Page 57 - Monaco Economy 131

Overcoming the handicap of public debt

by Paolo di Gaeta
With interest rates that have soared since 2022, and borrowing conditions now much more onerous,
the position of the eurozone’s over-indebted countries appears to be very fragile.

economies of the states concerned are choked the duration of the loan. What’s more, to further
and there is a rise in unemployment: according reassure the stock markets and the lenders,
to the foresight experts, this is the price of the use to which the funds raised will be put
saving the single currency, the euro. is specified in advance, and must benefit the
long-term well-being of the borrowing country:
European Bonds for the Very Long Term expansion or launch of sectors of activity
This is not at all the opinion of Paolo Di synonymous with job creation, research into
Paolo di Gaeta Gaeta, a specialist in international finance. new non-fossil fuel energy sources, artificial
More and more observers are now predicting “Increasing taxes automatically leads to intelligence, telecommunications, IT, health
that the Mediterranean “cicadas” (with Italy and a drop in consumption and an overall fall and, of course, financing environmentally
France at the top of the list: countries whose in activity: recession is guaranteed. It’s a friendly actions and the fight against global
sovereign debt peaks at 140% of the Gross disastrous phenomenon that is recognised warming”.
National Product in the case of the former, and when it starts, but you never know when it’s
the latter at 110%) can no longer carry on with going to end. Fortunately, there is another A Question of Political Will
impunity, and that it is high time for them to way to breathe new life into public finances Are these “covered bonds” a figment of the
put their house in order. And this with all that while preserving the means for companies to imagination, a utopia too good to be true?
is implied in terms of deep cuts in the different invest. This option is called “covered bonds”. Paolo Di Gaeta chuckles at this remark.
budget heads, including those relating to social These are very long-term bond issues, lasting “It's quite simply what was done during the
action and environmental preservation, without up to a century, launched by the European Pandemic. In fact, this is how the European
ruling out possible increases in taxation to authorities (Commission and Parliament). In authority was able to raise the funds needed to
further reduce the debt. addition to interest, repayment of the principal purchase massive quantities of Covid vaccine
And so much the worse if, as a result, the is guaranteed by an annual annuity of 1% for to protect the population.
From now on, this political will must pool
European resources in the name of a common
destiny, and the consciousness of all EU
leaders must reflect this, whether they are
the leaders of a country with solid finances
or those of a state whose cash flow is at half-
mast. Germany's financial health would not last
long if France or Italy were to default, since
they are among its best customers.
That said, the political class must not delay
any longer. In fact, given the length of the
implementation procedures (legislative,
banking), it takes two years to see the launch
of a European covered bond come to fruition:
we have already experienced this with the time
DEBT purchase of vaccines against Covid.
it took to launch the loan earmarked for the

And so, there’s no time to lose if we don't want
DETTE to have to resort to old, poisonous recipes to
make up for some state deficits. Unfortunately,
this was the kind of remedy implemented for
Greece in 2010”.
As a result, the country's economy has taken
DETTE DEBT sections of the population have become 57
a huge step backwards, the most vulnerable

deeply impoverished, and there has been a
huge wave of emigration, particularly among
young graduates.

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