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Understanding Italy's Stagnation 📉🇮🇹
Today is #Eurogroup. In the €, Italy is a puzzle. 1980s: among highest per-hour GDP. Today: long stagnation & problem child of €Zone. We tried to understand why. Here's what we found. 1/n
dezernatzukunft.org/understanding-…
Understanding Italy's Stagnation 📉🇮🇹
Today is #Eurogroup. In the €, Italy is a puzzle. 1980s: among highest per-hour GDP. Today: long stagnation & problem child of €Zone. We tried to understand why. Here's what we found. 1/n
dezernatzukunft.org/understanding-…
First, what's the problem? From 🇩🇪 & 🇪🇺 perspective, debt often foregrounded. Fear of default, too big to fail etc. etc.
True: Italian debt stock among largest in Eurozone (left chart). But the deeper problem is growth (right chart).
2/n
True: Italian debt stock among largest in Eurozone (left chart). But the deeper problem is growth (right chart).
2/n
So what happened to growth? Some say: regional story, southern Italy. And the Mezzogiorno did fall behind. But even Italy's fastest-growing region (North east) lagged Italy's European peers. It's a whole-of-Italy story. 3/n
France's finance minister has arrived at the #Eurogroup fuming at the state of EU energy market rules calling them "unfit for purpose" after energy price rises have "become unbearable for our citizens and businesses"
Le Maire will be teaming up with Spain's Nadia Calvino today to demand Brussels reform EU energy market rules to better regulate gas stocks and scrap a marginal pricing system so price of electricity production in each MS reflects costs for consumers ft.com/content/463d0e…
Commission's initial response - a flexibilities paper laying out what gov's can do - is unlikely to satiate French or Spanish asks. Worsening prices over winter risks poisoning Europe's fiscal and climate policy debate ft.com/content/5805c3…
#Eurogroup first round voting between three candidates is imminent. A reminder: the candidate with least votes will be asked to drop out if no-one reaches 10 votes. They keep going until someone does 👑
🔔#Eurogroup We head to a second round of votes after no candidates wins required 10 votes after the first attempt
Second round taking place in 20 mins. First round suggests that two candidates with lowest number of votes tied and the leader didn't get 10 needed. A 5,5,9 maybe?
Oggi LadyLaga...
Il banco chiude...sondaggio e scommesse finite...
VINCE KARLSRHUE SUL TRENINO
che amarezza!!😂😂👽
tra 15 minuti il responso finale!
VINCE KARLSRHUE SUL TRENINO
che amarezza!!😂😂👽
tra 15 minuti il responso finale!
BOOOOM
bucata la sogli di 1.40
boscaioli ne abbiamo?👽😂
bucata la sogli di 1.40
boscaioli ne abbiamo?👽😂
What future for international monetary system & financial globalization post #COVID19?
@ArminHaas3 @JoeRini6 & I developed 4 scenarios. Out now in JOIE
Factors: Will @federalreserve swap lines hold in crisis? Will G-20 states cooperate or compete?
cambridge.org/core/journals/…
1/n
@ArminHaas3 @JoeRini6 & I developed 4 scenarios. Out now in JOIE
Factors: Will @federalreserve swap lines hold in crisis? Will G-20 states cooperate or compete?
