Savona Giavazzi wand on state guarantees

Savona Giavazzi wand on state guarantees

Botta and response between economists: on the one hand the president of Consob, Paolo Savona, on the other the editorialist of Corriere della Sera, Francesco Giavazzi. Object of the dispute: if and how to extend the government guarantees provided by the government

Why not provide state guarantees also for risk capital and not just for debts?

This proposal, advanced by the economist Paolo Savona, in the course of its annual report as president of Consob , was criticized today on the front page of the Corriere della Sera by another economist, Francesco Giavazzi: “In other words, the state should guarantee the earnings of private investors and take charge of their losses. A safe recipe to eliminate the incentive of companies to make prudent investment choices. One more step towards happy degrowth, "commented the Bocconi economist.

Savona's response is ready, through his Facebook profile: “My proposal starts from the granting of the state guarantee on debts, already decided, which would unbalance the financial leverage of companies creating future problems for them. The debt guarantee would in any case cause a loss of the state, if not more, in perspective, because it aims to face the liquidity crisis and less responsible for a guarantee on risk capital. I also stressed that this guarantee would support the production initiatives compared to the debt one, proposing to start with the smaller exporting companies, as a solid and dynamic component of our development ", wrote the President of Consob.

Here is the full post of Savona and the part of Giavazzi's editorial dedicated to the Savona proposal

THE POST OF SAVONA

If a journalist comments on a sentence that is removed from the context, it can be justified, but if he does a university professor, who also has educational tasks, he betrays his social role. In today's Corriere della Sera Francesco Giavazzi, furthermore in a comment invoking the respect of the constraints, declares himself contrary to my proposal to make the risk capital benefit from the state guarantee because he considers it ethically regrettable that the losses are borne by the State and profits to private individuals. Noble intention that he is free to profess, if he does not omit that my proposal starts from the granting of the state guarantee on debts, already decided, which would unbalance the financial leverage of companies creating future problems for them. The debt guarantee would in any case cause a loss of the state, if not more, in perspective, because it aims to face the liquidity crisis and less responsible for a guarantee on risk capital. I also stressed that this guarantee would support production initiatives over debt, proposing to start with smaller exporting companies as a solid and dynamic component of our development.

THE EDITORIAL OF GIAVAZZI

a war or a pandemic temporarily eases budgetary constraints, but does not cancel the rules of a market economy. This also applies to those who invoke the state guarantee on private investment in corporate capital. Consob President Paolo Savona wrote in his Annual Report: «Enabling the risk capital of the state guarantee (…) would allow small savers to enjoy guarantees capable of eliminating the risk of their choices for a predetermined period. They would benefit from the advantages of a recovery in production by the companies to which they entrust their savings if the investments were successful ". In other words, the state should guarantee the profits of private investors and take charge of their losses. A safe recipe to eliminate the incentive of companies to make prudent investment choices. One more step towards happy degrowth.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/savona-bacchetta-giavazzi-sulle-garanzie-statali/?utm_source=rss&utm_medium=rss&utm_campaign=savona-bacchetta-giavazzi-sulle-garanzie-statali on Thu, 18 Jun 2020 11:43:09 +0000.