RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2018 - 4. An Issue in Honour of Giacomo Vaciago

The Italian Constitution was amended seven years ago to set two new constitutional principles: budget balance and public debt sustainability. The first rule allows for a budget deficit and countercyclical budget policies when the economy suffers cyclical downswings, and in other exceptional economic conditions to be defined by special legislation. The new Constitution restricts debt financing options, excluding deficit spending as a tool to foster long term dynamics of aggregate demand. The reform has not provided automatic mechanisms to prevent violation of the principles; it also seems that the Constitutional Court will have limited power to defend them. A balanced budget will thus suffer the destiny of other relevant constitutional principles, such as the progressivity of the tax system, the fiscal autonomy of regional and local governments, equal levels of protection in the supply of public services. The application of liberal or social ethics in public policy still lacks political defenders.

While a fully fledged fiscal union exists in the US, no similar entity has been developed in the eurozone, clear proof of the incompleteness of the Economic and Monetary Union, which leads to a condition of fragility. Currently, the quest for a deep regime change in Europe in the realm of fiscal policy management seems to have disappeared from sight. Politicians are still debating whether the (possible) centralization of fiscal policy requires risk reduction rather than risk sharing as a pre-condition. The paper is an updated survey of the debate on the role of and the need for a fiscal union in the eurozone. The ultimate conclusion is that the European project is still in disarray, while populist forces are acquiring consensus in (almost) every country. The completion of the EMU’s deepening phase – particularly the orderly maintenance of the common currency – is at risk.

This paper is a revisitation of Giacomo Vaciago’s ‘‘A soul for Europe’’. Perhaps his main theses are; (i) the incompleteness of the Monetary Union: (ii) the inadequacy of the official diagnosis of the 2009-2012 financial and economic crisis; (iii) the persistent lack of a common fiscal policy; (iv) the necessity to take up the ‘‘social market economy’’ if the European Union is to have a soul. I argue that the founders of the Monetary Union did not provide the Union with the institutions necessary to make up for the national policy tools forfeited. More than a coordinated fiscal policy, some key fiscal programs are needed if the Union is to survive. However, Germany draws from its ‘‘social market economy’’ doctrine the determination to prevent the Monetary Union from becoming a transfer union. This may stall any progress in the construction of ‘‘a more genuine Union’’ for decades to come.

The paper provides a description and preliminary evaluation of the Italian Banking Association’s (ABI) 2009-2013 Pattichiari initiative, a notable experiment in banking industry self-regulation. An original governance system, based on a committee of non-bankers endowed with a significant degree of independence from the industry, was established. It explored the organisational difficulties that arose in implementing a number of banks’ commitments, aimed at recognising effectively some basic customer rights, primarily the right to switch supplier. Moreover, it introduced and managed an evaluation system that could stimulate banks to overcome difficulties. The system could be effective by publishing bank ratings and influencing their reputation. The subsequent development of legislation and exogenous regulation took over the anticipated goals of self-regulation, yet the exercise was useful in organising their implementation, and the survival of the project could have been positive. The factors that caused the experiment’s drastic downsizing are explained.

This paper analyses the interactions between the financial and the real sector in an environment where liquidity holdings is an input of the credit/investment process. The supply of liquidity is constrained in that income pledgeability limits inside liquidity, and not all sovereign debt is safe/liquid. We derive firms’/banks’ liquid asset portfolios and real investment/credit-lines provision, government bonds’ prices, the associated liquidity/collateral premia and bond spreads, aggregate investment and credit. We provide empirical evidence of the model’s predictions for the Euro-area, and the relevance of a European safe asset for the long run survival of the euro-zone.

In its start-up phase, many scholars argued that the euro would join or replace the dollar as an international currency. The use of the European currency in foreign trade and as a reserve currency, after rising significantly until 2007, has decreased considerably since the global financial crisis. The main reason for this decline is that, in recent crises, the euro area financial market appeared to be extremely fragmented. This reduced the liquidity of assets denominated in euros. One of the prerequisites for a currency to become an international currency was lacking.