cambridge.org/core/journals/…
1/n
Today’s IMS is “Offshore US-Dollar System”, composed of “monetary areas”. It is global & hierarchical. The USD monetary area is in apex. Monetary areas with unlimited USD swap lines are 1st layer periphery. More layers to follow below, here BRICS
2/n
2/n
Core features of Offshore USD System: offshore creation of key currencies (esp USD @i_aldasoro), shadow money creation in main areas (@danielagabor @morganricks)
We have developed a visual conceptual framework to go beyond triple coincidence
@StefanAvdjiev @HyungSongShin
3/n
We have developed a visual conceptual framework to go beyond triple coincidence
@StefanAvdjiev @HyungSongShin
3/n
We now know the #ESM lending conditions. Look at footnote 2 of the #Eurogroup statement
Lending rate will be at around 0.13% for loans up to 10 years (drawn for up to 2 years)
consilium.europa.eu/it/press/press…
Lending rate will be at around 0.13% for loans up to 10 years (drawn for up to 2 years)
consilium.europa.eu/it/press/press…
A quick calculation (at today's 10 year market rates) for Italy gives yearly savings in interest payment of about € 600 mln, or 0.033% of GDP
This is more or less what we had calculated with my colleagues at @ofceparis. Not a lot, to be honest (with the whole 540bn package Italy would save at best 0.08% of GDP in interest)
ofce.sciences-po.fr/blog/les-milli…
ofce.sciences-po.fr/blog/les-milli…
German government has remained stoically unresponsive to Karlsruhe. Finance minister @OlafScholz told his Eurogroup colleagues today that he was confident Berlin, ECB and commission would cooperate closely over the next three months and that the central bank remains independent
Berlin standing behind ECB over Karlsruhe would mean commission launching an infringement procedure against German government against the ruling of its independent constitutional court (that the gov disagrees with) would be quite a strange move
@PaoloGentiloni after the #eurogroup says the ECB's "independence is beyond question"
The #Eurogroup has actually decided on something. And we should take a second to cherish that moment. In sum: We get an ESM credit line nobody needs; an EU loans scheme with no real strings attached; and an opening for burden sharing.
1/ First on the ESM: There will be a credit line to cover "direct and indirect" healthcare costs. That is obviously a joke as in the grand scheme of things, health care costs won't matter much. This will never be used. But now the ESM is symbolically part of the solution.
2/ There will be an EU program to give cheap loans to member states without conditionality called SURE. What matters: EU will be allowed to borrow in the markets and hand the funds to member states. This is an important political step that seemed totally out of reach 4 weeks ago.
1/6 After long and intense conversations the last couple of days, the #Eurogroup came to a good conclusion today. We made sensible agreements together for Europe and the NL to face the #coronacrisis.
2/6 We have put a comprehensive package on the table that will help countries finance the medical costs, that will help companies and our employees. Under the right conditions it will also help to build our national economies on the long-term.
3/6 The #ESM can provide financial help to countries without conditions for medical expenses. It will also available for economic support, but with conditions. That's fair and reasonable.
Rome and The Hague are happy with the draft as it stands. A southern European diplomat offers rare praise for 🇳🇱. "We have to be fair to them, they moved"
New crucial par 16 on ESM: "The only requirement to access the credit line will be that euro area MS requesting support would commit to use this credit line to support domestic financing of costs direct and indirect healthcare, cure and prevention related costs due to COVID 19"
As part of the compromise, Mario Centeno will send a letter to EU leaders laying out that some capitals are in favour of coronabonds and others are not. Debt mutualisation is not mentioned in the formal text
#Eurgroup delayed by at least 1hr (~1800 start) as finance ministers pick holes in draft report they failed to agree earlier this weeks. Lots of bilateral calls going on between 🇮🇹🇩🇪🇫🇷🇳🇱 as they try to iron out new differences (over credit lines and SURE) before dialing in at 27
Make that *1900 #Eurogroup
Deafening silence from #Eurogroup for another few hours may not be such a bad thing. Past weeks suggests that when we are in Zoom format things usually go wrong 📞
Rutte stands by Hoekstra's #Eurogroup negotiating stance and insists the Netherlands is not alone on the eurobonds debate. Less forthcoming on the ESM but says there is a possibility ministers can agree a deal tonight
After D66 coalition partner distance themselves from Hoekstra, Rutte says the government position is supported by broad majority of the Dutch parliament and is in line with the 4-party coalition agreement
Rutte: "We're trying to do the maximum to help to bring the negotiations to a successful conclusion".
Very long, intense and also constructive #Eurogroup about this #coronacrisis that affects us all.
We’re dealing primarily with a health crisis and it’s important that Europe makes funds available. We also agreed on EIB support for our struggling companies and entrepreneurs.
