10 December 2012

イタリアのマリオ・モンティ首相の辞任はEU（欧州連合）にとって極めて時期が悪いが、イタリアとEUの双方にとってモンティ首相が有益な遺産を残す時間はまだ十分にあるかもしれない

• Who could be better qualified to be a potential successor to Herman van Rompuy as President of the European Council when HvR’s second and final term expires on 30 November 2014? But even before then, the President of the European Commission will have been indirectly elected via the votes cast in the summer 2014 European Parliament elections. The intention is that, as a part of the election campaign, the political families in the Parliament will indicate their candidate for the Presidency of the European Commission. So Mario Monti could yet play an even greater role on the European stage.
• The timing for the EU is so difficult because the 'two-pack' is not quite agreed and the Heads of Government meet later this week to take historic decisions in principle to drive forward to a “genuine economic and monetary union” (GEMU). The key decisions on deepening the union will fall into the period after 2014. If the European Parliament backs down on its demands for the inclusion of `redemption bonds’ in the two-pack legislation, then the legislation can come into force quickly and, in combination with the fiscal compact Treaty (the TSCG), bind Monti’s successor in Italy to follow sound economic (including fiscal) policies. On the current timetable for the Italian Budget vote, Monti will remain Prime Minister of Italy during these key EU votes.
• Monti’s successor – even if it were (almost unimaginably!) Berlusconi – will find himself locked in to a set of Budgets and agreements with the EU that are the policy conditions for any ESM loans. Only the degree of intrusiveness of monitoring varies. A successful application for ESM funding is a pre-condition before the ECB will consider any OMT support. So a major change of policy in Italy would rapidly bring it into conflict with the Commission – reinforced with new powers by the two-pack so that its recommendations cannot easily be overturned by the Member States. Such a conflict would automatically prevent OMT’s operating.

The Italian electorate will soon be faced with a binary choice:

1. Elect a set of parties that cannot muster enough Parliamentary votes to change the Monti budgetary legacy.  So Italy would remain eligible for EU support via the ESM/OMT should it be needed but the economic outlook should not require that; OR

2. Vote in a government committed to a fundamental breach with Europe that would probably spell chaos for both.

 *Extracts from key documents below*

Country-specific recommendation for Italy – adopted by European Council in July 2102

Para (10) sets out the economic forecasts embodied in the recommendations and the extract from the Commission’s Autumn Forecast show the worsening since this agreement. The paragraph 1 and 2 extracts from the agreed Recommendation make clear that the EU expects Italy to stick to its stated budgetary intentions.  (Full document:  link.)

(10) Based on the assessment of the Stability Programme pursuant to Article 5(1) of Regulation (EC) No 1466/97, the Council is of the opinion that the macro-economic scenario underlying that Programme is plausible, under the assumption of no further worsening in financial market conditions. In line with the Commission services 2012 spring forecast, real GDP is expected to contract sharply in 2012 and recover gradually in 2013. In compliance with the excessive deficit procedure (EDP), the objective of the budgetary strategy outlined in the Stability Programme is to bring the general government deficit below the 3 per cent of GDP Teaty reference value by 2012, based on further expenditure restraint and additional revenues. Following the correction of the excessive deficit, the Stability Programme confirms the medium-term budgetary objective (MTO) of a balanced budgetary position in structural terms, which adequately reflects the requirements of the Stability and Growth Pact. Italy plans to achieve it in 2013, i.e. one year earlier than targeted in the previous Stability Programme, through the measures already adopeted in 2010 - 2011. Based on the (recalculated) structural budget balance, the planned average annual fiscal effort over the period 2010-2012 is well above the 0.5 per cent of GDP recommended by the Council under EDP. The envisaged pace of adjustment in structural terms in 2013 allows Italy to achieve the MTO in that year and the planned rate of growth of government expenditure, taking into account discretionary revenue measures would comply with the expenditure benchmark of the Stability and Growth Pact.

© Graham Bishop