A manifesto to turn around Europe

Rightly or wrongly markets yesterday proved that they are still strongly perplexed on how effective the Italian measures to shore up public accounts and to re-launch growth will be. And certainly it is first of all up to Italian politics to give clear and incisive answers, with the strength of the facts, in order to eliminate all doubts that remain.

Italy is still paying a high cost for Europe's incapability of indicating decisive solutions to the sovereign debt crisis. European leaders in their constant search for an answer that can appease markets are like Achilles in the footrace with the tortoise in Zeno's famous paradox: in July, like last week, the objective seemed to have been reached with an inflated deal that injected enthusiasm to spreads and stock exchanges. But just a few days were enough, the time needed to study the details of a deal that for certain aspects is still vague, to realize that the tortoise was already ahead and market confidence once again slipped away.

It was not enough to impose on Greek creditors a 50% loss on their holdings, a bank recapitalization that is estimated at over 100 billion and a strengthened bailout fund that has firepower of over 1000 billion but in still an undetermined way. The new fund will in part act as an insurer and it will partially have to lean on special vehicles (SPVs) to which the FMI, sovereign funds and private

investors will take part in (but to what extent and how?).

In light of this draining cut and paste job by the 27 European leaders, which forces them to go into the G-20 exam in Cannes Thursday and Friday with solutions that are still not entirely satisfactory, it seems clear that a change in direction is necessary. For this reason, il Sole 24 Ore tried to identify a few key points that could allow Europe to really make a leap forward, to defuse the sovereign debt crisis and to boldly go before its partners. Obviously, the opposition from the states to give more powers to Brussels would have to be overcome and the barriers that still limit the European banking sector would have to be knocked down. Then, German resistance to Eurobonds, both for infrastructure projects or in general, has to be neutralized as does its opposition to a broader role for the ECB, allowing it to act more effectively to safeguard economic and financial stability and to favor growth.

These seem to be the five key points to come out of the crisis. Quickly moving towards a real economic Government, deciding rapidly whether to follow the road of a super EU commissioner, undertaken by the EU Commission of José Manuel Barroso, or undertaking the road of a European Finance Minister, proposed by the outgoing president of the ECB, Jean-Claude Trichet.

The Euro project bond, or common bonds aimed at funding large projects, is an effective tool to support growth, by channeling resources towards infrastructures that can stimulate competitiveness. To dispel market doubts, then, Euro union bonds would be precious as they would allow Countries in difficulty to re-finance at lower costs part of their debts, benefiting from guarantees from the European Union and from the more virtuous European partners.

Finally, knocking down the constraints of the common credit market that prevent banks from funding themselves in Countries where it would be more convenient. Barriers that remain and that are defended by national supervisory authorities; the result is that capital cannot circulate and competition within the European Union cannot really take off. There are five points that could help Europe, which had the ambition of having a common currency but not a single Government, to come out of this phase of incompleteness and to give it a mature and well defined standing, for the benefit of everyone.

Now that the euro has been created, an economic government is needed

The ECB has to be able to act, like the Fed, in favor of financial stability

A bond to create infrastructures for the growth of the Continent

A bond to narrow spreads and reduce difficulties

In the banking sector a real single market has to be created

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