We’re dealing primarily with a health crisis and it’s important that Europe makes funds available. We also agreed on EIB support for our struggling companies and entrepreneurs.
NL was and remains against the idea of #Eurobonds, we think this will create more problems than solutions for the EU. We would have to guarantee debts of other countries which isn’t reasonable. The majority of the Eurogroup shares this view and does not support Eurobonds.
On the use of the ESM is no compromise yet and therefore the leaders must decide on this topic. The ESM is a lender of last resort when countries are in deep financial trouble. In our view the use of this budget has to come with some form of conditions.
Or maybe not just yet...#eurogroup teleconference to resume ~2340 after over three hours of bilateral talks. If by some miracle 🇮🇹 and 🇳🇱 agree compromise on the trickiest stuff (ESM, recovery fund) then we have a deal for 10am. If not - more likely - then its back to #euco 🏓
Update: #eurogroup resumes with a new compromise text supported by France and Germany. But Italy and the Netherlands still at loggerheads. Rome demanding reference to coronabonds and no conditionality on ESM loans. The Dutch insisting on "phased" conditionality
On the other points, finance ministers agree to use €200bn in loan guarantees from the EIB. And details of a "recovery fund" (French fund or Spain's SPV) will be left for EU27 leaders to sort out
#eurgroup breaks for an hour. History suggests could stretch much longer than as officials digitally try to draft report for EU leaders. Sticking points are how to refer to ESM and a post pandemic "recovery plan". Dutch and others also want assurances that SURE is not forever
Current draft of #Eurogroup text has no explicit mention of ESM conditionality and no mention of debt mutualisation. The financing of any post pandemic "recovery fund" is also left entirely open. So lots to do ⏰
#Eurogroup rn 💤💤
As leaders prepare for #Eurogroup meeting, the opening positions appear to be:
Germany and NL prepared to use (perhaps enlarged) ESM, and create a joint emergency fund for immediate use.
While Italy demands: Eurobonds or bust!
France sits somewhere in the middle.
1/
Germany and NL prepared to use (perhaps enlarged) ESM, and create a joint emergency fund for immediate use.
While Italy demands: Eurobonds or bust!
France sits somewhere in the middle.
1/
Commentators like @fromTGA and @zingales say the EU must show its worth, saying solidarity is essential and must be unequivocal.
While smart economists like @COdendahl
@FerdiGiugliano and others draw up proposals that sit between German/NL and Italian positions.
/2
While smart economists like @COdendahl
@FerdiGiugliano and others draw up proposals that sit between German/NL and Italian positions.
/2
And @jaemmanouilidis is probably right. We cd see an outcome that is more than ESM, but less than Eurobonds, and includes EIB. With ECB sprinkled on top. Or even a limited solidarity instrument that looks like Corona-bonds but has a different name.
/n
/n
very good morning to @FT who's joined the fight for coordination between central bank & government, and now recognises what some of us have said for a long time: 'there is no clear distinction between quantitative easing and monetary financing'.
ft.com/content/fd1d35…
ft.com/content/fd1d35…
4 years ago, monetary financing
two years ago, joking w @Louih73 about the only flaw in Benoit Coeure (then ECB's repo man) top 3 speeches
Today, a Marshall plan for the recovery can only be financed by Europeans. We are our best/only line of defence. Relying on US or anyone else is not possible or desirable. We have no one to rely on but ourselves.
Interview w/ 5 EU papers.
europa.eu/!CX46ct
Interview w/ 5 EU papers.
europa.eu/!CX46ct
The #Eurogroup on Tuesday will discuss new measures to defend the euro & the EU. We have been working on 3 new European backstops: for sovereigns, for businesses and for workers. Combined they represent a safety net of roughly a half trillion euros europa.eu/!CX46ct
We’re ready to decouple the ESM credit line from the sovereign debt crisis logic. No sense in linking pandemic crisis to a privatizations or labour market reform. Conditions must be virus-related, & later countries must return to a stable position.
