Why Italy will not follow the Greek road; Eurozone to change or unravel

Italian President, Sergio Mattarella (on the left) receives the European Commission President, Jean-Claude Juncker in Rome. Mattarella’s recent decisions lead to new elections soon. Date: 26/02/2016. Location: Rome – Quirinal, Roma – Residence of the President of the Republic. (© European Union, 2016 / Source: EC – Audiovisual Service / Photo: Marco Zeppetella).

the next Italian election is, very probably, to take place within the next few months or even weeks. Then, Berlin, the rest of Eurozone capitals and probably the entire western financial world will learn, if it’s still politically possible to ask just one country’s taxpayers to save an obviously faltering global financial system. The test was performed in Greece during the past eight years. The political and social structures of the country finally stomached the persisting bitter pills and today the government budget produces unbelievable prime surpluses above 3% of a slashed by 25% GDP.

Of course, Greece was forced by Berlin, Brussels and the International Monetary Fund into the inferno. However, Italy is a different story both in size and availability of alternative routes, outside the single euro money highway. Most certainly, the Italian voters will turn the next election into an in, out referendum for the euro, as it happened in Greece in July 2015. In the latter country 63% of the vote was against the acceptance of the humiliating terms attached to remaining in Eurozone. The governing SYRIZA party however and personally the Prime Minister Alexis Tsipras overruled the result and conceded to the terms of creditors. But let’s take the story from the beginning.

The Greek catastrophe

Greece has lost by now one quarter of her annual national income and product, compared to the 2010 levels. Nevertheless, the country carries on rather soundly, despite unemployment rates around 20% overall and 40% for the youths. The impossible salvage, a quasi miracle, has to be attributed to the full policy reverse, if not ideological U-turn, of the leftists governing SYRIZA party and Prime Minister Alexis Tsipras himself. In the summer of 2015, Greece, Europe and the financial world lived horrifying days.

Finally, on 15 July, SYRIZA and Tsipras proposed and the Parliament conceded Greece to remain in the Eurozone and pay the dear price. It was barbaric spending cuts, hideous tax increases and unseen before reductions in wages and pensions. Is Italy ready to do the same? Many people doubt it; let’s see why. But first return to Athens to see what happened.

Unbearable Germany

All along the difficult years after 2010, Berlin led the Eurozone hawks callously demanding time after time Athens to capitulate. Finally, the Germans got what they wanted; profiteering ruthlessly on the Greek debt, while they should have shared the cost. After all, it was the German banks which the Greek taxpayers undertook to repay in full for imprudent credits. To be noted, that sharing sovereign bankruptcy costs between creditors and debtors has become a tradition, after the Latin American debt arrangement of the 1980s. On that occasion, the New York banks accepted to get partially paid off with the famous Brady Bonds. But no, Berlin wanted it its own way.

The reasons why Greece accepted this humiliating and financially catastrophic arrangement – capital controls are still there – is not difficult to explain. The country is small and geographically located in a very unstable cross continental region of the Balkans and the Eastern Mediterranean, where South East Europe meets Asia and Africa. At that time, Greece suffered of excessive foreign trade and fiscal deficits, guaranteeing an inferno if outside the Eurozone. So, it had to be the euro or no real money at all, let alone the external risks. This extended reference to Greece’s problems serves as a comparison base.

Italy is different

Italy suffers from nothing of the sort. Her neighbors pose no outside threats whatsoever and the country has a solid productive machine (industry, agriculture, services), also very competent on world markets. So, it’s the only south Eurozone country which can avoid a catastrophe in a possible transition period while leaving the euro area.

On top of that, it must be stressed that the really excessive Italian state debt at 130% of GDP is mainly financed and held at home by a super rich north, comparing excellently or even surpassing Germany in every respect (industry, services, agriculture and more). The European Central Bank also holds a good part, of the Italian state debt of round €250 billion, from a €1.3 trillion in total. Is Germany ready to negotiate a salvation of Italy? It might be so. So, Rome has the arsenal to resist the German attacks.

