France, Italy and Fubini’s strabismus in the Corriere della Sera

When on the Corriere della Sera, still the most widely circulated Italian newspaper, if you read some data, you are generally led to believe that it corresponds to the truth. Then you can obviously also disagree with the opinions and interpretations that follow.

But yesterday we witnessed astonished the reversal of reality. In the editorial signed by Federico Fubini, one of the newspaper’s leading authors, we read that “Italian headlines are shaking more than French ones”, as a consequence of the political chaos in France.

Hence the usual little novel about our country being “fragile”, “in need of reforms, consolidation of accounts and a strong, integrated and full of projects” Europe.

I would say that we are frankly tired of seeing our country put in the crosshairs even when the problems are elsewhere. This is not to say that there are watertight compartments and to deny that the political and economic crisis of the eurozone’s second largest economy is a problem that does not concern us. But you still have to know how to distinguish the speck from the beam.

It is an irrefutable fact that this week the yield on the 10-year BTP has remained where it was last Friday, around 3.90%. And it is an equally irrefutable fact that the spread rose to 157 (from 135 last Friday) only because the German Bund saw its yield drop, stopping at 2.35%. This only happened because the Bund has always been considered a safe haven in times of crisis. The same thing happened to the euro/dollar exchange rate, which fell close to the lows of the last six months.

There was a much worse reaction for French government bonds. Whose spread against the Bund increased from 48 to 79 points. A 31 point increase, compared to the 22 of the Italian spread. How is it possible to overturn these incontrovertible data?

In other times, with other economic fundamentals, our country would have been overwhelmed by sales. But that’s not the case. Because today, as Fubini also admits, the “political risk” is in France. So why bring Italy into the mix, which this week even reduced the spread with French bonds?

Instead of perhaps highlighting that if there were a true monetary and fiscal union, with the unlimited and joint guarantee of all member states, these situations could not even occur.

Giorgia Meloni is not “receiving messages from the markets”. In fact, she is receiving some positive ones. For the aforementioned reasons and because we have a positive trade balance and a net foreign position to be envied. We are the ones funding the world right now. Exactly the opposite of France. Investors know this and are not selling Italy too much. But they sell France.

According to Fubini, all this is happening because Marine Le Pen promises spending and revenue cuts in an irresponsible way, sinking the French accounts. “Our country has already gone there, in the pharaonic times of the yellow-green government,” he concludes.

But which “pharaonic ones”? He talks about the government that intended to have a deficit/GDP of 2.4%, which was then reduced to 2.04% because it seemed like it was on the brink of the abyss, but then ended 2019 with a deficit/GDP of 1.6%, the lower than the previous ten years (excluding 2009)?

Always great respect for opinions, but they must start from true data.