ESM Incoming!

DISCLAIMER: nothing in here represents advice of any kind, blah blah blah, all those fancy acronyms who protect the powerful have been looked at.

Italy has been enduring for months now a political debate about accepting the ESM money, about 37 Bn. EUR earmarked for COVID related expenses. Of course, given that to my shock and horror I have witnessed proof that babies are not brought by storks, to me “earmarked” is the usual political fig leaf that means nothing, but that's not the main trust of my thoughts here.

The debate has been thrilling, but boiled down it amounted to one partner in the coalition, PD, saying “We have to ask for the ESM money!”, and the other, M5S, saying “no”. Fascinating, given that Italy is betting the farm (its citizens', that is) on getting money from the Recovery Fund in size and in time to spend... on whatever floats its boat.

Of course, as every politician and monetary economist has conveniently forgotten, money doesn't buy time (it might reduce the price of waiting things out, but as Einstein forgot to teach them, it does not reverse the direction of the flow even under negative rates), so asking for the ESM stash now is rather beside the point... but Italian politics are an interesting furry animal.

So strap on, and let's go. Why do I think that in the end Italy will ask for that money, and why it did not so far?

Let's start at the end: given that political authorities all over Europe needed to explode the debt load, the “never let a good crisis go to waste” principle begot the Recovery Fund, which saves every effing previous splurge, from having both Strasbourg and Brussels, to Alitalia, to a forthcoming infrastructure spending to make Robber Barons rise from the dead. No surprise there, and any claim by the Italian government that they obtained an unprecedented measure is overstated. BUT, it's not “Either/or”: why haven't they asked for the ESM so far?

Leaving aside any rational rationale (they are the thing that matters less over here anyway), there are political drivers. This majority has a very thin Senate majority, M5S has already been allied with the Lega in the previous government, and many of the opposition parties, but not Lega, have been supportive of ESM.

Given that true decisions on what to do are quite outside the purview of parties and representatives, with a view to engaging the opposition in a system of government where even those already on the inside are doing make work without losing support potentially leading to yet another movement morphing into a new political party that , like M5S, must be house trained like a puppy in a relatively short time frame, it suits the powers that be to throw at least a bone to the opposition to entice it to join a “national unity government”.

Enter ESM. New entrants get credit for causing Italy to get 35 bn EUR and maybe a (small) piece of the pie to get credit for. Former opposers of ESM get kudos for taking one for the team. President Mattarella does a great “let's love each other” speech at Christmas, Exeunt Omnes, as in a Drury Lane play with an happy ending.

Is this the playbook? Probably not, but remember, as playbooks go you've seen it here first.