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If, (as so many economists have averred from Krugman, Stiglitz and Varoufakis on, the Euro is flawed by design,) then does it matter much whose actions lead it to breaking point? It was a just a matter of time... No-one really wants to leave the Eurozone, but Italy will not be forced into austerity and Troika-ville as easily as the Greeks are. So it has to threaten to in order to make the rules more favorable to S.Europe. Game theory, innit. With Öttinger as the new Schaubler straight out of central casting in the villain role, it's not hard to see why many Italians are bristling at being insulted almost daily by the big cheeses in Brussels. There's a very good article in the latest Jacobin magazine about it, I can't link with this tablet, sorry. Maastricht and Dublin need renegotiating asap, or we will see more chaos down the road for the whole EU project, not just the EZ. 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
Varoufakis tried the game playing and lost. The response to the Great Recession was disastrous, but things have settled down since. Everyone else in the Eurozone is now doing quite well (off a low base), so why isn't Italy?
The best the Italians can hope for is to block Jens Weidmann from becoming President of the ECB and keeping someone like Draghi at the helm. Öttinger isn't really up to the job of being an adequate bogeyman.
The Italians are going to have to sort this one out themselves... Index of Frank's Diaries
Yes that's why many are ready here to ditch the common currency experiment before it does too much more harm!
It was on ET I read how Germany was bending the rules in their favour, back in the Greece crisis. How much of their debt was forgiven, how the 6% rule was breached, and the incredible story of how the 3% number was arbitrarily conjured out of some Frenchman's nether regions. Predatory capitalism has become the OS of European finance, protecting anal goldbugs' hard currency savings value stasis fantasies while the southern euro-states founder and falteringly re-climb out of the economic muck again, with the sword of Damocles swaying over their heads. The pearl-clutching in Brussels suggests something holy about the Euro, that the currency itself has lėse majesté, that it's the sheerest of heresies to even breathe a suggestion that it may not be irreversible (pace Draghi) or its terms renegotiable. The nervous hysteria is a sure tell there's a bluff going on. If the currency's success were a foregone conclusion after a decade and a half of practice using it, why are the results so unbalanced in favour of northern countries. If Italy's capacity for innovation, design and productivity was so high it rivaled Germany's, what virus suddenly infected the country to so swiftly degenerate it into a pack of corrupt, shiftless parasites with zero work ethic and a penchant for a life of ease? The Bild propaganda has done its dirty work just as the Sun's did for Brexit voters. Italy's industrial heyday was before the galloping globalisation that has enriched Asia just as colonialism enriched Europe. So many factories of businesses nurtured in Italy have moved a few kilometers to take advantage of cheaper labour the other side of the border, this is doing the country in much more than the Mafia or incompetent governments, (hardly an Italian exclusive). The EU decision to import cheap Tunisian frozen olive oil (as reward to encourage the country into democracy after the Arab Spring) was doubtless well-intentioned, but was it really so important that it was worth pauperising Italian olive farmers? Ditto lemons from Cile breaking citrus farms here etc etc? The idea of the EU was to protect Europe's member states from the pressures of globalisation, not the opposite. Italians are fed up with being treated as second-class Europeans by the Northern contingent who are the only ones really profiting from the Euro. The pain of leaving will be traumatic and immense, the country will eat bread and onions for a few years until freedom from the Euro-yoke is complete, but then its ability to re-flower its economy will be by its own merit, not because a generation of sleazy politicians wasted zillions on boondoggle vanity projects financed by cheaper interest rate loans than they were used to, indebting the country up to its eyeballs. The very topography of the country determines that small to medium businesses will always the the backbone of Italy's economy, the very sized businesses that suffer most in this climate of global corporate giantism. That's why Italians feel conned by the Euro, and betrayed by Prodi for signing up for it. Those against leaving it are so terrified of the immediate consequences they don't see beyond that short-term view. Besides, as Migeru and Jake used to say about Greece back in the day, what is the EU going to do, send gunships? Disselbloem, Tusk, Jungker et al are so ratty because they're bluffing, their Euro is a castle built on sand. Shh, tiptoe through the tulips, intone the right pieties, don't disturb the confidence fairy or the spread will come sort you right out and it'll be Troika-time! (Hold still and it won't hurt so much when we come after your 1000 billion of savings stashed away for that rainy day Italians justly fear.)
Italy is getting up off its knees.
