The effect of the clauses will be way much less pro-cyclical than cutting public expenditure and/or raising taxes, as under EU rules, given that they wouldn’t normally drain purchasing power from the economy and would only replace TCCs for euro in investor portfolios.
By combining the introduction of TCCs with the above safeguards, each Eurozone country can trigger a robust recovery while fulfilling the Fiscal Compact and the OMT programme announced by the ECB in 2012, whereby a country’s public debt is guaranteed by the ECB for as long it commits to balancing the budget also to gradually reducing the general public debt-to-GDP ratio (to 60%). Currently, crisis countries lack the instrument to execute countercyclical macroeconomic policies. The TCC programme would provide that instrument, while preventing the ECB have to guarantee increasing volumes of public debts – as TCCs aren’t to be reimbursed, issuing countries can’t be forced to default on them, making the ECB guarantee unnecessary.
Financial stability: Strengthening the banking systems
The introduction of TCCs would also create conditions for reducing and gradually eliminating another serious problem inherent in the Eurozone. Finance institutions, specifically the national banking systems, hold huge amounts of government bonds issued by their government. Therefore, state insolvency causes severe disruptions to them. As TCCs start being issued, banks can partially replace traditional government bonds with TCCs within their asset portfolio, thus lowering the chance that public debt default hits the domestic bank operating system.
Furthermore, the rapid recovery permitted by the TCC programme would help banking systems suffering from high degrees of non-performing loans gradually to boost the caliber of their loan portfolios, as debtors’ repayment capacity and credit risk prospects would both improve.
TCCs: An overdue solution to the Eurozone Crisis
In Italy, a lot more than in other Eurozone countries, a debate happens to be underway, and growing more passionate each day, about if the current Eurozone economic governance is sustainable. The primary opposition parties, credited in the aggregate with an electoral consensus in the neighbourhood of 50%, explicitly demand Italy to exit the euro.
Beneath the current framework, Italy (in addition to a large section of the Eurozone) will probably experience a lot more years of depression, increased social unrest, and potential political instability. No economic governance system may survive if its foundations prove shaky and there is nothing done to strengthen them.
As proponents of the TCCs, we devised them as an instrument in order to avoid the breakup of the Eurosystem and its own potentially disruptive consequences (including political ones), while putting a finish to the deep and long-lasting depression still affecting the majority of the Eurozone. Nothing significantly less than that may be deemed to be a satisfactory solution to the Eurozone Crisis. A euro breakup, specifically, remains a concrete possibility so long as the existing dysfunctionalities of the Eurozone continue steadily to go unresolved.
Bossone, B, M Cattaneo, E Grazzini and S Sylos Labini (2015) “Fiscal Debit Cards and Tax Credit Certificates: The easiest method to boost economic recovery in Italy (and other Euro Crisis Countries),” EconoMonitor, 8 September.
 Mediobanca Securities, Country Update, Italy – Tide turns as recovery starts, 17 November 2015.
 See “Nota di aggiornamento del Documento di Economia e Finanza,” Ministero dell’Economia e delle Finanze.
 For a concise description of the proposal, see Bossone et al (2015). Originated by M. Cattaneo, the proposal was elaborated by the same authors in a public manifesto, obtainable in English translation here. The proposal can be the main topic of the recent e-book Per una moneta fiscale gratuita. Come uscire dall’austerità senza spaccare l’euro, edited by the same authors. The e-book collects numerous in-depth studies of the many (economic, legal, accounting, and institutional) areas of the proposal.
 In 2002, in a now famous speech prior to the National Economists Club in Washington, former US Fed chairman Ben Bernanke, talking about stagnation in Japan, recommended that “A broad-based tax cut, for instance, accommodated by an application of open-market purchases to ease any tendency for interest levels to increase, would probably be a highly effective stimulant to consumption and therefore to prices. . A money-financed tax cut is actually equal to Milton Friedman’s famous ‘helicopter drop’ of money”. Actually, Friedman had not been the only economist who considered pouring money from helicopters out to people in the streets as the utmost effective stimulant to a depressed economy. Keynes himself wrote as much provocatively about them, suggesting that in the lack of other measures it will be socially useful for the general public authority to bury bottles filled up with banknotes and let individuals unearth them, thus increasing incomes and jobs via the multiplier effect. Similar types of monetary cum fiscal stimulus – which helicopter money is focused on – were thereafter recommended by as diverse and well-known economists as Henry Simon, Irving Fisher and Abba Lerner.