The #Eurogroup continues to be terrifyingly behind the curve. ECCL+OMT would have been a viable strategy 10 days ago, but the @ecb announcement has changed the situation completely. Now we need a long-term solution.
Thread:
consilium.europa.eu/en/press/press…
Thread:
consilium.europa.eu/en/press/press…
1/ 10 days ago, the main worry was soaring financing costs for 🇮🇹🇵🇹🇪🇸 and others. At that stage, an ECCL-based approach would have put OMT on the table: The Eurogroup would have given the ECB the necessary political cover. But ministers failed to put such a safety net in place.
2/ Then last Wed, the ECB decided to act on its own, without political cover. This is a stunning difference to 2012 when far-reaching decisions by the leaders e.g. on banking union paved the way for "whatever it takes". The PEPP is now the Eurozone's safety net for market access.
1/ At tonight’s #eurogroup, I stressed that a crisis like #COVID19 requires concerted action to support #healthcare, keep #jobs, and help companies stay afloat. We can only do so together. 1/5
The good news is: across the EU, countries have provided massive financial support to both their citizens and businesses. 2/5
2) NL often stresses the importance of the SGP, because it helps to build buffers for difficult times. However, we were among the first to articulate the logic of flexibly applying the SGP due to Corona. 3/5
"It is clear that this health crisis will take a severe toll on our economies. Behind the market data is the jobs and livelihoods of our citizens. Our policy response needs to match the gravity of the situation." - @PaoloGentiloni, #Eurogroup press conference
#COVID19
#COVID19
"The fiscal measures at national & EU level amount to about 1% of GDP for 2020 and these figures will surely become larger very soon. In addition to this there is the significant impact of automatic stabiliser." - @PaoloGentiloni
#Eurogroup #COVID19
#Eurogroup #COVID19
"The liquidity facilities announced- public guarantees and delayed tax collection - add up to about 10% of GDP. In short, decisive action is being taken." @PaoloGentiloni
#Eurogroup #COVID19
#Eurogroup #COVID19
The #Eurogroup has adopted its statement. It is not in crisis mode, the text is still very much normal-times lingo.
It ends on a vague commitment to do "whatever further coordinated and decisive policy action is necessary",
but the text is very timid:
consilium.europa.eu/en/press/press…
It ends on a vague commitment to do "whatever further coordinated and decisive policy action is necessary",
but the text is very timid:
consilium.europa.eu/en/press/press…
1/ Upside: Clear agreement that flexibility in the application of the fiscal rules is needed. EG also welcomes Commission's willingness to activate the general escape clause in the SGP. Same for state aid.
2/ Downside: Nothing concrete on safeguarding fiscal measures. There is a vague reference to the ESM being there and a commitment to further work on EMU deepening. The message here clearly is not "We are ready, bring it on."
The #Eurogroup has one deliverable today: Signal to markets that 🇪🇺 has the tools and the political commitment to stick together in the coming months. This requires above all clear communication instead of ambiguous Brussels lingo.
Thread:
Thread:
1/ Market volatility in recent days has shown that the risk of fragmentation is real. This is a symmetric shock that hits all member states, but its impact could very well be very asymmetric, also on bond markets.
2/ No member state needs an ESM programme at this stage. What member states need is insurance - a safety net as @hemker_h and I have called in our proposal. This safety net has to be provided by the ESM via the #Eurogroup and by the @ecb.
delorscentre.eu/en/publication…
delorscentre.eu/en/publication…
Really no need for self-congratulations, this European Council teleconference was incredibly disappointing for the following reasons (thread): @MatinaStevis @quatremer @jdomerchet @MESandbu @adam_tooze
The conclusions fail to agree on a common EU line on testing, quarantine, containment and social distancing leaving Italy alone to take the boldest measures when they should be undertaken across the EU consilium.europa.eu/en/press/press…
In line with the Health Ministers meeting on March 6th, HoSG also failed to lift exports bans on medical supplies (mask, respiratory aid kits) displaying no sign of solidarity and resource pooling whatsoever euobserver.com/social/147659
