New Stability Pact and the contradictions of European economic policy

The EU Commission has presented the reform of the Stability Pact. The limits of 3% (deficit/GDP ratio) and 60% (debt/GDP ratio) remain, but flexibility is given to the way public finances return to these parameters. If the new budgetary formulas are not respected, the sanctions will be triggered automatically this time. Germany wanted much more attention to the accounts, Italy more flexibility. In the end, this middle ground came out. We talked about it with Giuseppe Sabella, director of Oikonova.

Sabella, what about the European Commission's proposal for the newbudgetary rules?

The reform of the Stability Pact is an obligatory step. In the sense that Europe – as a Union of 27 member states – gives itself common rules. These rules had previously been suspended, due to the pandemic emergency, and are now being reintroduced in a new form that provides more flexible paths to reduce higher debts, such as the Italian one. The time could be long: 4 years from the Commission communication, plus another 3 in the case of reforms on the sustainability of the accounts or investments in defence, technology and ecological transition. From this point of view, I see an important mediation intent to overcome those rigidities with which, more or less 10 years ago, the debt crisis and its most striking cases, Greece and Spain, were managed. However, I see a Europe that does not have a clear idea of what is happening in the world and that, as usual, is moving very slowly and in a very contradictory way. At this stage, we are risking a lot.

What does it refer to?

Understanding, as I said earlier, the need for the EU to give itself new rules for the coexistence of the 27 member states, it escapes me why, from the economic discussion in Brussels, the issue of public investment still remains outside. China lives on public investments and the USA, at this stage, has put 400 billion dollars on the plate to support companies (Inflaction Reduction Act) to combat inflation and for what we call ecological and energy transition, that is, to support companies for their conversion. As usual, we theorize and talk a lot about things that others do. The U.S. and China are moving toward renewable energy and electric cars faster than we think, who think we're the only ones who want the transition.

European programming is decidedly geared towards transition. Why do you think thereare such slowness to proceed?

Because Europe still lacks political unity, which means unity of objectives and interests. In Italy, for example, we have not yet understood that, basically, it is a capitalist transition: in particular, large investments are abandoning oil and gas. On the one hand, therefore, we have an increasingly precarious situation of the political balance in the world – see war in Ukraine – because those countries that depend on commodity exports are in turmoil; on the other hand, the transformation of industry must be monitored and accompanied. Europe does it with the rigidity of the rules, the US and China do it by investing in the economy. It is clear that this is left behind and there is a serious risk, at this point, that what some analysts had predicted in November – when the novelty of the Inflaction Reduction Act (IRA) bounced from the US to Europe – or that European industries could think of relocating / investing in the USA, as some cases are already occurring: Europe's largest copper group, Aurubis, is currently building a new plant in the state of Georgia; the chemical company Evonik, is building a new plant for the production of so-called pharmaceutical lipids in Texas; Audi, BMW and Siemens Energy are exploring the possibility of investing in the US. In short, Europe must respond decisively to this scenario. Otherwise, once again, we will lose ground.

Italy, however, is the country that most insists on the need to support companies in the transition...

Yes, Italy has long been asking for a new European fund for green industry and against inflation, along the lines of the IRA. That said, until yesterday the Italian government does not seem to me to have clear ideas about the green industry: the battle for biofuels is fine, but there are some ministers who have not understood the irreversibility of the direction that the European automotive industry has taken, oriented towards electric technology. Italy is a major supplier of components, our companies must be helped to understand the transition. If the government is the first to fight against the electric car, it is clear that rather than helping companies so we disorient them.

Speaking of European programming, what about the discussion around PNR funds?

This is no surprise. We find ourselves managing this mountain of resources with a slow and inefficient public administration. We knew this and we have already seen the waste of European funds. Now, however, the game is getting tough because I have no doubt that France – which together with us is the heart of European industry – will be able to exploit these resources. We risk not keeping up. It was said a few days ago that the government is trying to direct to Europe those projects that the companies controlled by the Treasury have planned for the coming years, so as not to lose precious resources. It's not a bad idea, but what is asked of us is a newly designed effort.

Why do you think the ecological and energy transition is a capitalist transition?

Because as Luc Boltansky in Paris and Mauro Magatti in Milan teach, capitalism chameleonically transforms, feeding and feeding on everything it encounters on its way. One of the reasons he manages to be so vital is his sensitivity to the transformations of the world. In addition, it is able to absorb criticism and make it fuel for new cycles. The current condition of digital, energy and ecological transformation is clearly a phase of capitalist transition. Today the codes around which capitalism is changing skin are the two great drivers of European EU programs, in particular of the Green Deal and the Next Generation EU: sustainability and digitalization. The contemporary capitalist form tends to reorganize itself around these two polarities. A bit like in the eighties, when the two watchwords were liberalization and flexibility. "Sustainable development" and "ecological transition" are, in fact, the new discourse of capitalist legitimation. There is always a need for a speech. And sustainability is perfect today. Of course, there are also those who really believe in it. But the important thing is to have found a good reason to relaunch production and investment. In any case, this is the beginning of a new economic cycle. And that's why the system is transformed. We have already seen it in other moments...

For example?

In the second half of the '900 the great cultural and social reaction that there was against the capitalist system, instead of causing its collapse, witnessed that of the Berlin Wall and the Soviet Union. Globalization is the natural and consequent expansion of liberal democracy, capitalism and the free market. This is how the ruling classes of the West were convinced of the "end of history" to use the words of Francis Fukuyama. The growth would have been endless, at least that was the narrative of the time. The crisis of 2008 then explained to us that nothing is over. Indeed...