A means of depriving State Financial Sovereignty, for our economy and future

The ESM (acronym of European Stability Mechanism) has existed for some time, as a financial body, a sort of guarantee syndicate ancillary to the debt economy to which we are subject on the banking markets.

The Covid effect and the related “financial support instruments” (this is the sold image of these financial transactions that add up to the national debt status) has “silenced” the economic issue relating to the ESM which is still in force and looms over the economic structure of Italy. It is good to recall some points, mentioned below and previous, relating to what is in place for the ESM “financial product” paid by the “Customer” Italy whose conditions have NOT changed and continue to remain additional and active, in addition to the “new” financialisation operations subservient to the Recovery Fund, with further supply diktats, in progress.

But let us pay attention, again, to the “past” mechanism of the ESM, forgotten, silenced and still in force. With the ongoing evolutions, which are the subject of national and European discussions, this organism will now be consolidated in a dramatic way to save the German banks, exposed more than any other in Europe not only on the basis of debt exposure parameters – which is not simply public debt, a relatively small thing, but the aggregate of all the public and private bank money supply of each state – but due to the “chasm” of sub prime derivatives of the US markets which they hold in addition to many other products (“thousand leaves and assignments of various credits, boring stuff to explain but financially defined as “toxic” and part of a real financial market) compared to Italian banks that are less exposed (fortunately) and more shrewd in terms of financial management.

Now with Brexit (and the British were right to free themselves from EU dictates, which is possible by virtue of their sovereign currency, beyond exposure in Euros) the ESM is weakening due to the withdrawal of British participation and as the banks are the most solid, Italy was asked, already in 2019, to “pay” over 120 billion to consolidate its position with respect to the “changed” cash scenario.
But this is a real “own goal” for Italy.

This has not been talked about for some time, with the silence induced by Covid 19 health emergencies and related “debt” financial transactions in progress. By pulling out all this money (where and how will such a figure be produced?) which is worth 3/4 of the financial “tears and blood”, the debt exposure gets worse (the public debt which – remember – is NEVER repayable but is an Indicator of private property mortgage for financial assets in each country) and the “rating” which will “dispel” institutional buyers in the Italian government bond markets (primary) and which will induce changes in interest rates with deviant effects on the spread. This will mean not having easy access, under current conditions, to other public loans on private markets (the operational-financial shame that has been active since the time of privatizations) making the Italian economy at risk of “default” due to a necessary “restructuring” of the debt, due to the fact that in order to “plump out” our ESM share, the total debt rises and is – further compared to the current situation – “REFINANCED”.


What is the “torpedo” that awaits us?

With a restructured debt, in addition to no longer having easy and normal access to the sale of government bonds on the financial markets, paradoxically, one cannot benefit from the ESM due to the financial crisis induced/prospective by a worsening of the debt exposure to which we would inevitably go encounter.
This would deprive us of the support ownership of the state-saving fund and, therefore – in the “vulgar” language – we would be “screwed” twice. So: we pay. The beneficiaries are the “irresponsible” German banks exposed to the risk of default and salvageable with our money, and in addition we worsen our debt exposure and are no longer eligible for financing as we have been until today. Why does this availability of 120 billion euros exist – and could be destined for many URGENT activities for the nation, for social issues, for public spending, to produce work, to reduce the tax burden – or if “non-existent” … is request to the already oppressed population? Do we just want to think about what a required spending capacity of 120 billion euros means for the nation?

  1. Further and improper/vexatious growing taxation, with weakening of the productive and business faculties of national companies with special attention to SMEs. This results in LESS WORK and worsening/ precariousness of the existing one.
  2. Worsening of the market rating for the sale of government securities with financing from international banks (primary market) required for public management and related expenses.
  3. Worsening of the ability to place securities also on the secondary market of national banks which will hardly invest (this too is a source of financing for the state, which was “on credit” in times prior to neoliberalism) in them, reducing the economic potential of the nation with inevitable repercussions and cuts in the expenditure of public and related services.
  4. Deterioration of the general conditions of the economy induced by private banking stagnation which, in worsening conditions, will further restrict access to credit for businesses and individuals as a result of the compromised stability criteria as above. This will mean less wealth and spending power, blocking the availability of access to current accounts and further actions to reduce the use of cash; the only convertible spending resource for the weakest sections of the population. Final results? Risk of COMMISSIONER, style that already suffered by Greece!! That is, the “sale” of the Nation…

Let’s add these financial harassments, “in debt” to the nation, to the frighteningly induced crisis by the pro-Covid 19 social and economic phenomenology, and we get a “lethal” cocktail for our survival. In addition, there are rumors regarding economic issues, through “improper” slogans from some sources, that the ESM is an expression of Financial Sovereignty on the part of the Member States and participants in the operation heralded as “salvation”. This is a “flagship” proposal totally far from reality. It deals with Sovereignism with “deviant” commentaries. It is like saying that the Banks have your interest at heart as a customer. This is certainly not the case if they “lend” you money at interest (financial and not ethical).

