Questo blog è dedicato principalmente al progetto Moneta Fiscale / Certificati di Credito Fiscale (MF / CCF), finalizzato a risolvere la crisi dell'Eurozona.
La descrizione più aggiornata del progetto è reperibile in questo post.
martedì 17 settembre 2013
Tax Credit Certificates - Certificati di Credito Fiscale (CCF): Q&A
Q1. What does the CCF project propose with respect to Italy ?
A1. To issue each year 200 billion in CCF, which are monetary government
Q2. What does “monetary government bonds” mean ?
A2. The Italian government will not reimburse CCF. Rather, starting from
two years after their issuance, CCF will be unlimitedly accepted to fulfill
financial obligations towards the Italian state, including taxes, public
pension contributions, national health system contributions etc. Such payments
will be indifferently and validly made either in euros or in CCF.
Q3. Are CCF an equivalent of money ?
A3. They are deferred Italian money.
Q4. Why the two years deferral ?
A4. Because when they will be used, CCF will ceteris paribus reduce Italian governmental euro receipts. The
deferral allows the Italian economy to recover and to generate higher tax
receipts, which will offset this.
Q5. Who will receive the CCF ?
A5. Private enterprises, workers and the State itself. Proposed
breakdown is approximately 80, 70 and 50 billion respectively.
Q6. As concerns private enterprises…
A6. …they will be bestowed CCF based on their labor costs. Eg a company
paying 100 euros in total labor costs (gross of taxes and social costs) will
receive 20 in CCF. This for lower salaries; for higher compensation levels, the
CCF weight on gross salaries will be much lower, based on a layer mechanism.
Q7. What about workers ?
A7. Again, an employee with a 100 salary (net of taxes in this case)
will receive 20 in CCF (much less for above average salaries).
Q8. Enterprises and workers will then receive free of charge a
significant amount of CCF, of “deferred money”. What will they do with that ?
A8. They will either wait two years and use them upon expiration to pay
their taxes or whatever they will owe the government, or they will convert them
into cash (ie into euros) before expiration.
Q9. How will the conversion take place ?
A9. CCF are just a new category of government bonds. At the end of the
second year following the introduction, there will constantly be 400 billion of
CCF outstanding. An active and liquid market will develop.
Q10. How expensive will be the conversion ?
A10. The market price will imply a financial discount, presumably
similar to the one applicable to a zero coupon two-year bond. It should be
noticed that a CCF is safer than an Italian government bond.
Q11. Why is it safer ?
A11. The Italian government might default on a euro debt obligation. CCF
will retain their value even under a default scenario – as the owner will have
the ability to use CCF to pay taxes or whatever is due to the state.
Q12. Who will buy CCF ?
A12. The ultimate buyer will be somebody who has to fulfill taxes or
other financial obligations towards the Italian state.
Q13. Why 50 billion will be further bestowed to the Italian state itself
A13. To put in place further actions to support demand, including
supplementing income to financially distressed families, improving the National
health system, speeding up payments of overdue bills to government suppliers, rebuilding
parts of the country affected by earthquakes, etc.
Q14. Why does the project call for issuing 200 billion in CCF annually ?
A14. Because the financial crisis and the eurocrisis caused a huge
output gap to Italy.
Q15. How big is the output gap ?
A15. Assuming the potential GDP growth to be 1.5% per year and further
assuming that in 2007 Italy was at full employment (both conservative
assumptions) the output gap currently is € 300 billion.
Q16. CCF to be issued are 200 billion per year, not 300...
A16. This is because a multiplier effect – more demand will stimulate
more production and income, thus further demand – is expected.
Q17. What is the rationale behind the 200 billion breakdown - private
enterprises, workers and the State itself being assigned 80, 70 and 50 billion
A17. The actual breakdown will be a political decision. Having said
that, a key point is the size of CCF bestowed to private enterprises.
Q18. Why ?
A18. Because Italian unit labor costs must be realigned to Northern eurozone
countries’. 80 billion is approximately 18% of total Italian private
enterprises labor costs.
