Stability Pact, pro-Italy proposal. More time to pay off debt
From the German economist Klaus Peter Regling comes an unexpected assist for Italy. the director general of the European Stability Mechanism, created to grant resources to countries in financial difficulties, opens a possible favor to countries with a very high public debt. Regling’s idea – reads the Corriere della Sera – is to revise upwards the constraint envisaged for the public debt from 60% of the gross product (GDP), established in 1991 with the Maastricht Treaty, up to 100%. The road that Italy should cover would be shorter and perhaps to be taken at a less unsustainable step, because we also envisage a revision of the law that requires a reduction of the debt by one twentieth of the distance from the threshold every year.
Regling’s proposal – continues the Corriere – overturns the minimalist strategy that circulates in Berlin. The adjustment of the debt threshold to 100% reflects the fact that the interest cost, much lower than thirty years ago, makes nominally higher charges more sustainable. According to the ESM study, this adjustment of the rules would require the unanimity of the 27 governments but without complicated changes to the European Treaty with relative national ratifications. For clarity: if the European rules were to come back into force in 2023 as they are written today, Italy would have to reduce the public debt by almost 5% of GDP per year (never happened since 1947), or end up subject to a procedure of Brussels for many years.
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