Fratzscher’s foundings

Speaking of Germany, Marcel Fratzscher the second most prominent economist of the country (according to an evaluation of Frankfurter Allgemeine Zeitung) estimated recently that his country has gained €294 billion in interest savings, since 2007 from the policies of Eurozone’s central bank, the ECB.

Apart from that, Germany is the largest beneficiary from the existence of the single currency and the single internal EU market. It has a yearly trade surplus of more around €60bn with her Eurozone partners, not because it manufactures better Mercedes, but because the others do not protect their own markets from the German dumping.

Dumping people

Yes, one may argue that Germany dumps a good part of her own people. Again Fratzscher in some ways unwillingly supports the dumping allegation. He says that part time work has doubled in a few years and adds that the average household “has almost 3 percent less income today than it did in 2000”.

All that must be attributed to the infamous and peculiar employer-trade unions ‘understanding’ sponsored ‘energetically’ by the government in even more peculiar ways. In this way, the country secures an almost uninterrupted labor peace. Isn’t it a democratic discrepancy, when a European country works underground with its ‘deep state’, in order to pacify its labor market? Why do we only denounce second and third world countries for suppressing their labor movements, and do not discuss how Germany secures an almost fully pacified labor market?

Seasick marines

As for the legendary German effectiveness and competitiveness there are important sectors of total German failure, proving the opposite. Banking and mercantile marine are two famous cases. The ‘great’ Deutsche Bank when exposed to the New York banking market competition, almost went bankrupt and returned shamed to Germany. It was saved by the grey workings of an underground ‘patriotic collaboration’ between the German economic elites and the state. Openly the German business leaders vowed to support the bank with what it needed. They didn’t give a damn if the EU fair completion legislation permitted such a salvation. Still, the Deutsche Bank has to fire more than ten percent of its personnel in order to survive.

Another famous case of German impotency to compete in the high seas, is the full failure of the country’s shipping sector. During the past ten years, mainly Greek ship-owners have cheaply bought and dearly re-sold after some time tens of merchant ships of German ownership. So, the ‘bitter pill’ that the previous heartless minister of Finance, Wolfgang Shäuble tried to shamelessly insert into the obligations of the Athens government a super-tax for the Greek ship-owners turned around to hit him on the head.

Teuton thinking

He was so ‘Teuton’ as not to understand that ocean going ships have propellers and can go wherever they like and raise whichever flag they chose. At the same time, the German state offers a multiple and largely illegal subsidies to her merchant marine companies. The merchant marine is an infallible proof that the German effectiveness is of a special character, needs special support to flourish, while Berlin unscrupulously and deceitfully tries to undermine fair competition.

All in all, during the next few months, the Italian political developments will bring everybody before their responsibilities. How long yet will Jens Weidmann, the President of Bundesbank (German central bank) will be able to denounce ECB’s monetary policy as favoring the South and still Germany gaining hundreds of billions from it? How long more will Berlin be able to block any discussion about the recycling of the German surpluses, through investments and more consumption? For how long more will Germany be able to pretend it fulfills her EU obligations and still refuse to honor her obligations to Athens?

Hopefully, the Italian deviation may awaken the sound German thinkers and convince the country’s leaderships not to continue on the catastrophic way until we come to a horrible repetition of history.

 

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

A new world that demands new doctors in the fourth industrial revolution

MEPs list conditions for new EU-Azerbaijan deal

Migration has set EU’s political clock ticking; the stagnating economy cannot help it and Turkey doesn’t cooperate

“Beyond the beach: tackling plastic pollution upstream”, a Sting Exclusive by Erik Solheim, Head of UN Environment

Fighting cybercrime – what happens to the law when the law cannot be enforced?

