Home > Uncategorized > Italy — shows why the euro has to be abandoned if Europe is to be saved

Italy — shows why the euro has to be abandoned if Europe is to be saved

from Lars Syll

ita ger 10y spreadInvestors had until recently been widely expected the European Central Bank to signal at its next meeting in two weeks’ time that it would wind down QE later in the year. Now, questions are growing about how feasible it will be to withdraw the ECB’s buying power at a time when investors are already driving Italian debt costs higher. Nearly half a decade ago, the Greek debt crisis turned into a crunch point for the bloc as a whole. The sheer scale of both the Italian economy and its bond market make it much more of a systemic challenge to the bloc than Greece was. Some commentators have dubbed Italy “too big to fail and too big to bail”. “On a number of levels — by challenging political cohesion, by raising public and private borrowing costs, and ultimately, through growing eurosystem imbalances — events in Italy could destabilise the euro area,” said Marchel Alexandrovich, senior European financial economist at Jefferies.

Financial Times

The euro has taken away the possibility for national governments to manage their economies in a meaningful way — and in Italy, just as in Greece a couple of years ago, the people have​ had to pay the true costs of its concomitant misguided austerity policies. 

The unfolding of the repeated economic crises in euroland during the last decade has shown beyond any doubts that the euro is not only an economic project​ but just as much a political one. What the neoliberal revolution during the 1980s and 1990s didn’t manage to accomplish, the euro shall now force on us.

austerity22But do the peoples of Europe really want to deprive themselves of economic autonomy, enforce lower wages and slash social welfare at the slightest sign of economic distress? Is increasing​ income inequality and a federal überstate really the stuff that our dreams are made of? I doubt it.

History ought to act as a deterrent. During the 1930s our economies didn’t come out of the depression until the folly of that time — the gold standard — was thrown on the dustbin of history. The euro will hopefully soon join it.

Economists have a tendency to get enthralled by their theories and model​​ and forget that behind the figures and abstractions there is a real world with real people. Real people that have to pay dearly for fundamentally flawed doctrines and recommendations.

The ‘European idea’—or better: ideology—notwithstanding, the euro has split Europe in two. As the engine of an ever-closer union the currency’s balance sheet has been disastrous. Norway and Switzerland will not be joining the eu any time soon; Britain is actively considering leaving it altogether. Sweden and Denmark were supposed to adopt the euro at some point; that is now off the table. The Eurozone itself is split between surplus and deficit countries, North and South, Germany and the rest. At no point since the end of World War Two have its nation-states confronted each other with so much hostility; the historic achievements of European unification have never been so threatened …

Anyone wishing to understand how an institution such as the single currency can wreak such havoc needs a concept of money that goes beyond that of the liberal economic tradition and the sociological theory informed by it. The conflicts in the Eurozone can only be decoded with the aid of an economic theory that can conceive of money not merely as a system of signs that symbolize claims and contractual obligations, but also, in tune with Weber’s view, as the product of a ruling organization, and hence as a contentious and contested institution with distributive consequences full of potential for conflict …

NLR95coverNow more than ever there is a grotesque gap between capitalism’s intensifying reproduction problems and the collective energy needed to resolve them … This may mean that there is no guarantee that the people who have been so kind as to present us with the euro will be able to protect us from its consequences, or will even make a serious attempt to do so. The sorcerer’s apprentices will be unable to let go of the broom with which they aimed to cleanse Europe of its pre-modern social and anti-capitalist foibles, for the sake of a neoliberal transformation of its capitalism. The most plausible scenario for the Europe of the near and not-so-near future is one of growing economic disparities—and of increasing political and cultural hostility between its peoples, as they find themselves flanked by technocratic attempts to undermine democracy on the one side, and the rise of new nationalist parties on the other. These will seize the opportunity to declare themselves the authentic champions of the growing number of so-called losers of modernization, who feel they have been abandoned by a social democracy that has embraced the market and globalization.

Wolfgang Streec

  1. Craig
    May 31, 2018 at 10:25 pm

    The accomplishment of satisfactory economic democracy and the transformation and rejuvenation of profit making systems is directly dependent upon cogniting on the efficacy of the policies of the new paradigm of Direct and Reciprocal Monetary Gifting and its policies.

  2. Helen Sakho
    May 31, 2018 at 11:21 pm

    A single currency requires a single history, a single dustbin and a single conscience.

    • Dave Raithel
      June 1, 2018 at 3:27 am

      Which implies we either have none, or we have money traders. And if we have money traders, we have…? For the fact is, people do not have a single conscience. I sure would not want Trump’s.

      • Rob Reno
        June 2, 2018 at 2:26 am

        “I sure would not want Trump’s.” Me either that would be one shithole of mind devoid of all truth, beauty, and goodness.

  3. Helen Sakho
    June 1, 2018 at 3:37 am

    Dave, you shall be endowed by the Universal God of Humanity – UGH, for short for those without a short memory.

  4. Helen Sakho
    June 1, 2018 at 3:38 am


  5. Philippe Frémeaux
    June 1, 2018 at 8:39 am

    On the one hand, you are perferctly right, and this is the risk that many supporters of the euro, like me, has described at the minute the Maastricht treaty was signed. The problem is that is not only a macroeconomic issue. The euro was also a political issue, meaningful, and it is not obvious, in the present situation, that its disparition would create a better situation that the situation we have right now. That”s why a large part of the European left is still fighting in favor of a larger european budget, even if the rise of nationalists makes this task uneasy. Philippe Frémeaux, columnist Alternatives Economiques

  6. Vince
    June 1, 2018 at 9:17 am

    The EU is built on an ever closer union, to get there they need crises. The recommended solution to crises is always an even closer union.There is reason in this madness.

  7. Mike Hall
    June 1, 2018 at 12:33 pm

    Warren Mosler has a workable solution, and importantly one which any EZ member can usefully adopt unilaterally, incl. Italy. (9mins video)

    • June 2, 2018 at 11:54 am

      Very instructive, and see other views via the “more videos” link.

    • Craig
      June 2, 2018 at 6:31 pm

      MMT has the mechanics of money creation correct. But like every other mere new theory or iconoclastic insight it neither rises to the level of paradigm nor simultaneously plumbs the depths of and seamlessly integrates into the temporal universe….which is what occurs in a paradigm change. The policies of Direct and Reciprocal Monetary Gifting go to the heart and the groin of the problem (the current paradigm) and implement the paradigm change.

  8. Helen Sakho
    June 15, 2018 at 12:10 am

    Yes, in addition to my comment above and previous comments, I must just add this one:
    It is the Merry-Go-Round of the classical type! The banks and the Economists go in round circles, until they feel so dizzy that they fall off the balancing Seesaw altogether, leaving the rest of us wondering what went up and what came down and who went round which cycle or circle. Perfectly repetitive, predictable, and profitable except for the vast majority of Italian and other nations – European or not – who struggle day in day out to make end’s meet and do not have time or energy to play useless games.

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