The reactionary front thinks about taking care of your pocket only: Nordics demand "greater precision" in "reducing risk" before sharing anything. The Germans too, but y write it more carefully. They fear that money from financial Stability Mechanism or bailout fund (MEDE, now half a trillion euros) will be squandered on saving Italian banks and remember that ir part (168.3 billion) "comes" from sacred "Federal Budget".
Draghi not arredró this Friday for se anxieties, in a speech in Florence for a few days under title State of Union. He said that "sharing risk of public resources helps reduce risk", as it is clear that before a powerful firewall markets are thinking about it and bearish speculation regresses.More information
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The test is comparison of what happened to 2008 crisis in America and Europe. That's where 500 banks closed. But with a strong public disbursement wound was sajóed and even with benefits. The U.S. bailout fund "only had to appeal to Treasury once and paid debt very few years later," recalled Draghi. Here, only 50 banks were closed. But "we learned lesson of each actor's inability alone to absorb shocks."
Something similar happened after previous oil crises: re credit restrictions concentrated in local banking were absorbed by 70% by markets; Here, it was only 25%. So "deepening private risk sharing would be beneficial for entire EU," according to Draghi. But that must be "facilitated" by "public authorities".
How does that translate? That what is missing in EU is " firewall for bank's resolution [and liquidation] Fund," of course "fed by banks." But in very deep crises fund can be overwhelmed, so in U.S. and Japan "have firewalls supported by public sector."
Although it did not enter nominal concretions, all Draghi's argument was this Friday a clear support to project to convert MEDE into ultimate reserve box for bank resolution. What is one of essential components of European Monetary Fund which is being defended by European Commission and Macron.
Draghi also supported fiscal capacity, although it was resisted to baptize it according to its most frequent incarnations: Euro budget, budgetary line, investment fund, daily Risk fund or European unemployment insurance. The bottom line is idea of "increasing convergence of economies" and "Enhancing confidence". That is way to consolidate and expand what has already been achieved, because markets "tend to be pro-cyclical", to play against when situation is adverse, he recalled. It's a "common stabilization function."Criticisms of MEDE
For this one does not serve MEDE, on which Draghi was very critical, since "conditionality" imposed on countries that it rescued had "procyclical effects, aggravating its recession". He was bleeding from wound because lack of active fiscal policy in EU — which he did five years ago denounced at Jackson Hole governors ' Meeting — is what has burdened recovery's responsibilities on ECB's narrow backs, and that he has had to widen . The MEDE does not serve for that (against what ir Alemanísimos managers intend). "We need anor instrument, capable of maintaining confidence in recessive times", of skinny cows.
He did not get Draghi as far as his collaborator Frank Smets, CEO of bank's economy, in a parallel session of ADEMU Association: "I like idea of launching junior bonds and senior bonds at a time," he said. But this can be expressed in more technical terms and without compromising institution.
Yet Draghi overflowed ideologues of austeritaria intransigence embedded in institutions such as MEDE himself. Its chief economist, Rolf Strauch, pretended to attribute to his house nothing less than all functions in discussion: To be firewall of bank resolution; To have a "greater role" in negotiations of bailouts of countries [not to service, but] "jointly with Commission"; Embodying fiscal capacity; Facilitate eurozone's financial stabilization and advance debt enhancement to make it more sustainable. By holy attributes of an intergovernmental body, without common democratic control, and subject to discipline of most rigorous.
"These Germans, what audacity, y want to do everything, y alone, and from Luxembourg", commented in room an accredited European.Calendar and narrative for summit
Draghi confessed excited to return to city where he was a teacher, and to act in Great Hall of Medici Palazzo Vecchio, which he visited, admired, as a young man.
Presented by Barcelona-based Ramon Marimón, professor at University Institute of Florence and coordinator of Ademu — Association of economists promoting deepening of euro — Italian triumphed at home.
Anor countryman, Director-General of Commission, Marco Butti, was explicit and pragmatic about achievable at forthcoming Euro Summit. It foresaw a timetable (on firewall for bank resolution, and some progress in deposit guarantee); A certain return to broaden objectives (capital market Union, Invest-UE), and a conciliatory narrative between sharing and reducing risk.