International community makes important progress on the tax challenges of digitalisation

Copyright: European Union , 2017; Source: EC - Audiovisual Service; Photo: Frank Molter

EU hits deadlock on the future of glyphosate a month before deadline

A Sting Exclusive: EU Commissioner Mimica looks at how the private sector can better deliver for international development

Bayer’s cross at night (Copyright: Bayer AG)

The EU clears Bayer-Monsanto merger amid wide competition and environmental concerns

3+1 issues to haunt tomorrow’s EU Summit

UN lauds special chemistry of the periodic table, kicking off 150th anniversary celebrations

Trump to run America to the tune of his business affairs

Another 170 migrants disappear in shipwrecks, UN agency reiterates call for an end to Mediterranean tragedy

Counting unemployment in the EU: The real rate comes to anything between 16.1% and 20.6%

Idea of ‘homogenous’ Polish culture is a myth: UN human rights expert

Mali not fulfilling its ‘sovereign role’ in protecting its people: UN human rights expert

Syria: ‘Violence, displacement’ and cold kill 11 infants ‘in the past two days’

EU finally agrees on target for 40% greenhouse emission cuts ahead of Paris climate talks

‘Forgotten crisis’ in Cameroon, with attacks on the rise, millions in need of ‘lifesaving assistance’

Did young people just kill television?

At least 2.5 million migrants were smuggled in 2016, first UN global study shows

Korea must enhance detection and reinforce sanctions to boost foreign bribery enforcement

Iceland won’t talk with Brussels about EU accession

Security Council imposes arms embargo on South Sudan

UN chief ‘commends’ leadership of Greece and former Yugoslav Republic of Macedonia, as name dispute draws to final close

Asian and Pacific economies: decreases in tax revenue highlight need to broaden tax bases

The remote doctor, can it ever work?

Syria: Why did the US-Russia brokered ceasefire collapse? What does the duo care for?

EU to spend €6 billion on youth employment and training futile schemes

Guatemala: UN anti-corruption body will continue working, as Constitutional Court blocks Government expulsion

Can the US deal a blow to EU and Russia together over Ukraine?

How do we build an ethical framework for the Fourth Industrial Revolution?

Greenpeace’s saints and sinners in the tech world

Public opinion misled by the Commission on air transport safety

Unemployment and immigrants haunt the EU; who can offer relief?

MEPs commend Ukraine‘s reform efforts and denounce Russian aggression

UN launches plan to promote peace, inclusive growth in Africa’s Sahel

New report says better metrics could have prompted stronger response to the crisis

EU Parliament semi worried over democratic deficit

Summer 2018 Interim Economic Forecast: Resilient Growth amid increased uncertainty

FROM THE FIELD: Enduring freezing winter in a war zone

Why this is the year we must take action on mental health

Celebrating the Customs Union: the world’s largest trading bloc turns 50

EP leaders call for negotiations on upgraded Transparency Register to continue

Reflections on the the biggest refugee crisis since World War II

Can the EU afford to block China’s business openings to Europe by denying her the ‘market economy status’?

Parliamentary bid to democratize Myanmar constitution a ‘positive development’ says UN rights expert

UN chief encourages victims of terrorism to ‘raise up their voices’

‘Deteriorating’ human rights in Belarus amounts to ‘wholescale oppression’: UN expert

Businesses succeed internationally

As human genome editing moves from the lab to the clinic, the ethical debate is no longer hypothetical

A Valentine’s Special: heart has nothing to do with it, it’s all Brain

Force used against protestors in Gaza ‘wholly disproportionate’ says UN human rights chief

The Fourth Industrial Revolution is about to hit the construction industry. Here’s how it can thrive

UN expert calls for international investigation into ‘evident murder’ of Jamal Khashoggi

Azerbaijan chooses Greek corridor for its natural gas flow to EU

Unlock the value proposition for Connected Insurance

South Korea: A cherished partner for the EU

More billions needed to help Eurozone recover; ECB sidesteps German objections about QE

Moving from a promise made in Sweden towards hope for peace in Yemen

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s