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Giovanni Sgaravatti

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Dear readers, at this moment in history it is very difficult to keep a clear head and analyse facts with reason. It is difficult not to be influenced by natural concerns, which in some cases evolve into real family dramas. However, I believe that, today even more than yesterday, it is necessary to make a critical effort and evaluate the facts outside of rhetoric or, even worse, propaganda.

Italy’s relationship with the European Union in these weeks of health emergency has been severely questioned and Eurosceptics are on the rise [1]. Undoubtedly Europe plays a fundamental role in the society in which we live, as well as in the political and economic current affairs of our beautiful country, whether we like it or not [2].

©️ Comitato Ventotene
Italy export worth 533 billions €, of these 52% is towards EU, 2% Russia, 3% China, 5% UK, 9% USA, 20% other countries, 9% towards countries that have commercial agreements with EU

Since the beginning of the crisis, the European Union has responded in a fragmented and inconsistent fashion. For this reason, last Thursday the President of the European Commission publicly apologized to Italy on the behalf of the European Union as a whole. A powerful as much as a necessary political gesture. In the last two months, there have been unpleasant episodes, not up to a Union whose founding values are respect and solidarity between peoples. Let us think of the case of the medical devices blocked at the border by Germany and France, the unfortunate phrase Mrs. Lagarde said that sent the FTSE MIB index nosedive, or the inappropriate comments from the Dutch Finance Minister [3]. It is clear that the European Union project is still far from being completed.

In the same way, however, we cannot forget everything that has been done at the European level to help Italy and how much is now under study. Since the beginning of the epidemic, the EU has proposed the suspension of the Stability Pact and it has given the green light to state aid. Both initiatives have been widely approved by the Eurogroup. Moreover, the European Central Bank has launched the Pandemic Emergency Purchase Programme for an amount of 750 billion euros, substantially lowering interest rates [4] on Italian treasury bonds. In addition, the re-use of unused European funds in 2019 has been authorised, freeing up a fund of 37 billion for businesses in the fight against the virus. All this while Germany started receiving Covid-19 patients in its hospitals, taking care of transportation, and becoming the first country in the world to help the Lombardy region (even before many other Italian regions). Sure, an airplane with the Chinese flag printed on the side is more impressive, but the EU has never been very good at communication (perhaps because of the bad memories that propaganda evokes among its Member States).

Picture by DAVID ILIFF. License: CC BY-SA 3.0 The European Parliament in Strasbourg

Let’s now turn to the proposals that are being prepared and the negotiations underway in Brussels.

On 9 April, the Eurogroup approved a coordinated response at the European level for about 540 billion, with the commitment to implement a Recovery Fund for the future economic restart which would amount to about another 500 billion once this first phase is over. The first tranche of aid approved is divided into 200 billion for companies to be disbursed through the European Investment Bank, 240 billion through the European Stability Mechanism (with the only condition of being spent on the health emergency) and 100 billion of a European fund to support workers who risk losing their jobs (the SURE fund). Once we sum these instruments to the responses taken at the national level by individual member states, we obtain an amount of 430 billion in fiscal stimulus and 2,240 billion in liquidity injections [5].

As Adriana Cerretelli writes on -Il Sole 24, April 15th edition- “In simple terms, this means that Europe is ready to help Italy with 80-82 billion in loans from the EIB (20), Sure (15), unused structural funds (10-11) and Mes (36, with savings of 1.5 billion interest rates). All of this while waiting for the European relaunch plan which, with or without Eurobonds, it is known that it will take time to build. Hard not to call it solidarity.”

But let us return for a moment to the instruments agreed by the Eurogroup. Last April 17, the European Parliament approved both the Recovery Fund and a new credit line of the European Stability Mechanism (ESM), while it was said no to the Corona Bonds. As Carlo Cottarelli points out in the press, these instruments (SURE and EIB loans included) are all based on a concept very similar to that of the Corona Bond. That is, the disbursement of common debt, guaranteed by a fund made available jointly by all Member States, basically a mutualisation of debt. This is also written black and white by the Italian Office of the European Parliament [6].

