The first battle in the war between Brussels and Rome has thus been won by Brussels: I have little doubt that Mattarella was lobbied very strongly by EU figures to block Savona, because he is capable of developing the real weapon that Five Star/Northern League could bring to bear against the euro – the “mini-BOT.” Named in reference to Italy’s “buoni ordinario del tesoro,” which are short-term government bonds, these would be government-issued notes valued at between €1 and €500, which would be issued to people and companies owed tax refunds by the government. These, in turn, would be valid for paying taxes, buying train tickets, getting petrol at government-owned fuel stations, and so on.
These sidestep the euro’s monopoly as legal tender in the eurozone because a vendor does not have to accept these if they are tendered in an exchange. But they can be accepted, perhaps at a discount to face value, and thereby become an alternative means of payment to the euro.
This is a weapon that Greece prepared, but never used, because Yanis Varoufakis, in what he describes in Adults in the Room as “Mea Maxima Culpa” (“my most grievous fault”) decided to leave the decision to Alexis Tsipras. Tsipras demurred, and the result was a Greek tragedy.
An alternative-means-of-payment is a much more cogent weapon in Italy’s hands than it would have been in Greece’s. Italy’s economy is six times larger than Greece’s and average salaries are almost double (though per-capita income has fallen substantially since the global financial crisis); its economy, particularly in the north, is an industrial powerhouse; and its climate supports a huge range of agricultural products. Much more of what Italians need to buy can be purchased from other Italians than was ever feasible for Greece (the only categorical exception is oil). The mini-BOT could really free Italy from the stranglehold of the euro.…Much more. Worth a read.
Brussels will seek to blame the anti-euro rebels, but the real villains of this crisis are the euro itself and the Maastricht Treaty. As the rebel British economist Wynne Godley stated back in 1992 when the Treaty was signed:
“If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalization, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.” (Wynne Godley, ‘Maastricht and All That’ London Review of Books, October 1992)Of course, another option is "populist" revolt. If a genuine left can't rise to the occasion, Mussolini anyone?
RT
Brussels-Rome war: EU holds back Italy’s anti-euro tide for now
Steve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London
7 comments:
His conclusion is
Brussels has blocked this [Leaving the euro] for today, but the odds of it happening in the near future have risen dramatically thanks to Mattarella’s veto of Savona.
That's what I guessed and hope too. I think the MMTers should hold some rock concerts in Italy.
Eurozone delenda est.
“As the rebel British economist Wynne Godley stated ”
He was hardly a “rebel”...
If a genuine left can't rise to the occasion, Mussolini anyone? Tom Hickey
Until we have ethical fiat and credit creation, we can expect endless oscillation between the ethically clueless Left and the ethically clueless Right.
Not that ethical fiat and credit creation is necessarily sufficient at this point; asset redistribution may also be necessary - to provide restitution.
Yves Smith starting to get a clue about the need for an additional, risk-free, always-liquid payment system, i.e. accounts for all citizens at the Central Bank itself and the abolition of all other privileges for the banks, credit unions, etc.?
I find it hard to get excited about stock market risks unless defaults on the borrowings can damage the banking/payments system, as they did in the Great Crash. Yves Smith [bold added] from Stock Market Borrowing at All Time High, Increasing Risk of Downdrafts
“Though the differences are tiny, over the two decades since the euro began, Italy has become 10 percent less competitive with Germany. That’s a handicap that could easily be corrected by a 10-percent devaluation of the lira against the deutschmark. Unfortunately, such an option doesn’t exist today.”
Yeah unfortunately for Germany’s Deutschebank...
Keen has largely been discredited by Bill in the area of National income accounting...
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PART 1 of 2
Italy had its chance for freedom, but lost it to political divisiveness among the new government.
Let’s go over some quick facts…
If your nation has a trade surplus, then the euro currency gives you advantages. You can trade with other euro-zone nations without going into debt. You can suck other nations dry if they use the euro, and if they have trade deficits.
