Questo blog è dedicato non solo, ma 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.
lunedì 20 luglio 2015
Save the Eurozone from the Euro
By Biagio Bossone and Marco Cattaneo
An agreement was reached last Monday in Bruxelles to try and solve the
Greek crisis. But nobody believes that the outcome will be sustainable. Alexis
Tsipras was not brave enough to go for Grexit, and accepted instead austerity
measures even harsher than the earlier ones. Combined with the negative impact
of the negotiation stalemate of the last few months, and the bank holiday that started
two weeks ago (and is not over yet), this will cause a further steep decline in
Greece’s GDP, in 2015 and 2016 at least.
The largest share of the new loans will go to refinance the old ones,
under an “extend-and-pretend” framework, and to recapitalize the banks. No
adequate financing will be made available to support domestic demand and invert
the debt deflationary spiral. The IMF predicts that the public debt / GDP ratio
will exceed 200% and has issued a strongly negative judgment on the program.
This makes it very unlikely for the Fund to adhere to the new program, and
raises doubts on Euromembers’ willingness to go ahead with it.
Greece may be too small to destabilize the world economy, but much
larger countries such as Italy and Spain, and possibly France, face similar (albeit
less extreme) problems: low growth, high unemployment, spiraling debt ratios,
lack of fiscal space and higher financial fragility. In the worst of
circumstances – say, a major euro crisis confidence – these countries might
become the epicenter of a world financial tsunami. In the best of
circumstances, their citizens will be bound to relentless economic decline.
We believe that a thorough Eurosystem reform is not only long overdue
but, regrettably, also impossible to undertake under the current European
leadership. At the same time, a system breakup, unless well planned and orderly
executed, would bring us all into unchartered waters.
Our proposed approach to exit this nightmare can be independently
implemented by each country, while it would avoid disrupting the system. A
national government, say Italy, could issue rights to tax cuts two years after
issuance. Call these rights tax credit certificates (TCCs). These are non-debt
bonds that only commit the government to reducing the tax burden of their
bearers by an amount equivalent to the nominal value of the bonds two years after
they have been issued. We’ll discuss the two-year deferral in a moment.
The TCCs are transferable, can be sold in exchange for euros, and may be
thus used to finance immediate spending. Those who sell TCCs want to get euros
to buy stuff. Those who buy TCCs want to acquire rights to future tax cuts
(which means more future savings). Financial intermediaries can buy TCCs from
sellers at a discount and either use them for future tax cuts or resell them at
a lower discount and earn a profit.
The government allocates newly issued TCCs to households and
enterprises. Many households will want to convert them to finance consumption.
Enterprises can use tax reductions to cut prices and gain competitiveness. In a
depressed economy, the new spending stimulated by TCC issuances will have
multiplier effects on output and employment. Credit prospects will improve and
banks will have an incentive to start lending again to finance production and
investment. The new output will raise fiscal revenues. As projections show, a
small multiplier (0,8) and the two-year deferral on the TCC would be enough to
avoid that the fiscal deficit in two years time would increase as a result of
the TCC-induced fiscal cuts.
The TCCs could act as a quasi-money instrument and might even be used by
the public as a currency parallel to the euro. This has raised a lot of
misunderstandings, in particular by implication that their issuance would break
euro rules. This is non-sense: the TCCs would not be issued by the government
as a currency to replace the euro. The public and the market, however, might use
them any way they wish, even as money, as for any financial instrument). The
only thing that matters is that the TCCs would make possible for the government
to engineer a huge tax cut / demand support action in a situation where no
other policy lever is available. The TCCs would enable the private sector to
monetize and spend today the tax cuts maturing in two years and allow enough time
for demand-driven output to increase and generate the fiscal revenues needed to
finance the tax cuts.
Are there risks that this program might not work?
No, there are not, if basic Keynesian macroeconomics is right, as it has
proven to be since 2008, and if expansionary austerity proves to be a deep
failure, as it has plenty shown.
Besides, TCC issuances can be supported by "safeguard clauses"
to be triggered if output growth were to generate less fiscal revenues than
First, the government could announce a commitment to pay a fraction
(presumably, just a small one) of its public expenditures with TCCs.
Second, taxpayers could be entitled to receive TCCs as compensation for
additional euro tax payments: this would be equivalent to replacing tax raises
with compulsory TCC-for-euro swaps.
Third, TCC holders could be incentivized to postpone the use of TCCs for
tax reductions by receiving an increase in their face value (equivalent to
interest income being paid in the form of TCCs).
Fourth, the government could raise euros in the market by placing TCCs
with longer maturities instead of debt bonds.
These safeguards would be much less pro-cyclical than those imposed by
the EU to secure budget targets. In fact, they would easily accommodate for
even significant shortfalls in primary budget surplus targets.
A “euro + TCC” system would be technically stable. Yet, it would be possible
for the TCCs to evolve into new legal tender, and ultimately replace the euro,
if need be. This would be a political decision. Should we get there, our
alternative approach would allow for a “velvet”, efficient, and non-disruptive
winding up of the euro.