Last Friday’s vote is also important for another reason. With its vote against Corona Bonds, the League party has made its position clear before the eyes of the Italian electorate. After weeks of bitter controversy over the ESM, the League refuted any doubt that the problem is not the ESM, but solidarity within the European Union. For a certain kind of rhetoric to continue, the EU must show no signs of solidarity. Not even if such gestures are directed towards our country. Unfortunately, the idea of blaming Europe for all Italian evils and the nostalgia for a weak currency, which would be catastrophic for Italy at this time, remain very much in vogue among many Italian voters – and the two main opposition parties are well aware that such beliefs must not be contradicted -. Their political future would be at stake. Be very well aware, dear readers, of alleged economists who call for a return to monetary sovereignty and at the same time speculate on the condition of political instability in our beautiful country, perhaps while they are in government [7].

To save itself from this health emergency, which is quickly turning into an economic drama, Italy must instead hope for a stronger, more supportive and more united Europe. Within this European Union we not only have our shoulders covered by a central bank that is doing our interests and a single market that will soon allow us to return exporting without duties and customs, but also, and above all, the political and economic support of 26 other friendly countries thanks to which we can jointly face the difficulties we are facing. Of course, some of these countries are not living up to the enormous crisis that has hit us. That is why we hope that we will continue to work towards the development and profound renewal of the European Union, which is an enormous guarantee for the well-being of all of us citizens. We should probably take as an example the 136 teams of international researchers who, funded by the EU, are joining their forces in trying to synthesize a vaccine against the virus.

I do not know what will be decided at the European Council on the 23rd, but I know for certain what to hope for.

Giovanni Sgaravatti

Chronicle of the EU and its approach to the coronavirus

  • On January 29th the first two cases of Coronavirus were reported in Italy (in Rome)
  • On 21 February, the first cases of local broadcasting (from people who had not recently travelled to China) were recorded
  • On March 4, the painful threshold of the first 100 deaths is crossed
  • On 6 March at an extraordinary European Council the Italian Minister of Health denounced some countries, including France and Germany, to prevent the export of health equipment
  • On 6 March the EU announces a package of 140 million, of which 47.5 million for 17 research projects involving 136 teams of scientists focussed on the development of a vaccine and 50 million for Italian companies producing medicinal products
  • On 9 March the Prime Minister signed the decree (Dpcm) “I stay at home”, asking all Italian citizens not to leave their homes except for compelling reasons
  • On 10 March the EU allocates a 25 billion euro fund to counter the emergency (10 billion SURE guarantee).
  • On March 11 the President of the European Commission publicly condemned the behaviour of some Member States to restrict the free movement of goods and in a video she addressed the European citizens saying “Today we are all Italians”.
  • On March 11 China sends a team of doctors to Italy
  • On 12 March Lagarde says that it is not within the ECB’s mandate to decrease spreads (the Italian spread soars)
  • On 13 March, the European Commission announces 37 billion in public investment using EU structural funds
  • On 15 March, the single market returns to be a de-facto single market again and shipments are allowed to transit freely
  • On 16 March the Eurogroup meeting happens online
  • On 16 March the “Cura Italia” was approved, with which the government authorized 25 billion in debt to deal with the emergency
  • On March 17, the USA NGO Samaritan’s Purse installs a field hospital in Cremona with 60 beds, 8 of which are equipped for intensive care and 60 doctors and health personnel
  • On 18 March the European Central Bank launches the Pandemic Emergency Purchase Programme for an amount of 750 billion euros (the spread returns to normal levels)
  • On 19 March, the European Investment Bank announced that it was working on a pan-European investment plan worth 250 billion euro for companies and especially SMEs. The underlying guarantee should be a fund of 25 billion euro
  • On March 20, the Stability Pact is suspended
  • On March 22, the government closes all non-essential production activities
  • On March the 22nd, 52 Cuban doctors land in Malpensa
  • March 24th, Germany is the first country in the world to receive COVID-19 Italian patients
  • 24 March, the European Commissioner for Economic Affairs confirms that the member states that will be able to use European funds to deal with the emergency 
  • March the 25th, China sends 30 lung ventilators, 20 sets of health monitors, 3,000 protective suits, 300,000 masks (plus another 20,000 of type N95) and 3,000 face shields
  • On March 26, 120 doctors, equipment and pharmaceutical products and 122 military personnel arrive from Russia. A journalist from “La Stampa” is later threatened by a spokesman of the Russian Ministry of Defence via Twitter for an inquiry into the type of aid granted and the reasons behind it
  • On 26 March the European Council meets to put in place a joint fiscal response to the pandemic. The first opponent of this response is the Netherlands, whose Finance Minister asks why countries like Spain cannot respond independently after 7 years of economic growth in the eurozone. The Portuguese Prime Minister will label the phrase as “repugnant”
  • On March 27, French President Macron gives a series of interviews to Italian newspapers where he publicly sides with Spain and Italy in favour of the Corona Bonds
  • March 28th Von Der Leyen gives an interview to the German newspaper DPA where he defines the Corona Bonds a slogan
  • 29 March, Albania sends a medical-health team to Italy to reciprocate gestures of solidarity of the past
  • On 2 April the European Commission formally proposes the SURE, a 100 billion euro fund to support unemployment caused by the emergency.
  • 8 April, Mauro Ferrari leaves the European Research Centre
  • April 8th, Schroder opens Eurobonds
  • 9 April, the Eurogroup agrees on the measures to be taken (ESM, SURE, EIB, Recovery Fund)
  • 10 April, Conte announces that Italy will be locked-down until the 3rd of May
  • On 17 April, the European Parliament approves the Recovery Fund and the new ESM credit line, no to Coronabonds

