Marcello Minenna, a division head at the Italian securities regulator, emailed his plan to “Cure the Eurozone”.
Despite being quite soft (there will not be permanent transfers between Member States), the recent proposals of the European Commission to deepen integration in the economic and monetary union could meet the opposition of Germany as soon as it will come out from the impasse on the creation of the new government. Germany could rather pretend a systematic application of burden sharing provisions in the event of a sovereign debt crisis.
Berlin wants private investors to take part in any losses on Govies and calls for an automatic 3-year debt reprofiling and (should it be not enough) for a restructuring to be approved by easy-to-achieve majorities and implemented according to the technical procedures decided by the Euro-bureaucracy. Appropriate Creditor Participation Clauses should govern these mechanisms and also prevent Govies’ conversion in a new national currency in the case of exit from the euro.
What Germany calls burden sharing is not sharing at all, but a method for legalizing a wider risks segregation within individual countries, just it has happened since the Merkel-Sarkozy meeting in Deauville of late 2010. No coincidence that recently primary German newspapers spoke again of the Weidmann’s proposal to impose a mandatory collateralization of any increase of Target 2 deficits of Club Med countries.
This post was published at Zero Hedge on Dec 22, 2017.