A split Europe, North versus South, as in the 2012 financial crisis. Then the contrast was real. Speculation, overwhelmed Greece, attacked Italy and the other southern countries for their financial fragility and in the doubt that not everyone could remain in the euro. Germany and the Northern countries were perceived as strong and capital flowed into it. Despite objective differences, the heads of state and government managed after strong tensions to reach a unanimous agreement in June 2012. Germany and the Northern countries also recognized for the first time that, as Italy, France and Spain claimed, they would have been appropriate. ECB interventions in support of the government bonds of those countries which, while still being targeted by speculation, were following the policies agreed in the European headquarters. From that day the ECB knew that not even the northern hawks could have criticized it if it had declared the purpose (Whatever it takes by Mario Draghi) and then packaged the instrument (Omt) to carry out these interventions.
The contrast between North and South, which emerged the other day between the heads of state and government, it does not have a similar objective justification, given that the coronavirus is affecting everyone, while financial speculation was affecting the less virtuous economies. The rift also occurred after the ECB had already acted, albeit with an uncertain communication. The divergence which, in my opinion, can be overcome if in the next few days there was – primarily between Italy and Germany, as in 2012 – a close confrontation at the highest levels, with the effort to understand the other’s positions rather than stigmatize him in front of his own public opinion . If, however, those with government responsibilities prevailed, the latter would only win the sovereigns of the South and North, with a possibly irremediable fracture between Italy and Germany, probably fatal for the European Union. Putin and Trump would toast.
Italy should not, in my opinion, hang on to coronabonds, or at least eurobonds, as the only yardstick of its negotiation success and to declare that any European solidarity would be missed if they did not see the light of day. After all, the Stability Pact has been suspended, as has the strict state aid discipline, and the ECB has already taken massive measures. Furthermore, in this exceptional situation, the modalities of any interventions within the Mes or through the OMT could, I believe, be subject to ad hoc negotiation, in particular to reduce to a minimum, and finalize to the maximum, any forms of conditionality.
This does not mean that Italy’s pressure on Eurobonds should ease. Indeed, Conte should insist with Merkel that here it is not a question of charging the Germans with part of the Italian public debt created up to now and not with all the new debt that will arise from the interventions to combat the pandemic and to allow the restart of the economy, but only a part to be established. In fact, the Italian government will issue public health vouchers also and above all internally and will appeal to the Italians with appeals and other instruments to sign them. But it would be a real step forward for Europe, for a Europe felt close to citizens, if for each country – Germany, Italy and others – a share of the greater public debt were subscribed by savers and financial institutions from all over Europe , who participate in a great common commitment consisting in the purchase of securities issued, for this specific purpose, by a European entity and therefore with a zero risk and a very low interest rate. Or we have to think – Conte alla Merkel might say – that you don’t want to see this title born because you want only your Bund, your government bond, to be the undisputed dominus of the market and that only your country can finance itself at zero rate or negative?
It would also be useful to remind Germany that the independence of the ECB from politics it risks not being in reality anymore (with the joy of many Italians, but this is what President Conte will avoid saying to Chancellor Merkel), if the ECB is left alone to absorb the great current shock because Germany only says neinto all other potentially available tools. And does the chancellor realize that, if that were the case, at the next wave of inflation, which sooner or later there will be, the ECB may not be able to avoid Weimar Republic-style hyperinflation? Perhaps, those who govern Germany would be better off paying a small price today, accepting the Eurobonds, rather than perhaps being remembered one day as those who were unable to prevent the end of the independence of the ECB.
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