[1] Coronavirus: Is Europe losing Italy?

[2] Economics – Let us trade

[3] https://www.portugalresident.com/repugnant-pm-costa-launches-extraordinary-attack-on-dutch-finance-minister/?fbclid=IwAR2IVazHYsGqYpq_7HXTqHFAsN2qY1S2p_DKFvZYef1KEIx5kseslzq70fQ

[4] https://tradingeconomics.com/italy/government-bond-yield

[5] Economia | Commissione europea)

[6] https://europarl.europa.eu/italy/it/succede-al-pe/cosa-sta-facendo-l%E2%80%99ue-per-rispondere-all%E2%80%99emergenza-covid-19

[7] Italy’s Top Euroskeptic Made Hefty Profit From Salvini’s Bad Bet

Further readings

https://www.repubblica.it/economia/2020/03/10/news/ue_von_der_leyen_un_fondo_da_25_miliardi_per_il_lavoro_e_la_salute_-250887782/

https://ec.europa.eu/commission/presscorner/detail/en/ip_20_386

Riprende l’export di mascherine verso l’Italia: Germania e Francia costrette a piegarsi alla Ue

https://ec.europa.eu/info/sites/info/files/regulation-coronavirus-response-investment-initiative-march-2020_en.pdf

https://www.corriere.it/esteri/20_marzo_06/mascherine-dividono-ue-germania-francia-bloccano-l-export-30087c42-5fd6-11ea-96d2-d1c7db9c0ec3.shtml

https://eurohealthnet.eu/COVID-19

https://www.europarl.europa.eu/news/it/headlines/economy/20200323STO75617/coronavirus-il-parlamento-europeo-approva-la-misura-da-37-miliardi

https://ec.europa.eu/info/sites/info/files/support_to_mitigate_unemployment_risks_in_an_emergency_sure_0.pdf

http://www.mpifg.de/forschung/forschung/themen/baccaro_coronabonds_en.asp?fbclid=IwAR1BgN3iOyf3e22fzGYzoSGr1QP4TuXISqRnbAyS1S8r2QK02tssdU-oRU8

https://www.lastampa.it/cronaca/2020/03/16/news/un-ospedale-da-campo-davanti-all-ospedale-di-cremona-1.38600421

https://www.tgcom24.mediaset.it/cronaca/dalla-russia-con-amore-nel-team-di-medici-destinato-a-bergamo-anche-militari-russi-esperti-in-guerra-batteriologica_16573710-202002a.shtml

https://www.ft.com/content/d19dc7a6-c33b-4931-9a7e-4a74674da29a

https://www.corriere.it/esteri/20_aprile_07/coronavirus-ferrari-lascia-cer-deluso-dall-approccio-dell-europa-811d1a72-7915-11ea-ab65-4f14b5300fbb.shtml

https://europarl.europa.eu/italy/it/succede-al-pe/cosa-sta-facendo-l%E2%80%99ue-per-rispondere-all%E2%80%99emergenza-covid-19

https://ec.europa.eu/info/live-work-travel-eu/health/coronavirus-response/economy_it


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