Italian Official Has An Idea For The ECB: Just Cancel The Bonds You Bought

Italian Official Has An Idea For The ECB: Just Cancel The Bonds You Bought

In comments that are sure to rankle critics of the current policy conjuncture that finds central banks accommodating fiscal spending aimed at resuscitating economies in the wake of the pandemic, an Italian official is now advocating for the ECB to cancel some of the bonds it bought this year. Riccardo Fraccaro, cabinet undersecretary to Italian Premier Giuseppe Conte, insisted that "monetary policy must support member states’ expansionary fiscal policies in every possible way." Fraccaro, spe
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5 thoughts on “Italian Official Has An Idea For The ECB: Just Cancel The Bonds You Bought

  1. It sure can. But should we?

    The issue there isn’t that Italy should live “within its means” or any such tripe to justify austerity and ‘blaming the poor’. But even MMT notes that the fundamental issue is real assets and the ability to mobilise them.

    My issue with Europe (and I’m French, just to be clear) is that, while I believe we should be a lot more redistributive when it comes to the uber-rich (the billionaires but not the millionaires), we should also ask ourselves why there’s been so few successful high tech start-ups etc.

    I no longer know much about Italy but, from courses on industrial economics, it was specialising in low and middle added value products. In a free trading environment, it may well means they’re suffering from international competition by emerging market countries.

    Should we consider closing the block further to intl’ trade? When it comes to China, yes. But others, like Vietnam or Turkey or Tunisia? I’m not convinced.

    So – yeah. I’d like to understand how much wealth Italy does produce, if or why that’s not enough for Italians and what’s their plans to grow their pie before forgiving “debt”/financing bridges to nowhere…

  2. I can answer to that. In Italy is really hard to build wealth legally. This is mostly because of high taxes and bureaucracy, but also because of lack of opportunities. The wealth is mostly concentrated on the hands of the old generations, and for the young the only chance is immigrating (I am an Italian immigrant as you may have immagined).

    Regarding the products, I think that now we mostly have highly specialized industries producing high-end products (think of fashion, mechanics, food). But the problem with international competition is again mostly taxes, burocracy, and lack of investments. To give you an idea, gas is now 5 euro a gallon (it was 6 few years back) and there are not many people willing to pay 50,000 euro for a tesla.

    1. Thanks for the answer. To a degree, I think that applies to a lot of European countries, France included. Italy just seems to have the same diseases but somewhat worse.

      That said, I wouldn’t call fashion, mechanics or food high value or high tech products. They might be highly specialized (asides of commodities, what isn’t?) and they might be high end (high quality) but that doesn’t necessarily make them dynamic sectors on their own and/or having powerful multiplier effects on local activity/local employment.

      NB: I am sure of nothing in what I’m saying above. I’m generally speaking a demand-sider (Keynesian, post Keynesian kind of guy) rather than a supply sider let alone an austerity tea partier but, in lots of parts of Europe, I suspect supply sided reforms might really help…

  3. Pleased to see a mention of swapping into perpetuals. Zero coupon perps make the best sense, but I guess a fractional coupon would have to be slapped on to appease the Calvinists.

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