The Mes? A Trojan horse, that’s why

The Mes? A Trojan horse, that's why

The analysis of the analyst Giuseppe Liturri on Mes and surroundings

The recent election of the Irish Paschal Donohoe as president of the Eurogroup is certainly not a good viaticum for the defense of Italy's interests in the week that is about to open. Between the Governing Council of the ECB and the European Council in which the negotiation for the Recovery Fund will come alive, our country plays a lot. And it seems that the results collected by President Giuseppe Conte during his pilgrimage to some European capitals, including Madrid, have been quite modest, at least so far, with the intent, however commendable, of seeking a common platform for negotiations now upon us ( with the convitato of stone).

About the Mes, it seems that the strategy chosen by its supporters is precisely to repeat a lie indefinitely, until it becomes a truth. But unfortunately for them, the official documents circulating between the European Parliament and the Commission confirm the worst suspicions that the Mes is a Trojan horse.

In fact, it is sufficient to dig into an apparently obscure delegated regulation (877/2013), the modification of which by the EU Commission passed on Thursday 2 July for the Economic Affairs Commission of the European Parliament so that it could exercise a possible right of veto, to reveal the great bluff del Mes "unconditional".

Let's take a step back and start from 7 May, when Commissioners Valdis Dombrovskis and Paolo Gentiloni guaranteed, with a two-and-a-half-page letter to the Eurogroup, that the Commission would in fact have disapplicated a large part of its monitoring powers in the field enhanced surveillance and post-program surveillance foreseen for countries that had recourse to the loan from the Mes.

But, since the devil of the complex regulatory construction that starts from article 136 (3) of the Treaty for the Functioning of the EU, passes by the Mes Treaty and ends with the two-pack Regulations (472/473), does all pots but does not have the necessary and numerous lids, something has remained uncovered.

In fact, the Commission was forced to change the tables of Delegated Regulation 877/2013, initially foreseen to keep the budget of the State benefiting from the Mes loan under strict control. These tables are used to implement the "careful monitoring" provided for in article 10 of Regulation 473, referred to in article 3 (2) of Reg. 472/2013. The change proposed and passed to the Commission without veto provides for the compilation of a new quarterly information table which, in the case of the Pandemic Crisis Support (PSC) credit line only, replaces the previous tables. All in all, a secondary aspect that could well be managed – by disapplying this last rule together with all the others of Regulation 472 – by the letter of 7/5.

But no. Legislative intervention was needed and this necessity dealt to the Mes castle of cards, according to some who was freed from all conditions only because there is a 2-page letter, a double hit:

  1. Communicating the expenses quarterly up to the moment of the disbursement of the funds, reiterating that these are only direct and indirect costs of treatment, prevention and health care, in addition to part of the overall costs of the health system attributable to the fight against the pandemic, means delimiting with precision the expenses that can be financed and clear the field of the imaginative projects to strengthen the health system which included expenses not connected with Covid 19 . So this condition of access to the Mes turns out to be much more stringent than how many have superficially understood it. In addition, that disclosure obligation applies precisely to verify that there are expenses that can be financed within the defined perimeter and therefore funds can be received. It is a very serious condition.
  2. That letter of 7/5 is the smoking gun of the malice of the Commission and the Mes. In fact, it is considered necessary to amend a Regulation for a rather secondary aspect such as a reporting table and instead a letter is considered sufficient to invoke the "non-application" of article 3 paragraphs 3, 4 and 7 (this last paragraph gives the Council the power to "recommend to the Member State to take precautionary corrective measures or to prepare a draft macroeconomic adjustment program"), Article 6 (debt sustainability assessment), Article 7 (macro adjustment program) and Article 14 of Regulation 472 (post-program surveillance). Stuff to blow up the jurists we asked about the topic. Suddenly we discover that a letter is a source of law. When, however, a delegated regulation is not enough to modify essential aspects of a regulation, such as those listed; you need a real regulation. Why didn't they amend those articles too? Because they couldn't because it would have been manifestly illegitimate and contrary to the will of the Treaties. The Commission therefore limited itself to doing what was allowed: to change what little it could and leave all the rest, that is, the most relevant part, to be paid by the letter which is the legal equivalent of a pat on the back. Regulation 472/2013 remained uncut.

The thesis of the absence of conditions falls miserably because it misunderstands that they are only those for access to the credit line. It is in fact correct to state that the conditions of access, contained in the memorandum of understanding signed at the time of the request and in the financial assistance device, in this case are limited to the destination of the expenditure for the purpose described above. But it is not certain that a memorandum of understanding with that single condition holds up to the scrutiny of some Court. Subsequently, from the moment of the request (at the latest on 12/31/2022) to the disbursement of the funds (within the following 12 months), in fact, there is reinforced surveillance – we repeat, not at all weakened by a letter – with lots of analysis debt sustainability and the possibility of introducing corrective measures. After the disbursement and up to the repayment of 75% of the debt, there is post-program surveillance with the option of corrective measures also in this case. This is the risk of the Mes for us and its great virtue for the Nordic blockade that we need on a leash. It is known to all that the conditioning power of the coordination cycle of the European semester is very little compared to the tools described here. That's why we want to "offer" the Mes. For 10 years Italy will be in check.

It is surprising that in recent days we have had the opportunity to read on Twitter a Bocconi professor stumbling upon sensational inaccuracies such as "a multiplication table replaces macroeconomic surveillance" and other various amenities. Beyond the obvious falsity of this statement, not to grasp the difference between the fact that enhanced surveillance and post-program surveillance are automatically triggered by the Mes, unlike the discretionary assessment in case of deviation from the Stability Pact, it means to underestimate the main " virtues ”of the Mes in the eyes of the Nordic countries. That is, its greater disciplining power. With Mes, the Troika is already in Rome and thus also guarantees the ECB's purchases made with maximum flexibility.

Now we understand the reason why that apparently innocuous reporting table received the contrary vote of the League's MEPs Antonio Rinaldi, Francesca Donato and Marco Zanni and, surprisingly, of the M5S MEP Piernicola Pedicini of M5S who told our newspaper that the Mes was and remains "a poisoned meatball" not at all gilded by the change of a table.

(Integrated and updated version of the article published by the newspaper La Verità on 4th July)


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/il-mes-un-cavallo-di-troia-ecco-perche/ on Sun, 12 Jul 2020 08:15:15 +0000.