The tweet from Italy's most rightwing xenophobe was enough to send a chill down any liberal democrat's spine. In the face of a resounding defeat of centre-left prime minister Matteo Renzi, Northern League leader Matteo Salvini wrote: “Viva Trump, viva Putin, viva la Le Pen e viva la Lega!”
I have already noted my concern and slight relief about the Austrian presidential result: this result is different. It cannot be said that this was a vote for the far right alone, although they clearly played a part in it. They also demonstrated the ability of parties without answers to questions to disrupt at present. But for Italy the questions are ore complex, and urgent.
Its migrant crisis is very real.
Its political impasse is critical.
Its banks are tottering, still effectively unreformed since 2008.
Renzi, like Cameron before him, took an unnecessary and seemingly foolish risk. The result is massive uncertainty.
That is, of course, unnecessary: more than a trillion euros of QE could have been used to help solve Italy's banking crisis as it could have previously been used to solve the Greek debt crisis. But that willing to solve real problems does not appear to exist within the banking hierarchy of Europe that is solely dedicated to serving the interests of those already well off. And in that one sentence the challenge facing Europe, which may make Brexit look irrelevant, is summarised. The EU's leadership and the European Central bank's leadership could stave off the crisis that Europe is facing if they recognised that the EU and its institutions must be run for the benefit of the people of Europe. It's still not clear that they do. And that is why, at least in part, Europe is in meltdown.
I won't say that coming to the rescue of democracy provides the EU with one last chance: we do not know that. But the time to use monetary policy to save economies from decades of ruin resulting from bank recklessness has arrived, as has use of QE for social purposes become a political imperative. Unconventional monetary policy (or QE) is possible. But now it has to be used to preserve democracy, serve people, reverse inequality, build jobs and deliver the foundation for long term prosperity. All that is possible: People's QE could work. If democrats believed in their cause they'd demand the money be made to back it, because that's what QE does.
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Agreed Richard. However is it not the case that the sort of monetary expansion leading to increased demand and therefore growth is really only possible on an EU scale ? Do you think it would be viable for say Italy on its own ?
Its banks could be saved on their own
QE is for monetary sovereigns. How can a monetary union allow one member to expand the money supply when it decides to borrow more than it can repay?
Italy must take it’s medicine or get out of the Eurozone. My hope is that they will get out. If not, their bondholders should take posession of their ancient sites, ports, airports, railways and utilities.
You clearly have no clue how money works
Go and do some reading
‘But that willing to solve real problems does not appear to exist within the banking hierarchy of Europe that is solely dedicated to serving the interests of those already well off.’
And now more than ever I suspect that that’s because these individuals know that even if (when) the EU turns into a collection of more of less fascist states they’ll still be safely doing what they’re doing now, and have done for years. Is that not what we’re seeing with Trumpism? And to be honest, is that not what we saw over the previous period in European history when fascist dictators were in the ascent.
But that willing to solve real problems does not appear to exist within the banking hierarchy of Europe that is solely dedicated to serving the interests of those already well off.
You right-and in one sentence. The core problem and the most important of several solutions. I wish others had your clarity of insight.
I read somewhere that the tax avoidance throughout Europe was also of the order of a trillion euros. Might it be if a euro QE was started , some of this money would be taken out of its vaults and invested because demand was rising?
The trillion euro estimate is mine….
It would be good if this too was tackled
Completely agree Richard. Based on the Banca di Italia article (linked below) I think there are about $330bn “non-performing loans” still poisoning the Italian banking sector. This is about 20% of Italian GDP. By selling assets much of this could be recovered, but we’re still have at least a $100bn black-hole that is clearly too big be covered by recapitalisation from investors.
Italian savers (not necessarily just the wealthy) constitute a large fraction of the creditors to Italian banks because of the mis-selling of bonds, therefore failing banks could cause many ordinary Italians to lose their life-savings and pensions. This is a political powder-keg.
It is up to the ECB to step in: (a) using OMF to protect creditors and ordinary savers by recapitalising the weakest banks, and (b) to bundle-up the non-performing loans and take them off the books of regional banks. The current ECB policy of “bail-ins” is increasing systemic risk and making a banking crisis inevitable.
http://www.bancaditalia.it/pubblicazioni/rapporto-stabilita/2016-2/index.html
At least Beppe Grillo of the five star movement understands money (and gold) – this link from 1998 (with subtitles)
https://www.youtube.com/watch?v=16Sb9CXYUrQ&feature=youtu.be
1998 I regret to say, was long before I understood it!
But of course if he was able to campaign as forcefully in a referendum on Italy remaining in the Euro I’d doubt the Euro would survive in tact.