The European common good

There are diverging views about Mario Draghi, the man and his action. Some would regard him as an 'homo economicus" acting rationally as explained in economic text books. Others would see him as a man with a vision, driven by politics  in the sense that he puts the economy at the service of the common good. This may sound a bit idealistic, but this judgement is not completely wrong.  

 Political economy originated in moral philosophy with Adam Smith as a precursor. But in its current approach, after the advent of economics in the 19° century with Marshall, it explains how the political institutions, the political environment and the economic system influence each other. thus becoming intrinsically interrelated. In the classical meaning, economics' main rationale is the pursuit of self interest while ethics is about caring for the others. In its original significance, Politics is about linking economics and ethics and avoiding that one prevails over the other. 

M. Draghi has used all instruments at his disposal to stimulate growth but also as development of EU institutions towards the goal of a federal State. In other words he puts economic means at the service of political goals. 

As planned, the European Central Bank (ECB) will launch on 2 March a massive intervention  to buy public bonds. The effects on the market are already evident  with a further rise of asset prices and a narrowing of spread relative to the Bunds and an almost parity of the exchange rate of the euro relative to the dollar bringing immediate benefits in terms of increased exports. 

There is one important point to mention: the bulk of the operations (80%) will be made by national central banks and the remaining part (20%) directly by the ECB. As a result, part of these bonds will be owned by the European Union because there will be in the balance sheets of the ECB, as an European institution whose capital is held by all member States of the European Union. This means that one fifth of national debt becomes European debt. 

In this regard, there is some resemblance between Draghi'  and Alexander  Hamilton, the Treasury secretary of the United States under George Washington. What he did is bit similar, making the debt of each State of the Union as federal debt.  Draghi's plan is a step in that direction.

The political consequences of this operation is that this 20% of mutualized debt leads inevitably, in particular with the Banking Union, to the partial  transformation national debt into European sovereign debt with the common guarantee of bank deposits, European supervision of banks, and therefore a significant step toward the transfer of fiscal sovereignty and a genuine budget of the monetary and political Union. Some of these measures are already launched and others will be necessary for the constitution of a federal State. This will be a long and difficult process, but is there an alternative to it?