martedì 7 maggio 2013

Austerity: nuovo governo, vecchia musica

Nel primo articolo che proponiamo di seguito, di Wolfgang Munchau, si spiega come mai, nonostante tutti i dati puntino in direzione opposta, l'austerity rimarrà la linea guida del governo. Certo, Letta e Berlusconi hanno parlato di tagli alle tasse, ma nessuna vera nuova politica fiscale all'orizzonte. Qualche aggiustamento cosmetico sarà effettuato ma la stretta fiscale rimarrà inalterata, con tutti i suoi dirompenti effetti negativi sulla crescita. Almeno, forse, si riprenderà a pagare i fornitori - come nota giustamente Munchau la sospensione dei pagamenti (il trucchetto usato da Monti e soci per "mettere a posto i conti") equivale fondamentalmente ad una dichiarazione di fallimento. Ma nessun cambiamento strutturale è all'ordine del giorno. Inutile illudersi.
Di parere simile è Christopher Mahoney su Project Syndicate. Mahoney si interroga su quello che può fare la BCE - sostanzialmente abbandonare la linea monetarista, adottare obiettivo di politica legato al PIL e non all'inflazione e stampare moneta, difendendo al contempo i debiti dei paesi in difficoltà. Una idea parziale, se non accompagnata da interventi di politica fiscale, ma che potrebbe permettere di svalutare in termini reali l'ammontare del debito, riducendo quindi lo scopo del fiscal compact e aumentando i margini di manovra dei governi. Ma anche qui Mahoney pensa che la Germania si opporrà strenuamente e quindi le chance siano legate ad una possibile rivolta contro di Spagna e Italia (e magari Francia) contro il dominio tedesco.

Italy’s change from austerity is all talk

di Wolfgang Munchau
da Financial Times

There is a big buzz in Europe that austerity may soon be ending. The Italian elections have scared politicians in other parts of southern Europe. The European Commission seems sympathetic, too. As a consequence, I would expect to see minor small-print policy shifts. However, the main change will not be about policy itself, but the way it is sold.
A good example of the new PR-based anti-austerity strategy came in speeches last week by Enrico Letta, Italy’s new prime minister. He railed against austerity, but at the same time emphasised his commitments to Italy’s fiscal targets, as if the two were somehow unrelated.
He is planning to suspend an unpopular property tax, which would punch an €8bn hole in his budget if it were abolished. Now we are hearing that his government is working on a replacement tax to fill that gap.
My guess is that Italy will probably stick to the structural deficit reduction plan. However, because economic growth will be lower than previously expected, there is a good chance that nominal deficits will overshoot their targets. The most likely change in policy will be to allow that overshoot to happen, at least in part.
To see in more detail why the change is going to be so limited, one has to understand the sheer scale of austerity in the 2012 and 2013 budgets.
The structural government balance for Italy was -3.6 per cent of gross domestic product in 2010 and -3.5 per cent in 2011. However, in 2012 it jumped to -1.3 per cent, according to the data from the April World Economic Outlook by the International Monetary Fund. The forecast for 2013 is for another jump to -0.2 per cent of GDP. So the accumulated adjustment in 2012 and 2013 is projected at about 3.4 per cent of GDP.
This extreme fiscal correction has caused the current recession, the extent of which was underestimated by the European Commission and the previous Italian government.
What will happen now? European policy makers have some flexibility in their ability to trigger a clause in the economic governance framework of the eurozone, allowing them to adjust the targets during recessions.
The eurozone has come a long way from when the rule consisted of an inflexible nominal 3 per cent target. The 3 per cent rule still stands, but the main focus is now on structural deficits. This is an improvement, but in the way the framework is applied it remains pro-cyclical, though perhaps not to quite the same extent as before.
In addition, Italy may also be released from the excessive deficits procedure, which would provide some additional flexibility by releasing funds for investment that are currently blocked.
The slight moderation in the pace of austerity offers a further advantage. There will be less collateral damage from Italy’s hastily decided spending cuts. The Italian government applied austerity not so much by consuming less, but by simply not paying for services. Italy now needs to introduce a new law to allow the resumption of those payments. I would classify this behaviour as default.
The effect of a shift in strategy is therefore larger than zero, but still not much. The eurozone continues to move towards structural balance, in contrast to the US, the UK and Japan. Fiscal policy will continue to have a negative effect on growth.
If the eurozone were serious about a U-turn on austerity, the only effective way to accomplish this would be for the creditor countries to expand their fiscal positions during the recession. The opposite is happening.
Germany, a country with a lot more fiscal space than Italy, undertook a fiscal adjustment of almost similar scale. Between 2010 and 2012 the accumulated net improvement of the structural balance was 2.5 per cent of GDP. Italy and Germany are both projected to record structural balance, more or less, this year and in 2014.
There is no way that Germany in particular will accept a fiscal stimulus for the sake of the southern European countries. This is because Germany restrained itself by passing a balanced budget law that requires the government to run near-zero structural deficits indefinitely.
The European fiscal compact, an inter-governmental treaty that came into effect in January, provides far less flexibility to countries as they try to meet their deficit-cutting targets than they had under previous agreements. Under the fiscal compact, Italy will be required to pay back debt worth more than 2 per cent of GDP each year. To achieve that goal, Italy will need to run very large structural surpluses for almost a generation.
So if you want austerity to end, you need to start by repealing the fiscal pact and amending some of the secondary legislation governing fiscal policy co-ordination. I do not think this is going to happen. My conclusion is that austerity is here to stay, but will simply be presented with warmer words.
And it will last for as long as the euro exists.

