Articolo Voxeu - bozza

Stiamo preparando un articolo su crisi economica e modalità di soluzione. Dico "stiamo" perché dovrebbe uscire a firma congiunta Biagio Bossone - Marco Cattaneo - Giovanni Zibordi e forse anche Warren Mosler.

Su Voxeu.org, rivista online di politica economica. Eccovi un primo draft della mia parte sui Certificati di Credito Fiscale. Per chi conosce l'inglese peggio di me, un ripasso (anche) linguistico. Da chi lo conosce meglio, graditi suggerimenti (non necessariamente solo) linguistici...

 

It is proposed that Italy issues 200 billion in CCF (Certificati di Credito Fiscale = Tax Credit Certificates) each year.

CCF are monetary government bonds: the government will not refund them. Rather, starting from two years after issuance, CCF will be unlimitedly accepted to fulfill any financial obligation towards the Italian state (taxes, public pension contributions, national health system contributions etc.) Such payments will be indifferently, validly made either in euros or in CCF.

CCF basically are deferred Italian money. The two years deferral is necessary as CCF will ceteris paribus reduce governmental euro receipts. The deferral allows the economy to recover, generating offsetting tax revenues.

CCF will be issued free of charge to private enterprises, workers and the State itself. Proposed breakdown is 80, 70 and 50 billion respectively.

Private enterprises will be given CCF based on their labor costs. A company paying 100 euros in labor costs (gross of taxes and social costs) will receive 20 in CCF. This for low salaries; for higher compensation levels, the CCF weight on gross salaries will be lower, based on a layer mechanism.

Similarly, a worker with a 100 salary (net of taxes in this case) will receive 20 in CCF (less for above average salaries).

Enterprises and workers will then receive free of charge a significant amount of “deferred money”. They will either use CCF upon expiration to pay taxes or whatever due to the government, or convert them into cash (euros) before expiration. The market discount will be presumably similar to a zero coupon two-year government bond.

It should be noticed that CCF are safer than “normal” government bonds: while Italy might default on euro-denominated debt, CCF will retain value even under a default scenario, as the owner will use them to pay taxes or whatever is due to the government.

An additional 50 billion will be given to the Italian state itself, to implement further demand-support actions (supplementing income to financially distressed families, improving the national health system, speeding up payments of overdue bills to government suppliers, etc.)

Issuing 200 billion in CCF annually is proposed because the crisis caused a huge output gap. Assuming the potential GDP growth to be 1.5% per year and further (conservatively) assuming that in 2007 Italy was at full employment, the output gap currently is €300 billion. Issuing 200 billion per year (not 300) is proposed because of the multiplier effect: more demand will generate more production and income, thus further demand.

While the breakdown (80 / 70 / 50) is a political decision, a key point is the size of CCF given to private enterprises. 80 billion is approximately 18% of total Italian private enterprises labor costs. Issuing CCF to partially offset labor costs realigns Italian competitiveness with Germany, as effectively as a currency realignment would.

This will avoid trade imbalances, as supporting demand would otherwise increase Italian net imports, creating a trade deficit. Improving Italian competitiveness will compensate this by increasing net exports.

Meanwhile, Germany will not be affected, because Italy will increase imports, including from Germany: the net effect on both the Italian and the German trade balance will be approximately neutral (both will expand imports as well as exports).

In addition, it is recommended to refinance the Italian public debt, upon expiration, by issuing further CCF – ie refinancing it with monetary instruments, which do not carry any default risk. This will avoid a 2011-style sovereign debt crisis to occur again.

As concerns treaties (particularly the fiscal compact) Germany pushed for them out of worries to have to pay for Southern Eurozone debt. But the fiscal compact calls for a reduction ratio which is just impossible to achieve. Italy should continue to raise taxes and / or to cut public expenditures, year after year, causing GDP to further drop, which is self-defeating in terms of compliance with the reduction targets. To meet the targets, it should be accepted that CCF are not debt (which is true, as they are not to be reimbursed). Taking also into account the possibility to issue “refinancing CCF” as the existing debt gradually expires, the public debt / GDP ratio can be quickly reduced. This would be a huge positive both for Italy (which will be shielded from financial market setbacks) and for Germany (which will have no further concerns to have to pay for Italian debt).

As concerns inflation, while the CCF project triggers a powerful recovery, unemployment and idle production capacity are currently very high. No inflation risk exists as long as a significant output gap is still there.

The CCF project is much more efficient than breaking the euro up. It can be openly discussed and does not risk to create financial panic and bank runs. Germany is not forced to revaluate her currency. No financial asset has to be redenominated. No redistribution effect and no litigations arise. Italian citizens savings, salaries, pensions etc. are not converted into a different, lower-value currency.

In addition to Italy, each Eurozone country suffering from a significant output gap, particularly if associated with higher unit labor costs than Germany’s, should introduce CCF. Amount and breakdown will, of course, differ, depending on each country situation.