Α short story of how a country can be loaded with 40 billion euros
additional debt in just one day
In February
2012, the new Italian president, Mario Monti, meets with the
president of one of the largest Italian banks in his office. The
banker said to Monti, directly, that his bank issued private bonds of
40 billion euros total value.
"Certainly
Mr. President, as everyone knows our bank's difficult position, no
one will buy them unless you give us Italian state surety". "You
say that the Italian taxpayers must guarantee for your new huge
debts?", said Monti with surprise for the audacity of the
banker. "That's exactly what I'm saying, Mr. Monti", said
the banker, confirming his audacity. "Through the state surety I
will be able, even today, to deposit these bonds at the ECB and get
fresh money. Otherwise, the bank will not open tomorrow, the country
will fall in chaos and you government will collapse".
This is
roughly the way that the technocrat president was put in a dilemma:
should he give state surety to the cheeky banker, increasing public
debt by 40 billion euros in just one day? He asked his visitor to
wait outside his office and made a phone call to the Minister of
Finance and to the president of the ECB, Mario Draghi. They both told
him not to even think about let the bank collapse.
A desolate
Monti asked from his secretary to bring the banker back and signed
the papers of state surety for the new private debt. "Instead of
lending some money given by Draghi, the banks come to the state,
which is about to default, and ask for guarantees!", Monti
thought.
A few days
later, a message came from Brussels for their "selected"
Monti, as they observed an "abrupt" rise of the Italian
public debt which was in contrast with Monti's "mission" to
reduce debt. "With these new data, European Commission expects
from you to introduce new measures for the restriction of the fiscal
deficit of Italy", was the ending of this message.
Three weeks
later, an overwhelmed Mario Monti announced new measures in the
Italian parliament, which forced Italy in a new recession, as proved
little later.
Key
information from the article “Don't they know what they do?”, by
Yanis Varoufakis,
from the HotDoc magazine, Issue 41, Dec. 2013.
(translated by SCH)
(translated by SCH)
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