Also yesterday the theme of debt cancellation Italian public in the hands of the ECB was a topic that jumped to the honors of the political discussion. The idea was brought up by the Undersecretary to the Prime Minister, Riccardo Fraccaro, during an interview with a well-known US network.
Now, it would be great if the ECB canceled the Italian public debt because then all this could happen… What? Let’s find out better by proceeding step by step.
The statements of the undersecretary to the presidency of the Council
Yesterday’s proposal broadly resumed that of a few weeks ago by the President of the European Parliament, David Sassoli. That is the cancellation of the sovereign public debt purchased by the ECB during the pandemic. Undersecretary Fraccaro said: “Monetary policy should support the expansionary policies of states in every way”.
In this regard, it must be said that the ECB has already been doing this for almost a decade. Just think of zero rates and ultra-expansive monetary policies (first QE and then PEPP) have roughly accompanied the last decade.
However, according to the government official, the idea of canceling the sovereign debt acquired by the ECB during the pandemic should also be considered. Or, in any case, to make it “perpetual”, which is almost the same, even if softer – or masked, depending on the point of view – in the declared form.
Of course, in case of perpetual debt it should be noted that there would also be interest to be paid. But being very low, in the end the operation would always and in any case be strategic.
The “brake” of Minister Gualtieri
These statements were immediately echoed by the Minister for the Economy, Roberto Gualtieri. Who immediately clarified the idea of the government: “we consider that debts by definition must be repaid”. Declaring that the path towards debt cancellation passes through the canonical ways of public finance.
That is, “focused on growth, investments and a financial and budgetary policy that today needs strong fiscal budget stimulus”. But that looking at the post-pandemic still leads to its “gradual and sustainable reduction”.
A classic: I would like but I can’t
The whole country would certainly agree to implement the words of those who propose an active “rebate” (made up of hundreds of billions of euros) to the national budget. We would all win it. Moreover, it should be noted that most of the approximately 2.6 trillion of public debt was contracted during other legislatures.
So, a classic of the series: “I would like, but I can’t”. Now, net of how things will actually end up (cancellation yes, no, perhaps), the operation would not be easy in itself.
First of all, it could appear as a mockery to all those economies that have reached the appointment with the pandemic with their accounts in order.
Secondly, it would cause the ECB to lose credibility, as well as create a huge budget gap for it. Which then, in all likelihood, should cover the same member states.
It would certainly be great if the ECB canceled the Italian public debt because then all this could happen
But, above all, it could create a significant precedent. That is to say that for which the next black swan, of an endogenous or exogenous nature, to the economy, the future classes of government should be decidedly dissolved.
That is, they would have a precedent, a sort of pass, if they do not set themselves so many limits in terms of public spending. Trusting, in fact, that in the name of the recession we should act without delay or hesitation of any fate. Then, once the economic crisis is over, a swipe from the ECB would fix everything.
In similar hypothetical scenarios, we could then also witness a further proliferation of Bonuses. Definitely more than the current ones, and always given out in the name of the recession. By sending everyone into confusion about where the boundary line between supporting businesses and families and drifting would actually be.
Now, nobody wants another black swan, but the business cycle theory of schumpeteriana memoria he affirms that, willy-nilly, they promptly reappear sooner or later. Therefore, all that remains is to trust in the vaccine and get back on track as soon as possible.
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