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mercredi 23 novembre 2011

The verbose economist corner: everyone is an economist now . But we need much more savvy farmers

You judge how cogent is the content. (Franco bruni is a Bocconian friend of Monti)


The meetings European Mountains over, after the change of government, dialogue with the bodies on the adjustment of the Italian economy. Europe considers it credible that the new political climate of our country make the adjustment more strongly. But Monti is also the opportunity to contribute to refloat the Government Economic Community by a Franco-German leadership that is not effective, because Merkel and Sarkozy are not in agreement with the European visibility and shore up weaknesses in their policies in their countries .
The dual aim of these days both as Europe adapts to the prime minister of one of the member countries must make greater adjustment effort, which is also a person who has the reputation and long experience of leading institutions Community and their evolution. And it is also double the effort for Europe to resume the stability and growth: individual member states "to clear up their homes" and the EU action stimulates them and helps them.
On the reorganization of the Italian government will soon know of his first moves. On what the EU needs to do is intense and controversial debate. But now it is time to conclude: we can no longer improvise to dab the urgency of the crisis. This has been done too, wrangling, and the results are opaque and precarious, punished by the markets. Now the war to 'emergency must be fought on the Union by converging the best long-term decisions.Are clearly distributed tasks and responsibilities for maintaining financial stability in Europe. In the presence of clear and credible policy decisions the markets are willing to a truce, they are willing to give you time because they are implemented, including the time needed for any amendments to the Treaty.
Important steps have already been made: we have new EU financial supervisory authorities, but should be strengthened and we have new rules to govern public finances and other aspects of the macroeconomics of the member countries, but it really should be the first to apply the emergency break. It 'time to focus on long-term decisions to achieve financial stability in an' area where there are risks of illiquidity and insolvency for the government bonds.
I think the recipe has four ingredients, all essential in certain doses. The first is financial self-discipline and adjustment of individual national economies, coordinated with strength from the center of the 'EU. But it takes time to adjust imbalances in the long term, structural, socially and politically bearable. Because the markets are often impatient, then it takes the second ingredient: time must be given to adjustments by providing funding. What should be of two types, distinct: short-term support by the ECB and the medium to long term by a Community mechanism to see the shared commitment and solidarity of an adequate amount of funds from national governments. Who wants to be the only ECB to provide unlimited support, even beyond the short term, is proposing to upset the eurozone monetary constitution. And 'hoped that the intervention of Monti could weaken these positions.
Finance the imbalances in the short and medium term, does not mean abolishing the discipline with which markets speculate against countries unbalanced. It means even enhance the function of markets, which express themselves in ways to avoid violent and counterproductive. How supportive commitment of government funds in the medium to long term, it may take forms different techniques, including various possible versions of the so-called Eurobonds. But what matters is the substance of political commitment to inclusive finance, in a limited but enduring the risks involved, the gradual adjustment of the countries in difficulty, for the simple reason that their collective interest of Europe is successful. The explicit introduction of the principle of even a limited European financial solidarity is therefore the third ingredient of the recipe: the Germans are convinced, and particularly Mountains can help.
The fourth ingredient is the availability in the event of failure of the previous three ingredients, a procedure to handle the "failure" of government debt in an unsustainable manner and incorrigible, that is to restructure their debt by putting a part of the cost of adjustment countries in difficulty at the expense of those who have invested in their titles. Admitting that there may be failures of government, well-managed and controlled, stimulates the financial discipline and creates less panic that insist on denying it in front of the widespread belief that the partial failure is sometimes inevitable. This ingredient has already been, in principle, approved by the European Council in July.Nevertheless, it is difficult to introduce in the recipe, because it brings with it the need to review the insolvency of banks, which hold a lot of government bonds, and because among the enemies of this ingredient's long been the ECB. But we must hope that the forthcoming talks will resume the theme of Europe.The rules for the "default-controlled" sovereign debtors also serve to defend the independence of the ECB avoiding, to exclude any risk of insolvency of the government, it is obliged to replace them as a payer of last resort.

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