The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
The public debt mole Information regarding the high-speed railway project has been totally lacking, probably because the interests that lie behind these major works had no interest whatsoever in informing the public. On the other hand we have this extraordinary mobilization and support that the No TAV movement is seeing today, particularly in the Val di Susa ... For the past 20 years now this valley's numerous technical experts have been informing the citizens and the mobilisation that we are seeing now is the fruit of twenty years of effort and of awareness of the technical merits that Valley reflected in the numbers that show the total uselessness of this major public works. In this regard, the fact that the major media have chosen to ignore this issue for the past 20 years and now tend to focus on reporting only on those issues relating to public order and appear to be incapable of evaluating the merits of this issue is proof that interests, probably even in the cultural collapse of this Country, lie only in slogans, in ideologies and the flags that certain works of this nature may represent for the ruling class and that these kinds of works are merely an extension of their total inability to conceive any sort of vision for the future. But I am becoming ever more convinced that this ruling class is structurally bound to worry only about the present because the minute there is any sort of appraisal of the effects that their actions have on the future, they stand to immediately lose all of their privileges. The only interests are the annual budget and short-term results and for the bankers, it is getting their hands on some serious stock options, while for the politicians who live in the here and now, it's all about next month or next year's political outcomes and for the entrepreneurs in charge of the virtual companies, it's all about managing the debt. There will probably be no winners and we are all going to lose out in the end! They are gambling the future of our economy on these major public works, particularly here in Italy, because the financial architecture that is built on these major works are mechanisms designed to dig out hidden public debt from the accounts of privately held companies, this so-called project financing that has many politicians talking since public resources have become more scarce. However, this is precisely the mechanism that brought about the 2009 crash. In that case the debt was built on private funding while in this case the debt is being dumped into the public debt. That's what project financing is all about, a mole that causes future public debt that has to and will inevitably surface at some point in the future. This mole has been digging away for many years already, since way back in the 90's, since the post-Tangentopoli era and it is going to surface sooner or later because it is a hidden debt. The project financing debts or the debts of privately owned public companies may not be reflected in the 120% of GDP, but they are nevertheless public debt that is concealed in the accounts of private companies and will have to surface sooner or later. It is difficult to say when this will happen, however, it is not going to be in the long-term and when it does happen, any of these major works that have already begun will go to the wall and this debt will explode and reverberate on us all and on the economy as a whole!
'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
this is precisely the mechanism that brought about the 2009 crash.
That's false. What is true is that governments have used PPP (public private partnerships) as a way to avoid public debt (they pay "rent" on infrastructure which is privately-owned for a number of years after it's built) and this tends to be more expensive in the long term than the State building it itself and paying for it. Depending on how well the tender is defined, it can be an effective tool, and a real way to pass on some risks to the private sector.
So PPP is a different way to build infrastructure, with more private sector involvement, and it can result in some unnecessary transfers of money from public to private hands over time, but it's not crazy and it does not create systemic risk.
Even if not done in the most effective way, it is lending to real infrastructure projects. Whether these are necessary or not is not really linked to how they are financed (private contractors would lobby for them anyway if government were to pay for them), and that financing certainly did not create the financial crisis.
by Frank Schnittger - Jun 21 6 comments
by Migeru - Jun 17 16 comments
by Frank Schnittger - Jun 17 9 comments
by gmoke - Jun 13
by Frank Schnittger - Jun 11 25 comments
by gmoke - May 29 23 comments
by Zwackus - May 28 109 comments
by Frank Schnittger - Jun 216 comments
by Migeru - Jun 1716 comments
by Frank Schnittger - Jun 179 comments
by gmoke - Jun 13
by Frank Schnittger - Jun 1125 comments
by Frank Schnittger - Jun 54 comments
by gmoke - May 2923 comments
by Zwackus - May 28109 comments