Strange presence, the one of the IMF in Italy, checking from now on quarterly Italy’s progress in implementing reforms. The IMF visits Rome every year within its regular mission, within the scope of its mandate. But what mandate does the IMF have in this new case? The one of being the watchdog of Italian public accounts?
Wrong, try again. For that, we have 3 institutions, yes, three. Their names? European Commission, Eurostat, European Central Bank. So why another one, in addition covering a geographical area much vaster than the EU one? Simple enough: China, Russia and all other emerging countries in the G-20 do not trust these 3 institutions; too much mess they have done in the past in certifying fraudolent public accounts for Greece. And to invest in euro countries’public debt they have probably asked for additional and credible auditing support, which they believe they have found with the IMF.
So here is another reason for the (growing) spread on many euro sovereign borrowers: the lack of trust in the EU capacity to ensure sound fiscal reporting. You dont buy my argument? Well then read below.
“The European Central Bank refused to disclose internal documents showing how Greece used derivatives to hide its government debt because of the “acute” risk of roiling (sic) markets, President Jean-Claude Trichet said.”(Bloomberg, November 5, 2010). “The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy,” Trichet wrote in an Oct. 21 letter in which he rejected the appeal.
Disclosure “bears, in the current very vulnerable market environment, the substantial and acute risk of adding to volatility and instability.” Bloomberg is suing the ECB at the European Union’s General Court in Luxembourg to obtain those Greek swap transactions that rocked the world.
The ECB motivations are preposterous and demonstrate a fear of true and credible accounting practices in the public sector. We are (transparency is) either in the hands of the European Court or of Dr. Draghi’s more candid approach compared to M. Trichet’s one. After all, Dr. Draghi has already shown a vast superiority in handling monetary policy over his predecessor, why shouldn’t he succeed on the transparency front too by releasing all information the ECB has on Greek swap transactions?