Spinelli's chicken

The ECB has done its job!

The new Outright Monetary Transactions Programme, decided on friday by the ECB, is a good news. The bond buying programme will ease tension in the bond market and stabilise the Eurozone.

The decision has been almost unanimous and this proves wrong the idea of a division between North and South in Europe. However, some points have to be clarified.

The implementation of the OMT programme will be linked to some conditionalities.What are these conditionalities?

On Friday Mario Draghi has mentioned the intervention of the IFM in the OMT programme. This is a very thorny issue. Although the IFM has changed in the past 10 years, this institution is still obsessed by austerity. Mr Draghi also highlighted that any purchases under the OMT will be subject to “strict and effective conditionality”.

For Italy and Spain the game starts now. The negotiation to define the nature of these conditionalities will be tough. Italy and Spain have already implemented very ambitious austerity measures which have undermined social cohesion and reduced the potential for growth. The lesson from Greece is, however, clear: austerity results in a vicious circle: the GDP declines thus affecting revenues and worsening the stock of public debt.

The conditionalities will not be decided alone by the IFM and the ECB but will be defined by the member States. Member States will have to choose whether to follow the Greek path, based on austerity and economic recession, or support growth while pursuing market stabilisation. The future of Europe is in their hands.

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