Lorenzo sure is busy giving speeches these days. Here‘s his latest. Some highlights:
Recently, a former Irish Prime Minister has even had the honour of front page headlines when he reproached the ECB for not having sufficiently monitored the Irish banking system when it is well known that in Europe the powers of prudential supervision are the responsibility of the national authorities, a competence that you do not want to give up.
And it’s not only former Irish Prime Ministers that get a tongue-lashing. Current heads of state also:
The piecemeal approach followed in recent months risks losing sight of the long-term goal. The measures may not be completely coherent. We came close to it last autumn, with the Franco-German proposal, endorsed by other countries, to make it easier for countries to go bankrupt. Fortunately, the idea has not gained acceptance, not only because of the ECB’s dislike but also because of the devastating effect it has had on financial markets. It will take time to recover from the loss of credibility suffered by Europe with that proposal.
The proposal was based on the assumption that the best way to discipline governments and to ensure sounder public finances is to make it easier for a country to declare bankruptcy. As soon as a country has problems with its public finances, it should seek a restructuring of its debts or automatically extend its bond maturities as a necessary condition for receiving help from European and international institutions.
This idea is mistaken for several reasons.
Read it yourself to see if you’re convinced by Lorenzo’s vision of a default-free Europe.