The financial difficulties that began in the United States with the failure of the Silicon Valley Bank also involved Europe where the intervention of the Swiss authorities prevented the bankruptcy of Credit Suisse, one of the most important Swiss banks. A worrying situation which, however, has not dissuaded Christine Lagarde, the president of the European Central Bank, from the decision to raise interest rates to fight inflation.
The ECB’s decision to raise interest rates
Christine Lagarde acknowledged how the turmoil in the banking sector could force the ECB to stop raising interest rates. For now though, the Central Bank has decided to stick with its goals to reduce inflation and raised interest rates by 50 basis points last week.
In the last few hours, the Federal Reserve and the Bank of England have also taken similar decisions and many experts think it is inevitable to pursue this path to curb the increase in prices.
“Lagarde had no other choice – says Giuseppe Ferrandino of Italia Viva – we need to keep inflation low to reverse its course and reach the 2 percent target. However, the president of the ECB was right to say that she will monitor the banking situation before the next decisions ”.
Nicola Procaccini of Fratelli d’Italia agrees with the goal of pursuing 2 percent inflation, but criticizes the ways in which the ECB is pursuing this target. “The problem is in the sudden swerves! And on the monetary front we’ve seen a lot of that lately. First the lowering of interest rates to almost zero, which continued until the pandemic, then the sudden increase in recent months. The problem with such sharp swerves is that they create negative externalities,” he says.
Italy’s failure to ratify the Mes
The debate turns on the issue of the Mes, the European Stability Mechanism. The reform of the ESM treaty has been approved by all European Member States, except Italy. Until our Parliament authorizes the reform, no State will be able to access the Mes credit lines.
“The hesitations of the Meloni government can only be explained with an electoral and consensus logic. These small maneuvers diminish Italy’s weight in Europe” says the MEP of Italia Viva, who specifies how the approval of the reform does not imply its use.
Procaccini is open to a possible approval of the treaty, even if his party, Forza Italia, has not yet taken a definitive line on the issue. “On the ratification of the Mes we will not be ‘Japanese soldiers’, despite the fact that it is a technical pact that the Meloni government will never access. We must consider that it is one thing to ratify it, one thing is to use it ”he argues.
The doubts about the use of the Mes derive from the conditionalities that the countries that access the credit lines of this treaty must accept. These requirements, which were relaxed in the last reform, are still considered too strict by the parties that form the majority. The oppositions, on the other hand, believe that Italy does not run risks if it accesses the credit line for health care expenses. The latter, argue the opposition, would not lead to macroeconomic constraints for our country.
The reform of the Stability Pact
There is more convergence between the two MEPs as regards the reform of the Stability and Growth Pact, an issue that the heads of state are discussing these days in the European Council.
The Stability Pact is one of the pillars on which the single European market is based and provides for a series of common budgetary policy rules. It was suspended at the start of the pandemic and there are now discussions about how to reform it.
“Italy is very sensitive to the reform because we know what it means to have such strict rules for our budgets. The battle to be fought in Europe must ensure that the most important expenses for Italy, such as those linked to ecological transition and hydrogeological risk, are ‘exempt’ from the constraints of the Pact” says Giuseppe Ferrandino of Italia Viva.
Along the same lines, the MEP of the Brothers of Italy according to whom it is possible “to reduce the public debt only with an economy that works”, and for this he argues: “If the new Stability Pact is too depressing on the side of ‘growth’ it will not achieve the objective of keeping the public debt of the States under control”.