Southern Europe: Revolt Now Or Default Later

di Christopher Mahoney
da projectsyndicate

“The policy is being set by the AAA core. The Commission bends to power, and will not move unless the rest of EMU mobilises superior counter-power. All else has become irrelevant in the euro snake pit.”
---Ambrose Evans-Pritchard, Daily Telegraph, April 24th, 2013
There are two schools of thought emerging among the non-delusional community with respect to the future of the eurozone. One view is that the ECB can still, by heroic action, save the eurozone. The other view is that it is now too late for the ECB to save the eurozone, and that the Club Med bloc will need to resume monetary sovereignty.
I cling to the former view because the alternative is pretty awful. I find it hard to grapple with the idea of some of the world’s largest debt issuers defaulting on their debts. It’s a horrific prospect. Euro exit by Italy or Spain would eviscerate the European banking system and cause a Lehman-squared.
But is the ECB rescue scenario possible? First, we will need to dispense with current ECB politics. This scenario only works if the ECB comes to Jesus and executes a total policy reversal as a consequence of the imminent default of Spain or Italy. So it is a given in this scenario that either the ECB sees the light on its own, or the Club Med bloc somehow forces the ECB to reverse course.
So now we have Mario Draghi and his entire board including the Bundesbank on the side of the angels, willing to whatever it takes to save the euro. What should the ECB do? For starters, it should implement the plan outlined by Lars Christiansen:
Target the level of NGDP that would have resulted had the eurozone been growing at a reasonable pace since 2007. That is a level maybe 10-15% above the eurozone's current NGDP.
Commit to engage in asset purchases such that M3 growth will average 10% p.a. until the output gap has been closed.
Suspend the 2% inflation cap until the target is met.
The policy instrument would be a GDP-weighted basket of eurozone government bonds.
In addition to the Christiansen plan, I would add the following:
Active use of the OMT to backstop Club Med bond issuance, so as to limit yield spreads and restore market-access.
A eurozone-wide bank support scheme guaranteed by the ESM and funded by the ECB.
A statement that no bank in the eurozone will be allowed to default on its deposits for the next five years.
Such a program would: (1) restore market access; (2) restore depositor confidence; and (3) ensure that all eurozone banks have full access to ECB liquidity. Both the sovereign and banking crises would be solved.
It is true that this plan would not fully address the real effective exchange rate appreciation which has made the Club Med countries uncompetitive. But it would help in that inflation would permit real wages to decline over time (if nominal wages were constrained, a big if). Not ideal, but better than the current deflation and better than catastrophic default.
If this scenario proves impossible (see: Bundestag), the next question is whether a “managed exit” scenario is possible, by which one or more Club Med countries would be allowed to exit in the least disruptive way. Here, the answer is no. That is because euro exit at a minimum will be accompanied by redenomination of all debts, which is a form of default. There is no way that the troika (EU, ECB, IMF) is going to countenance a massive debt default. Indeed, it is likely that the troika will want to wreak its vengeance on the first escapee, to scare the others from trying to leave.
Thus, Spain and Italy face a stark choice: force the ECB to relent, or exit unilaterally. For Spain and Italy to be in a posture of revolt will require conditions to get much worse, and will require new governments. As Ambrose Evans-Pritchard wrote recently, a successful revolt by the south will require Churchillian leadership, which means different leaders.

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