Sorry Europe, your bluff ain't working any more.
Reform or get out of the way. 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
The pain of leaving will be traumatic and immense, the country will eat bread and onions for a few years until freedom from the Euro-yoke is complete, but then its ability to re-flower its economy will be by its own merit, not because a generation of sleazy politicians wasted zillions on boondoggle vanity projects financed by cheaper interest rate loans than they were used to, indebting the country up to its eyeballs.
This is exactly what the Brexiteers in the UK are saying, (although they are downplaying the bread and onions bit...).
I think you are right that globalisation has hurt Italy badly. Many of the industries, products and designs it pioneered are now produced in Asia and eastern Europe. The UK handled that by my switching to financial services, brand building, and some high tech industries. Germany had greater economies of scale and simply excelled at manufacturing and with robots making labour costs less important. Other than tourism, I'm not sure what the Italian strategy is, but I doubt ongoing devaluations will be a long term solution.
You are also right that the 3% and 60% rules were arbitrary and ignored when it suited Germany's or France's purposes. They should never have been enshrined in a Treaty. But the problem with them is that they limit the scope a government has implement counter-cyclical policies to deal with asymmetric shocks or sudden down-turns. Ongoing borrowing in the long term simply increases interests costs which creates a cycle of ever increasing debt and impoverishment. Unless your strategy is to default on debt every now and again, in which case virtually no one will lend to you.
AFAIK most of Italy's debt is held by the ECB as a result of QE and by Italians themselves, so any default would be devastating for Italian bond-holders, some of which may be wealthy but many of which are ultimately funding pensions. The ECB QE policy was primarily to get highly indebted countries like Italy, Greece and Ireland out of a hole by buying up government debt when private debt markets won't do so except at exorbitant rates to reflect what they say as default risk. This has helped the Eurozone economy generally to recover to the extent that large government deficits should no longer be needed and debt burdens as a % of GDP should be being reduced in any case.
So at the moment I don't see the Euro (or even its stupid rules) being a problem for Italy. Globalisation is, but you would have to leave the EU (not just the euro) if you wanted to introduce protectionist policies. And while you say the EU is facilitating globalisation, in fact third countries will tell you that the EU is a very protected market - particularly for agricultural produce. World prices for many goods are much lower than European ones, and European farmers get CAP payments to compensate.
If I were Italian, I would be waiting to see how Brexit works out before going down that road. Index of Frank's Diaries
The Italian government debt is the public debt owed by the government of Italy to all public and private lenders. As of January 2014, the Italian government debt stands at 2.1 trillion (131.1% of GDP).[1] However, Italy has the lowest share of public debt held by non-residents of all eurozone countries and the country's national wealth is four times larger than its public debt.[2]The Italian public debit is in 2017 owned by the private sector only for the 6% of the total amount. This percentage decreased a lot from 1988, where this share was 57% --,snip>-- In 2014, the Bank of Italy estimated that Italians held 180 billion in undeclared assets abroad, a figure that was three times as high as in 2004
--,snip>--
In 2014, the Bank of Italy estimated that Italians held 180 billion in undeclared assets abroad, a figure that was three times as high as in 2004
In other words, without QE and low interest rates, Italy would have been in a lot more trouble when even Italian investors won't invest in Italy. The fact that Italian politicians may have squandered the benefits of low interest rates is also hardly Germany's fault, for whom that assertion merely reinforces perceptions of Italian profligacy.
So I am suggesting to you that the Euro is the wrong bogeyman. Blame if you will, and leave it if you must. We will see how Brexit works out for the UK, and they don't even have the excuse of blaming the Euro... Index of Frank's Diaries
They blamed immigration, even though lots of immigrants are from outside the EU. So I don't see why they can't blame the Euro despite not being in the Euro....
Scotland has an acute shortage of qualified Gaelic teachers, so parents on the western island of Mull were stunned when the UK government refused to grant a visa for the sole candidate for a new position at one of its local schools. Blocking entry to Canadian Sìne Halfpenny has meant children at Bunessan primary school have been denied the chance to be taught in Gaelic -- seen as a vital way to maintain the ancient but endangered language -- for more than half a year.
Blocking entry to Canadian Sìne Halfpenny has meant children at Bunessan primary school have been denied the chance to be taught in Gaelic -- seen as a vital way to maintain the ancient but endangered language -- for more than half a year.
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