem for the sustainability of the debt when the board of the central bank were to pursue a more restrictive monetary policy.”
vulnerability
Weidmann has admitted that today an “expansionary” euro area “is more than appropriate ‘, although he immediately distanced himself from the choices of the President of the ECB Mario Draghi: “You can have different opinions about the tools.” But the German central banker has nevertheless made it clear, deliberate, that Italy is vulnerable to a new storm on its debt as soon as the interest rates will go up. And this time the markets can return to put radically questioning the euro’s future. “I think there is a danger that can emerge a new problem for the monetary union linked to confidence,” said Weidmann. For that day Germany will want to be separated from the crisis. Bundesbank president has returned to repeat her recipes, already rejected by the majority of euro area governments: limits to be introduced as soon as possible the exposure of banks in government bonds, so that the latter are not directly involved in a default of the public debt; and suspension for three years of repayment of government bonds the same, so in fact insolvency, as soon as a country in difficulty should seek help at the bottom of European bailouts.
The other recipe is not convincing Weidmann: a sharing of fiscal risks in Europe can not function if it is not linked to a narrow European control of the decisions of each individual country. Hence the distancing of the German banker, “Pier Carlo Padoan said that the sharing of risks and responsibilities are strong incentives to comply with the rules. But on this point I would not be so optimistic, “Goodman said Weidmann. For him, the opposite would happen: some countries would profit to download the risk of their debts on the other, taking advantage of the weakness of the EU Commission in monitoring.
From the pulpit of Weidmann in Rome yesterday, it seemed like she was already happening.
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April 27, 2016 (modified April 27, 2016 | 09:26)
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