Q19. Which realigns Italian competitivity with Germany ?
A19. Yes it does, as effectively as a currency realignment (which
implies breaking up the euro) would.
Q20. This is to avoid trade imbalances…
A20. …as supporting Italian demand would otherwise imply increasing
Italian net imports and creating a permanent trade deficit.
Q21. Realigning Italian competitivity to Germany would instead…
A21. …increase Italy’s net exports, which will offset higher imports due
to the economic recovery.
Q22. Will Germany be negatively affected ?
A22. No, because Italy will increase both exports and imports (including
from Germany). The total effect is approximately neutral as concerns both
Italian and Germany trade balances, as both countries will expand imports as
well as exports.
Q23. Will the Italian public debt keep on being euro-denominated ?
A23. The existing one will. It is recommended to refinance the euro
public debt, upon expiration, by issuing further CCF – ie refinancing the
public debt with monetary instruments, which do not carry any default risk. This
will make impossible for the 2011 sovereign debt crisis to occur again.
Q24. Do the CCF – the 200 billion issued on an annual basis – increase
the Italian public debt ?
A24. No, since CCF are not debt. They are money. There is no obligation
to reimburse them.
Q25. What do you expect as a reaction from European authorities, eurozone
partners, and the financial markets ?
A25. The CCF project makes the euro monetary system sustainable without
implementing a transfer union and without breaking up the euro. Nobody asks for
any money to Germany, and no Italian financial asset is converted in a weaker,
newly introduced currency.
Q26. Do current treaties, particularly the fiscal compact, need to be
A26. As it is today, the fiscal compact is inapplicable. On the other
hand, Germany pushed for it out of concerns of having ultimately to assume
responsibility for Southern eurozone debt. The CCF project has the capacity to
trigger a strong recovery and to make the South solvent.
Q27. What does make the fiscal compact inapplicable ?
A27. It calls for a reduction in the public debt / GDP ratio which is
just too quick to be implemented. Italy should continue to raise taxes and / or
to cut public expenditures, year after year, causing the GDP to further drop,
which is self-defeating in terms of compliance with the debt / GDP reduction
Q28. So must the fiscal compact be repealed ?
A28. Yes, unless it is accepted that CCF are not debt (which is true). Based
on this and taking into account the possibility to issue “refinancing CCF” as
the current debt gradually expires, the public debt / GDP ratio can be quickly
reduced. This would be a huge positive both for Italy (which will become
independent from financial markets’ gyrations) and for Germany (which will have
no further concerns with having to pay for Italian debt).
Q29. Do CCF risk producing inflation ?
A29. The CCF project triggers a powerful recovery, but this does not
create inflation risks as unemployment and unused production capacity are
currently very high in Italy. No inflation risk exists as long as a significant
output gap is still there.
Q30. Why do you prefer the CCF project to breaking the euro up ?
A30. Because it can be openly and properly discussed and does not imply
any risk of taking place disorderly and of creating panic, bank runs etc. Because
Germany is not forced to abruptly revaluate her currency. Because no financial
asset where an Italian resident is the debtor has to be written down. Because
no redistribution effect takes place and no litigation arises. Because Italian
citizens’ savings are not suddenly converted into something different, that is
Q31. Should the CCF project be adopted in countries other than Italy ?
A31. It should, in each eurozone country which currently suffers from a
significant output gap, particularly if this is associated with lower competitiveness
(ie higher unit labor costs) than Germany’s. Allocations of CCF will, of course
differ by total amount and breakdown, depending on each country situation.
Q32. Will CCF evolve and become the circulating national currency ?
A32. The CCF project will work even if CCF are not used for daily
transactions. Having said that, exchanging them via credit cards or other
electronic supports is a possibility. Presumably labor contracts, rents, real
estate transactions etc. will increasingly be CCF-denominated. It is conceivable
that, a few year from their introduction, CCF will actually become the national
currency in the adopting countries, while the euro will be used as a unit of
account and in some international financial transaction (such as was the case with