Only a short blog post today as I am travelling for a fair part of the day on my way from New York City to Dublin for my next speaking engagement. Tomorrow’s blog post will cover some reflections on the 3-day Modern Monetary Theory (MMT) conference that finished yesterday in New York. There are several things I thought about the event, some of which I will share in public, the others, in private, with the organisers. But, today’s post, is a brief reflection on the latest crisis that is about to engulf the Eurozone. I am referring to the announcement by the Italian government that it will target a fiscal deficit of 2.4 per cent of GDP. The elites are up in arms. I hope that Italy holds its nerve....
Bill Mitchell – billy blog
I hope the Italian government holds its nerve against BrusselsBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
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The new Italian coalition government wants to spend more money into the Italian economy, and is able to do so because Italy has had a trade surplus since 2012. This means there are more euros coming into Italy than there are going out. Therefore Italy is not in a debt trap.
“Italy has the bargaining power here. Whereas Greece was too small and succumbed to the bullying by the Troika, Italy is such a significant part of the Eurozone economy that it can call the shots if only it dares.” ~ Mitchell
Greece’s weakness is not a product of the size of the Greek economy, but of the fact that the Greece has a huge trade deficit, such that there are more euros flowing out of Greece than coming in. And since the Greek government cannot create euros out of thin air, the Greek government must borrow all its euros. Hence Greece is trapped in a death spiral of ever-increasing debt and austerity.
“As the Financial Times editorial noted, the planned additional spending by the new Italian government will undoubtedly be a boon to struggling Italians.”~ Mitchell
This is an example of how the Financial Times occasionally screws up and tells the truth, rather than spewing neoliberal lies.
The Troika does not want any “boon to struggling Italians,” since Italians do not submit to mass privatization when they are not struggling.
“The financial markets, aided and abetted by Brussels, want things on their terms, which are clearly detrimental to the interests of the Italian people.” ~ Mitchell
Gee, ya think?
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