After the main centre right party withdrew it support for the EU imposed technocratic Government, the end was always going to be insight for Mario Monti's Government and he has gone today.What is worse for Italy though is it looks unlikley he will get his budget law passed and instead it will be straight to elections. Silvio Berlusconi has said he will run again and with a well financed campaign he could end up as Prime Minister again, despite the two court cases hanging around his neck. This instability will do no good for the Italian debt and Stock markets.
This situation also highlights the desperate desire of people not to undergo austerity measures for a prolonged period. It is just too tough and it is increasingly becoming obvious that the process of long-drawn out austerity is unable to win any public mandate in most countries.
What is the alternative? Well in the pre-euro era a Mediterranean country in such trouble would simply devalue its currency to the point at which it regained lost competitiveness with Germany and the other northern states. Everyone would collectively be made poorer in the Country, but the shock was short and sharp.
Nowadays this is no yet an option - although who knows how long the euro will hold together as a stable currency. But the populations of Southern Europe are simply not accepting of such fierce financial governance, especially when it has also led to such a large amount of social instability with unemployment at such high levels.
For these states, austerity can't be the right solution, I hope Berlusconi wins and tries a new option for Italy. It's the only way this mad phase of fiscal and monetary experimentalism will come to an end.
20 comments:
"A new option"? There is only one - kill the euro stone dead and revert to national currencies controlled by national Treasuries. If the PIIGS got together they could bring this about quite soon.
I hope Berlusconi wins
things have come to a pretty pass !
whom shall we wish upon the Germans at their next election? Mr Bean is a favourite comic act in those parts
Seem to be two obvious ways to get out of this deflationary trap: to debase the Euro in the traditional way or to smash up the Euro.
I favour an orderly, treaty-based reversion to national currencies keeping the Euro as a common currency or as a single currency in countries that wish to abide by the strict monetary and fiscal rules.
As you say, we can't go on like this.
I don't suppose your average Italian or Greek feels their personal profligacy caused this mess. More austerity not likely to work, the world has changed and no Western nation will find growth easy.
So I reckon Germany has two choices - sling them out of the Euro and let them be poor forever or make them accept having the Official Receivers called in and be poor forever.
The real choice is what screws up Germany's finances the least!
For the politicians that run the EZ, getting rid of the euro is just not an option they are prepared to contemplate. So any British suggestion that the crisis can be solved by dismantling the euro, is met with irritation at the irrelevancy of such an "anglo-saxon" remark.
Consequently the euro just won't be dismantled. It might bust, but it won't be voluntary. However, it will be interesting to see which happens first: a change in the EZ attitude to dismantling, or a civil conflagration. In either case we need to disengage from "Europe" as fast as possible for our own safety.
What concerns me is that whatever happens, it is likely GBP will rise cf the EUR and so we will become less competetive.
Please remind me when France last balanced it's budget?
Nick, the annointed heir to Angela is a Jock called David 'Mac' McAllister who is currently the leader of Lower Saxony. Apparently he passes for a genuine boxhead. His daddy was a captain in the Royal Signals in Berlin in the late 60s and 70s.
Strange but true.
Perhaps Alec Salmond's cunning plan all along was to create a Neue Allianz with the sausage noshers when the European house of cards collapses. Mac is his man.
I remember real Austerity, it wasn't nice and it wasn't fun. But we managed. How the present generations could manage is an interesting question.
@CU "this mad phase of fiscal and monetary experimentalism"
The numbers are still too big!
Nothing is happening with the big numbers, they have to be brought back into line with what the world/Europe can "afford"
We can't afford to keep paying interest on funny bank money that is never ever going to be repaid.
The short sharp debt resolving bank-bust/euro-bust is is still the only way out as far as I can see, the funny money must be removed from the system, it is still the only way out as far as I can see...
the end was always going to be insight
... meaning they'd see the way or:
the end was always going to be in sight
... meaning the end was nigh?
"Well in the pre-euro era a Mediterranean country in such trouble would simply devalue its currency to the point at which it regained lost competitiveness with Germany and the other northern states."
This is Italy we are talking about.
Berlusconi never brought prosperity to Italy, what makes people think for him to be elected in 2013 would result in anything but a return to the anaemic growth and uncompetitive economy that existed during his previous misrule?
There are some right-wing people who like him because he made a fortune and winds up the people they hate, but I see no evidence at all that he succeeded, or would be anything less than a disaster if he returned. He should try having some dignity and leaving by the back door, that's what I say.
Asquith - its a fair point, but more socialists are not going to come up with the right answer in Italy. ALthough perhaps it is iwith socialist governments leading the Euro states to ruin that the reveloutions will start - after all they have a natural penchant for getting heavy with the people when in power...
The solution to keeping the club meds in the Euro AND letting them become competitive again is so obvious It's incredible no one has really tried it.
DEVALUE THE EURO.
Really devalue. Take a 30% chunk off it and watch the exports flow and the tourists return.
If, as the eurocrats tell us - over 50% of EU states trade is with each other, then a serious devaluation won't cause very much pain on imports.
Everyone in the zone has devalued at once. So Greek olives are no dearer to a Frenchman tomorrow than Camembert is to a Greek today.
But both are suddenly more inviting to us , and the Norwegians, Japanese, Americans,Brazilians and Russians and so on.
Anon - but why are the Germans and others going to want to see a big reduction in their purchasing power? For the greater glory of the EU...hhmmmm
Anon might be right. If the Germans really believe in the EU United States of Europe they might have to face reunification all over again. Reunifying north south this time.
Not a prospect that many Germans would relish, but in the long term..?
Anon and Numak, the only way to devalue the euro is to print a whole lot more. This is exactly what Germany hasn't accepted. Which is why it hasn't happened.
Asquith said: "Berlusconi never brought prosperity ..."
Monti hasn't either, but .....
Berlusconi was elected by the Italians.
Monti was installed by the EU, without democratic mandate.
You've highlighted the problem there, because I'm not a socialist and don't hold any hope at all for this Bersani improving matters. He might win, but I can't envisage him making Italy a better place after his victory. Unfortunately I can't identify any hope from any of their stable of politicians. A bit of a shite situation, I just wanted to caution against any support for Berlusconi but there aren't any identifiable alternatives.
(Just like when he was in office).
It goes against my nature to be negative, but still.
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