September 25, 2008 (LPAC) - In a long interview given to the Italian daily Il Foglio Sept. 24, Italian Economy minister Giulio Tremonti ridicules Paulson's plan and calls again for a new Bretton Woods. "There is an enormous quantum of debt falling due, a promissory note to be paid." Tremonti explains that the cost of the crisis "might be paid by the taxpayer, because the public bailout is a way to turn the bill from the guilty to the innocent, from the insanity of finance to the taxpayer's pocket. Or, it could be paid through inflation: a large inflation able to absorb in a short time large debt positions. And therefore, again to the cost of collectivity, being inflation a tax and an unjust one. Or, [it could be paid] with something else, which is better not to speak about".
Directly questioned on what he thinks about the Paulson plan, Tremonti answers: "It is better to think on one's own". "It is easy to judge from the outside, but it is evident that at the beginning there has not been a full and immediate understanding of the dimensions of the crisis. First one medicine, then another one, also with the effect of aggravating the sickness". "There was a debt crisis and one of the remedies has been to create enormous open-air dumps of debt-intoxicated assets. By shifting them back and forth, debt assets do not stop being debt assets". Anyone could have seen the crisis coming "by just looking at the banks' balance sheets... financial leverage was in a 20, 30 to 1 relationship". Economists "must explain their silence, protracted until 2007 and beyond", on the coming crisis. "Bad teachers, exorcists, alchemists, quacks, shamans, gurus."
Tremonti then explains again his proposal to have a network between the European investment bank and the national Kfw-like banks to finance infrastructure investments. "I would add an unsuspectable name to Roosevelt, Keynes and Delors", Tremonti says. Instead of mentioning him, he tells the tale of a "very old and famous banker in Milan" who explained to him how the Milan-Rome highway, in the fifties, was financed through bonds and paid back through tolls. "A public work, based on private capital. The vision, the project and the direction was public. The rest was private. This, to say that not just what goes through public budget is public. Public intervention is not neceseraly made through public deficit,to increase public expenses or reduce private taxes. Public intervention can be more productive than putting masses to dig holes just to pay them." What is the first economic doctrine to forget, if we want to go back to Keynes and Roosevelt, the interviewer asks. "Shareholder value", Tremonti answers.
We have to replace bad rules with good rules. "To define those rules is not the task of the market. It is the task of the states". And the journalist concludes by paraphrasing Tremonti on the NBW: "It is the new Bretton Woods that the minister calls for in his book--a new framework of rules embedded in international law through treaties which are binding for all. A political initiative that must be carried forth at supranational, intergovernmental level".
Tremonti: "The political conjuncture is that 2009 is the year when Italy chairs the G-8".
