Four observations:

1.All economic forecasts are optimistic, especially so in Europe, and especially so in Italy.

1/4

nationalreview.com/2020/04/europe… 2.Northern eurozone economies have the fiscal space for a sizeable stimulus, if just barely.
3.Southern states—Italy and Spain—do not. They need, between them, at least, 100-150 billion euros in grants.

2/4

What do the European Parliamentary elections say about the possible outcome of a second referendum in Britain? The votes cast favour Remain. But it is crucial to understand the votes not cast. Voter turnout in the EP elections was half of the turnout in the referendum. 1/5. Turnout fell especially heavily in districts that voted Leave. Here is the picture. 2/5.

Draghi, 6/6: "The Governing Council is determined to act in case of adverse contingencies and also stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner." 1/4 Break this up and consider: "Determined to act IN CASE OF adverse contingencies." What does "in case of" mean? Don't we have an adverse contingency NOW? The ECB has missed inflation forecasts for 5 years; core inflation is stuck at 1%. Italy and France, closer to 0.5-0.7%. 2/4.

And no my grandmother was not born on Mars. Since Turkey is having economic problems, it must be true that the ECB delivers "low inflation," not deflation. And Romano Prodi was stupid because he called the fiscal rules stupid. And Chancellor Merkel is idiotic because ....1/4

https://twitter.com/federicofubini/status/1120700900933345281

she called sanctions for breaking the rules "idiotic." And Turkey's poor financial condition finally clinches the argument for the eurozone. The eurozone looks even better because the ECB has run out of policy tools and can now definitively be of no help to Italy. 2/4

In summer 2018, I predicted that Italy would fall into recession later that year. World trade was slowing rapidly--and by my back-of-the-envelop "model"--a recession seemed very likely.
1/8
independent.co.uk/news/business/… I protested against Mattarella's folly--his attempt to replace an elected government with a technocrat. Financial markets also reacted adversely, knowing that Matteralla's actions would only raise temperatures and elevate uncertainty.
2/8
bloomberg.com/opinion/articl…

Germany is slipping into recession because world trade growth has slowed. In 2015-16, despite ECB's QE, German growth was lackluster. Only after China injected large domestic stimulus, which caused world trade to accelerate above 4% by mid-2017, German growth too off. 1/5 Chinese stimulus was turned off in late 2017, world trade growth began slowing and so did the German economy. World trade growth fell below the 4% threshold in mid-2018 and has stayed there. German growth has continued to slow. 2/5

Goldman Sachs says risk have risen but are contained. Italian risk are manageable. Really? China slowdown risks have risen but repercussions likely to be "contained." Really?

@pierremoscovici says there is no special treatment of France over budget rules. thelocal.it/20181212/eu-te….

Not true. Clear bias in France's favor. In the short-term the French and original Italian plans are similar, but long-term implications are worse for France. 1/8. In both cases, additional spending will be stimulative short-term, and because it is directed towards those likely to immediately spend it, it is potentially high impact stimulus. The French version, which has been slapped together, has less coherence than the Italian plan. 2/8.

The stand off between @EU_Commission and the Italian government on its fiscal stance is so intractable because it tests and threatens Europe's identity, the core sense of what European leaders believe they stand for: frugality and discipline. prospectmagazine.co.uk/economics-and-…. @prospect_uk The frugality identity runs deep. @SenatoreMonti said in January 2012, the "precious" German virtues of fiscal discipline have been "marvellously exported." ft.com/content/4385a5….
Those virtues are embodied in the fiscal rules. Chancellor Merkel calls them the guard rails.

In a widely cited blog, @ojblanchard1 and @jzettelmeyer insist that fiscal austerity will be good for Italy: it will raise output; in contrast, stimulus will raise interest rates, causing output to fall. piie.com/blogs/realtime…. Can that be true? Oddly, they do not refer to work by Daniel Leigh and IMF colleagues, who conclude there is no evidence of expansionary fiscal austerity. onlinelibrary.wiley.com/doi/abs/10.111….

Leigh also coauthored with @ojblanchard1, concluding that fiscal austerity can cause severe loss in output.