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Questo articolo è stato pubblicato il 15 gennaio 2012 alle ore 16:33.


It is true that the S&P's downgrade of several euro area countries said nothing new, as many people observed. However, it is important because it confirms that continental Europe's perception of reality is very different from that of the rest of the world.

In the euro area the new year started with optimism: the spread of peripheral countries was narrowing especially for short maturities, public debt was sold at auctions without too much trouble in several countries, banks were no longer snowed under thanks to the three year financing given by the ECB, an there were some steps forward towards completing the new agreement on Europe's economic governance. In short, there was starting to be the sensation that maybe a turning point in the crisis was not so far away.

S&P's downgrade signals that the rest of the world sees the euro area's problems in a very different way. Southern European countries risk entering a serious recession that could neutralize their efforts to shore up public accounts. The European Central Bank's expansionary monetary policy is still not enough because it tries to cure the symptom (banks' liquidity and financing problems), but without facing the real problem that is the lack of confidence in sovereign debt, and its communication still seems to be wrapped in complicated but useless rituals. European agreements are inadequate because they regard exclusively fiscal austerity. Summing up, the euro area is more than ever in the eye of the storm.

Be this justified or not, the skepticism from the rest of the world cannot be ignored because it risks becoming a self-fulfilling prophecy. The EFSF fund will have a hard time maintaining a triple A. Italy's downgrade to BBB+ will help make foreign investors shy away from our public debt, making its cost rise precisely when significant amounts are maturing. In addition to this, there is the uncertainty over the Greek crisis that risks exploding from one moment to the next.

To overcome the crisis a more marked turnaround is needed from Europe. It cannot be only up to the resources of the EFSF and then the ESM bailout fund or the hope that banks resume buying public debt because they are forced to do so by the pressure placed upon them by national authorities. The numbers at stake are too high. To bring back confidence and to interrupt the break of the European financial markets, the only alternative is for a greater and more transparent involvement of the ECB directly supporting sovereign debt.

The downgrade reflects a negative view towards the entire euro area, not towards Italy, which was subjected to a downgrade despite the appreciation for the steps forward that were made in these months.

However, also for Italy, S&p'S decision is an important signal of what really is our economic situation. Let's be careful not to get our hopes up and think that most of the work has already been done. Precisely the opposite is true. The work to transform the Italian economy has yet to begin and it is essential in order to resume growing. There is no more time to waste in mounting rearguard actions to defend privileges on the labor or products markets.

(translated by Yael Schrage)

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TAG: Europe


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