If, however, your nation has a trade deficit, then the euro will destroy your nation, as it destroyed Greece, and is slowly destroying France.
Italy has had a trade surplus since mid-2012. Each month an average of 4 billion more euros flow into Italy than out of Italy. Therefore Italy does not have to beg for loans from the Troika, and does not have to pay back loans by surrendering public assets to Troika cronies. Therefore Italy can start experimenting with an alternative currency. And right now is a good time, since Italy’s economy is strongest during the summer months, especially July. Italy could have one currency for domestic use, and the euro for foreign trade.
Unfortunately the new Italian government remains divided and deadlocked, and therefore subservient to the Troika (meaning the IMF, plus the European Commission in Brussels, and the European Central Bank in Frankfurt). Since the Troika’s power comes from the euro, the Troika does not want any Eurozone nation to experiment with alternative currencies.
Italian President Sergio Mattarella is a neoliberal who is a pro-Troika, and pro-euro. Mattarella has been working with the Troika to keep Italy’s new government deadlocked. The Troika does not want unity between the Northern League and the Five Star Movement, since both parties oppose the Troika.
In fact, the Troika's little servant (President Sergio Mattarella) has announced that he will soon appoint a “neutral government” of his own choosing (i.e. of the Troika’s choosing). President Mattarella vetoed the appointment Paolo Savona as finance minister, since Savona is an Italian nationalist who opposes the Troika.
Yesterday Mattarella appointed Carlo Cottarelli to start making plans to have a new general election, which will be rigged in favor of the Troika.
Today Mattarella appointed that same Carlo Cottarelli as acting Prime Minister. Mr. Cottarelli comes straight from the Troika itself, having been a director of the IMF. (His wife is a manager with the infamous World Bank.)
Continued below...
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PART 2 of 2
The Troika is terrified of an alternative currency in Italy, since Italy is far more self-sufficient than Greece, for example.
STEVE KEEN: “An alternative-means-of-payment is a much more cogent weapon in Italy’s hands than it would have been in Greece’s. Italy’s economy is six times larger than Greece’s, and average salaries are almost double (though per-capita income has fallen substantially since the global financial crisis). Italy’s economy, particularly in the north, is an industrial powerhouse; and its climate supports a huge range of agricultural products. Much more of what Italians need to buy can be purchased from other Italians than was ever feasible for Greece.”
Plus, Italy has a trade surplus, as I noted above.
STEVE KEEN: “The Maastricht Treaty’s pact…was really a decision to hand over money creation to private banks.”
That’s the euro-scam in a nutshell. The Maastricht Treaty did to the Eurozone what many people erroneously think was done to the UK and USA. That is, many people think that all dollars are created by the Fed and by private banks as loans. Banks do indeed create most of the money in US / UK circulation, but the U.S. government also creates money; about $4 trillion a year out of thin air. The U.S. government does not borrow that $4 trillion, and does not distribute that $4 trillion as loans. Food Stamps and Social Security benefits, for example, are not loans. Recipients are not required to pay those benefits back as loans (although Social Security benefits are taxable).
STEVE KEEN: “The euro project was driven far more by politics and naive economics than it was by financial imperatives.”
Right again.
Then Steve Keen fumbles the ball…
STEVE KEEN: “Under the Maastricht Treaty, Italians had only one source for new money: borrowing from the private banks.”
Only one source? No. The Italian trade surplus brings an average of 4 billion euros each month from abroad. (Germany collects an average of 20 billion euros each month from abroad.) That income is not loans. The portion of that income that consists of euros was originally created as loans, but Italy and Germany didn’t borrow those euros. Some other country borrowed those euros (e.g. Greece) and then paid them (not lent them) to Italy and Germany.
STEVE KEEN: “The real villains of this crisis are the euro itself and the Maastricht Treaty.”
No. The real villains are corrupt European politicians who surrendered their nations to the Maastricht Treaty, and thus to Troika tyranny.
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