Austerity plus Eurobonds to lift EU out of crisis
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E-mail Xinhua, May 6, 2012
Introducing Eurobonds would be the best way to boost growth in crisis-hit Europe, says former Italian Finance Minister Giulio Tremonti.
"According to the Italian central bank, our banking system is solid, and Italy is still the second biggest manufacturing country in Europe," Tremonti told Xinhua in a recent interview.
He said consumers' propensity to save recently increased due to a sentiment of fear triggered by the economic crisis.
However, Tremonti said Italy as well as other European countries have big problems arising from their public debt, which cannot be solved only by implementing austerity policies.
"So far there has been only a policy of austerity. But only adopting reforms of rigor is not enough and may even be negative... It can be counterproductive," Tremonti said.
For Italy as well as other European countries, "the right formula is not only austerity but also Eurobonds," he said.
In fact, he added, the current crisis in the European Union (EU) has its origin within the bloc's structure that lacks appropriate financial instruments to deal with difficult times.
"The EU treaties are based on positive and progressive assumptions, that is to say, on the good fortune. Good is the rule, evil is the exception," Tremonti said.
He said the word "crisis" in the EU treaties is only mentioned in special and peripheral sections, which means "the political, institutional and constitutional architecture of Europe was not built to handle the crisis."
"In recent years, this structure has been adapted to the crisis with great difficulty, using timings as well as methods different from those required, with subsequent attempts to approximate, and this for example was the case of Greece," Tremonti said.
"Moreover, the European problem was further complicated by the fact that the union is made up of 27 member states. The crisis is not over yet," he added.
Tremonti said growth is not easy to achieve not only in Italy but also at the European level, as was shown by the fact that "the latest anti-crisis move, a trillion (euros) of liquidity allocated by the European Central Bank (ECB), had no special effects."
"It was the same thing as to administer oxygen in an ambulance: it is necessary, but when you arrive at the hospital you must understand what the cause of the illness was, and it was that there are too many debts in the banking system," Tremonti said.
So that is why austerity plus Eurobonds is the right path to pursue, he said.
"In fact, while a government can easily meet austerity on its way, growth is much more difficult to achieve, and Eurobonds would help stimulate it," he said.
Proposed by the Italian government in 2003, Eurobonds include different hypotheses such as "a type issued to finance European infrastructure and investments, for example the green economy that can be a driver of development, or another type that would coordinate debts up to 60 percent of each country's gross domestic product in order to avoid speculation."
"I am optimistic that we will have both austerity and Eurobonds, whose implementation will produce positive effects also for Italy," he said.
