Is the multilateralism the future of Europe?

The future of Europe: Three women at the helm of international organizations like IMF, EU, and ECB, and one in the capacity of Treasury minister of the most powerful Nation in the world, soon led by a president who has not skimped on integrating her staff with prominent female characters in their professional field.

Could the fortunate anomaly, concerning the past, of such a large coexistence of female figures at political and institutional leaders be the harbinger of a significant change of pace in the geopolitical field? There is an urgent need for initiatives marked by the courage and wisdom necessary to face ambitious challenges that the present context of global economic-pandemic crisis will make inevitable shortly. And first of all in the desirable spirit of a renewed multilateralism, to the advantage of rules for a community of states that is made up of men, or rather of social animals naturally reaching out towards a sense of cooperation, incompatible with extreme nationalistic individualism.

But these are challenges for which we are already beginning to equip ourselves. The expectations placed on the recent EU-US dialogue proposals are high, as emerges from the text of their new collaborative agenda for global change. Which includes significant commitments on the main geopolitical issues currently under discussion, starting with the establishment of a Euro-American council dedicated to trade and technologies, a Transatlantic AI Agreement and a joint leadership on reforming the WTO.

While not encouraging indications on long-term economic development are reported by the IMF, which believes that new technologies, specifically connected to robotics and applications of artificial intelligence and automation, risk widening the gap between rich and poor countries, shifting greater investments in advanced economies where automation is already present.

With the negative consequence of threatening to replace, rather than integrate, their growing low-cost workforce, which has traditionally been the advantage on which the development of globalization has rested.

Furthermore, another behavioural paradigm that should be definitively debunked, to facilitate economic recovery on a global basis, is that of so-called shortism. Revealed by how the stock market, particularly the US, has so far encouraged publicly traded companies to prioritize short-term, preferable over long-term, and society-wide profits. With the consequence of a growing rift between stock markets and the real economy, massive growth of intangible assets and above all the growing irrelevance of the labor factor for capital. From this point of view, however, the Next Generation Recovery Fund (NGRF) marks a change of historical step in the measure in which it configures a long-term planning starting from the opening words of its title. And then because it is focused on issues such as: climate, education, transport, etc. All themes, to quote Jeffrey Sachs, foreshadowing a future different combination of prosperity, lower levels of inequality, and environmental sustainability.

In evaluating the implementation methods of the NGRF, the domain of digitization must also be considered. Thanks to this, technology and finance, the current drivers of political capitalism, are consolidating the pre-eminence of immateriality over materiality on the economic level, of platforms over industrial plants. While Covid has put a lot of its own in accelerating the advent of the premier, on a geopolitical level, the strategic value of information and the related algorithmic profiling. And in accelerating at the same time also the confluence of capitalist development under the aegis and the wing of politics, guided by intentions of neo-protectionism, of debt conditioning, but above all of state interventionism imposed / required for the needs of entrepreneurial rescue.

But positive expectations should also be associated with the work of the G20 for 2021, and with its presidency in particular, which now belongs to our country. Broad is the agenda of the issues to be submitted but, given the peculiarity of the Debt / GDP ratio that will characterize our country a few years from now, the focus of the geopolitical debate pinned on financial stability and sustainability in supporting resilience to emergencies will be very appropriate. global. A debate that is inseparable from that on the sources of taxation with which to repay the state debt. Largely hindered by Trump’s positions on the possibilities / methods of applying the Webtax, by the apathy of EU member countries towards the application of a minimum corporate tax rate, or limits on the deduction of interest expense for tax purposes. But also hampered by the matter of countervailing duties (Boeing-Airbus) now made potentially more harmful for EU countries by the possible application of these duties to the import of aircraft produced in the US by Great Britain in Brexit. A phenomenon, the latter, which however gives Italy the opportunity for a more incisive and proactive role of internal diplomacy, on proposals that can see us as a strategic balance between the two drivers: France and Germany.

The ECB already declared that it wants to expand its QE at least until March 2021. That suggests a lower use could only occur if the markets buy the debt at convenient conditions. From this point of view, the approval of the NGRF may itself constitute one of the conditions suitable to push the markets to buy with further lowering of country spreads, even if significant risks are still visible on the horizon. Brexit without a deal represents, in fact, a financial unknown still unfathomable a few days from the end. And, again, the risk of delays in the much-desired departure of the NGRF program, following a response not in line with the expectations, by the EU Court, on the legislative text which, definitely turning a blind eye to the rule of law in Poland and Hungary, however, made it possible to unlock the negotiations.

Regarding the ESM future, it is reasonable to expect that the reform demanded to examine will produce a text of a mechanism that does not lend itself to the tangle of interpretations that have affected the current system. Among those, some argue that it would not be adequate to the needs of a country like Italy. Those who still consider the positivity of its optionality. Who thinks the latter is detrimental on a reputational level due to the stigma associated with its potential use. And who believes that the mere fact that the ESM exists would discourage possible pressures in the financial markets. And a similar difference in assessment can be applied to the health MES, between those who consider it conditionally limited to the use of resources for health expenditure, and those with a completely different opinion.

If in the years to come, interest rates were to rise significantly, in compliance with a principle of solidarity it should also be possible to grant use to countries that request it, finding themselves in conditions of debt sustainability and full access to markets, but at a high cost. Also, providing that these countries pay additional interest to the ESM. The measure should be equal to half the difference between the EU rate and that which the requesting nation would obtain by sourcing on the market at the spread commensurate with its country risk level.