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The unknown spread that weighs on Draghi

The editor of Il Giornale noted that the spread, which is the difference in the interest rate on our public debt compared to the average for other euro countries, has begun to rise again, albeit slightly. And right after Prime Minister Mario Draghi’s press conference on December 23.

Could this be a sign of the emergence of a serious downturn capable of generating a financial crisis in Italy? The question is by no means strange. Unfortunately, there are many arguments that make a positive response realistic, which lies in the fact that the budget law under discussion for the next year and for three years is no longer valid. For various factors: first of all, the Omicron variant of Covid, which can turn into Omega, that is, in the final financial drama. Omicron will generate significant reduction in GDP of all countries. Shorthand “external” i.e. due to external factors that do not depend on us. Also in Italy, due to Omicron, the GDP will have a lower growth rate, which cannot be controlled by the efficiency of vaccinations by General Francesco Paolo Figlio. This lower growth for all countries, to varying degrees, leads to lower global demand for us as exporters. Omicron is also blocking tourist flows into Italy, putting the entire sector and related industries in crisis. Added to this are “internal” factors, regarding the choices we make to interact with Omicron.

If very harsh measures are taken, entire regions will go into crisis, but infections will be reduced and we will come out of the tunnel perhaps in the middle of 2022. If the crisis is averted now, the virus will spread more and there will be more problems in 2022. Either way, the output will suffer. GDP for 2022 from low. The injection of liquidity by the European Central Bank and governments running budget deficits, along with exorbitant capacity, has led to an inflation rate of 4%. This increases the personal income tax by 6%, because each point of inflation increases the progressive tax by 1.5. The tax burden will also increase in the face of the recent revision of the tax rate. We do not yet know the impact on public spending.

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But the spread has increased slightly because it is Draghi who leads the government. It was he, in his time, who saved the euro. Now according to the financial markets can save us from the financial crisis. Financial markets are built on trust in leaders who are able to take action like whatever it takes, whatever is needed and whatever is there. If Draghi stays at Palazzo Chigi, abandoning the temptation of the Quirinale, he will have achieved two historic feats: saving the euro and saving us from the financial crisis.

Harold Manning

"Infuriatingly humble social media ninja. Devoted travel junkie. Student. Avid internet lover."

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