The proponents of pseudo financial “sovereignty-salvific” ideology in favor of the ESM do not speak of the nature of the global financial mass of each nation, private and public (of which the Public is a minority component) or rather of the Banking Aggregate Debt, “reality” hidden in the national financial ledger which is, sadly and truly, supranational and an expression of debt vexation.
It is a reason for doubt to ask what is the use of “getting out YOUR OWN money (where do we get 120 billion?) to “create” an insurance fund at one’s own expense for one’s own debt, “binding one’s head before the damage”, when it costs a lot less, if necessary, to borrow “lower” amounts than those envisaged by these agreed quotas, for a “forecast” level of financial crisis that “we do not have today” and is feared as such “sending us into crisis” – immediately before of a crisis – making us spend more and sooner on costs to cover forecast “default” that is not guaranteed to occur.

This is a way through which we “finance” a Guarantee Fund which, instead, should be allocated by conservative procedure by the ECB and Ecofin through sector businesses in the financial world with “further” necessary loans – for now NOT necessary and not through the “imposition” of the fund to be paid by the States “financed” and “subservient” to the Loan/Debt. In the United States, Banks’ credit exposures are the subject of the financial insurance market through Institutions such as Freddie Mac and Fannie Mae.

It is true that these institutions acquired Sub Prime credits which were then difficult and partially repayable. But, in any case, they are the expression of an expected “sustainable” financial architecture that prevented the total implosion of the American banking system in the 2006-2007 crisis.

A real financial protection body, totally absent in the EU, and to which the banks “terrified” by the solvency of the EU Member States “yearn” and which, as such, should provide for the management of appropriate already existing insurance products (Credit Default Swaps) on the market. It is true that, unfortunately, the Financial reality is not Ethical and within the scenario the solutions are generally hidden/speculative orientation tools on the pro-default financial trends of the States etc.
But the MES solution – does NOT even provide for any of this, as a normal practice of “securitisation” of the markets. Worse: it provides for the privilege according to which the Creditor/Lender must NOT expose themselves to any default risk of the Client/Debtor States, “adding expense impositions” to those who have already requested a loan.

The opinion in favor of the ESM is obviously “spoiled” by those who are part of the pseudo-alternative-insurance body envisaged and who “sell” the idea even boasting of improper and false sovereignty (the insurance companies – normally – ask for insurance premiums on the risk default as a percentage of the damage and DO NOT ask for the amount of the damage itself as a total provision – guarantee for events subsequent to the stipulation). ‎

An example: it is as if a Bank, making a loan of € 1000 to a Customer, to protect itself from the risk of insolvency, asks the Customer (who has requested a loan and perhaps because, almost certainly, he needed it) to pay € 1000 at your expense (which you do not have due to a loan request) being “denied” the credit, therefore, with the attribution of a negative rating. Wouldn’t it make more sense, as normally happens to protect bank credits, to take out an insurance policy whose cost is a few “percentage points” on € 1000? Or rely on a Guarantee Consortium which, albeit with higher costs (generally by the decimals of the expected Credit but certainly NOT for the total amount lent) is a Credit insurance instrument, but is a Third Party between the Bank and the Customer?

Ecofin/EU which meets periodically to assess the credit and budgetary merits of “indebted” states, therefore, does not evaluate the financial engineering of the case – as happens in the USA? Let’s add yet another element that highlights the “real intentions” of these Private Financial Institutions which charge (despite being money creators) enormous sums to the Member States with participation quotas, re-lending of quotas but with “cut” financial procurement obligations if requested.

Against the disproportionately high Participation Quotas in the Salva Stati Fund, Italy, for example, is entitled to a “financing” or cash back of € 37 billion; that is, he will pay the money he has already invested at “subsidised” interest to get back “a part of it”. How can we not define these membership and “service” clauses as anything other than vexatious?
Is there anything else to add without getting technical? But the answer is only one and very technical. The American Fed Federal Reserve bank – despite being a public/private institution (with mixed private capital operating under public law) is a lender of last resort; which the European Central Bank is not. And due to this technical financial-legislative “gap” (certainly not an error but a financial strategy) the Nations are obliged – without freedom of any kind – to have to expose themselves in a “multiple” way on Credits granted to Them.