Bassanini warns Draghi: “ECB loans should be binded to investments in real economy”

“There is too much financial speculation because the regulations favour short-term speculative finance and investment. To face the crisis we need to enhance long-term investment in the real economy”. The analysis of Franco Bassanini, president of the Italian Cassa Depositi e Prestiti ( http://www.cassaddpp.it/en/index.html ), is clear. The professor, former Italian minister and former member of the Attali Commission in France, critics the anti-crisis measures: Project Bonds because “they are now limited to three sectors” and ECB longer-term refinancing operation (LTRO) because “they only last few years and they are not binded to investments in real economy”.

The professor came to Brussels to meet a delegation of Italian Meps and to take part in the Round table organised by the group of Socialist & Democrats on innovative financial instruments to face the crisis. The main issue of the debate was how to boost growth. That, for Patrizia Toia, vice-president of S&D Group, is a European task: “Because of the lack of resources some States want to reduce the contributions to the European budget. They don’t understand that growth needs more European politics”.

On this point Bassanini has been clear: “Only long term investment can guarantee growth”. Capital is usually more easily invest in speculative investment. We should remove the regulations that, nowadays, favour this kind of investment”.

Under the Fiscal Compact rules, public budget constraints are going to be binding in the coming years, for that reason there is a general need to increase private investments. “The long-term investments – explained Bassanini – are long-terms in economic returns but they create jobs immediately. Let’s think about investments in optical fiber. They create jobs also in the construction sector becouse we need to install conduit, dig, etc.”. But still banks prefer more profitable investments so, he continued, “we must do something to move capital on infrastructures and real economy. It is a moral and a political duty”.

On this point he criticized Mario Draghi: “The European banking system is still suffering from liquidity constraints so we applaud the ECB because the two LTRO operations have temporarily eased the liquidity crisis. But they could not do much for medium and long term financing of the economy because they only last three years. They should last at least 6 years and be binded to investments in real economy”. The ECB loans are in fact due to be repaid within three years at a rate of 1%, but often banks take that money and lend them at a rate of 4/5%.

The president of the Cassa Depositi e Prestiti also criticized Project Bond: “The projects eligible to be financed by the PB guaranteed by the European Investment Bank are now limited to Transport infrastructure, energy and NGN (Next Generation Networking). I suggest to extend guarantees and fiscal incentives also to other European LTIs with strong positive externalities for growth and competitiveness. The international and European regulators seem to be still prisoners of a pro-cyclical and short-termist cultural approach”.

Alfonso Bianchi