Thread by @fsaraceno

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…

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…

But it is better than nothing.
I had said since day 1 that the financial conditions (rate, fees etc), and the political conditions were crucial.

Financial conditions are now known and more or less what we expected.

The political conditions were necessary because legally speaking there is no such thing as an "ESM light".
ESM comes with Enhanced Surveillance and eventually may lead to Macroeconomic adjustment

I was involved in a long, boring, useless discussion over the past weeks on this conditionality.
My point in short: ESM lending is potentially a trojan horse for adjustment programs.
Details in this tweet (in Italian)

The only way to avoid that risk is to negotiate terms that do take leverage away from the institutions (maturity, tranches, etc).
The Commission penned a letter saying that they have the right to ask for macro adjustment, but that they will not use it.

In passing, this vindicates my point; so much waste of time...
Is this enough? No, the letter has no legal value. It would have been better to suspend the regulation.

But, honestly, I don't see the Commission renege on this formal engagement in a few months.

So, it is not a lot of money (peanuts, actually), but financial conditions are fine, and the risk of getting in a MoU is at this stage close to zero. I'd go for it. and focus on the real stuff (the #ERF)

Just look at the last paragraph of this (italian)
ilsole24ore.com/art/sulla-cond…