The assault on democracy in Italy

I decided to write an extended blog post today (Wednesday) because events in Italy are so interesting. My usual short post on a Wednesday will resume next week. George Soros is now saying that “everything that could go wrong has gone wrong” in Europe and a financial collapse is in the wind (Source). I doubt the latter but agree with the former assessment. All the flaws in the original neoliberal design of the Eurozone have been revealed and all the reasons why those flaws were created in the first place remain in place. Nothing has changed since 1977 when the MacDougall Report concluded that the cultural and national differences between the (then) Member States of the European Communities were too great to allow an effective monetary union to be created. That assessment and the earlier work of Pierre Werner in his 1970 Report were ignored as the neoliberals in France and Germany rushed headlong to Maastricht. France thought it would have a chance to dominate and Germany was distracted by unification but still firmly in charge of what would be allowed in the new monetary system and what would not. Now, one of the biggest nations – Italy – is is turmoil as the damage of being part of the Eurozone slowly but surely erodes its capacity to deliver anything remotely like prosperity and its social and political system starts to collapse. Italy must leave the Eurozone – the sooner the better. And, that will bring a reality check for the whole disaster and encourage other nations to push for an orderly dissolution.

The reason I doubt that another major financial crisis is looming as a result of Italian bond yields spiralling in recent days is because the ECB knows it can fund Member State fiscal deficits to any level and basically play the private bond markets out of the game.

It has been doing that successfully since May 2010 when it introduced its Securities Market Program (SMP), which morphed into the more recent large-scale bond buying exercise.

On May 14, 2010, the ECB established the SMP, which opened the possibility that the ECB and the national central banks could “conduct outright interventions in the euro area public and private debt securities markets” (Source).

That was central bank-speak for the practice of buying government bonds in the so-called secondary bond market in exchange for euros, that the ECB could out of ‘thin air’.

The decision meant that private bond investors (including private banks) could off-load distressed state debt onto the ECB.

It also meant that the bond dealers (the selective institutions (mostly banks) that participate by tender in the primary bond market) knew they could safely bid for the primary issue, then offload the purchases at a tidy capital gain to the ECB.

So, for them, even if the credit risk for a struggling Member State was skyrocketing, the risk to them was minimal.

The action also meant that the ECB was able to control the yields on the debt because by pushing up the demand for the debt, its price rose and so the fixed interest rates attached to the debt fell as the face value increased.

Competitive tenders then would ensure any further primary issues would be at the rate the ECB deemed appropriate (that is, low).

At the time, a number of ECB’s official members gave speeches claiming that the SMP program was within the realm of normal weekly central bank liquidity management operations.

Of course, that was nonsense. They were were trying to disabuse any notion that they were funding government deficits. This was to quell criticisms, from the likes of the Bundesbank and others, that the program contravened Article 123 of the TEU, which in essence it clearly did.

Whatever spin one wanted to put on the SMP, it was unambiguously a fiscal bailout package.

The SMP ramped up in June 2012 when the ECB began buying large volumes of Italian government bonds when the private bond market investors were reluctant and Italy would have become insolvent.

We are back to that situation now.

As I concluded in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – while the SMP saved the Eurozone from breakup, it remained a failed vision for European prosperity because it didn’t address the core problem: Southern Europe was in depression and the only way out is for fiscal deficits to expand.

The ECB clearly signalled a willingness to buy unlimited quantities of government bonds if there was the risk of insolvency.

But this intervention required that the countries succumb to a fiscal austerity package that ensured their growth prospects were minimal.

And the combination just meant that the next crisis was just around the corner.

The SMP gave way to the more recent asset-buying programs, which have seen huge volumes of government debt (other than Greece) accumulate on the ECB’s balance sheet, which have funded fiscal deficits and kept the Eurozone intact.

The interesting point is that while the ECB eventually dealt the private bond dealers out of the game they waited a time (in each episode) for those dealers to express their market preferences.

Why? It is obvious. They wanted to create a sense of public debt crisis – let the spreads of the Member State bonds rise against the German bund – to make it clear that Germany’s position was sound and the example and the rest were out of control rabble with excessive deficits.

Then they could have it both ways.

On the one hand, they could confect the crisis which allowed the Troika (of which it was a part) to impose harsh austerity on nations such as Greece but, generally, create a climate of fiscal pressure on all Member States.

On the other hand, they could stop the ‘crisis’ in its tracks by ‘funding’ the deficits.

Make no mistake – the only reason the Eurozone remains intact and its Member States remain solvent is because the ECB decided to break the Treaty rules and bailout Member States deficits under the guise of liquidity operations.

Without the massive ‘fiscal’ operation, many Member States, including Italy would have become bankrupt and been forced to exit and restore their own currency.

The Europhile progressives ignore that when they talk about their dreams for reform. The system is only intact because one of its key institutions is breaking the law. I don’t think that is a very good place to start.

And the reformists must be feeling pretty bleak after this week’s shenanigans in Italy.

For an excellent overview of the Italian disaster, my co-author Thomas Fazi’s American Affairs Op Ed (May 2018) – Italy’s Organic Crisis – is worth the time.

The recent Italian political dramas are intrinsically linked to its fateful decision to enter the Eurozone in the 1990s.

There is great denial about that. We read constantly how stupid the Italians are – they are all over the place – a random people prone to all sorts of emotional and corrupt variability.

But that sort of narrative is just a smokescreen to isolate the problem to Italy. The reality is that Italy is now suffering from the years of austerity and social and labour policy retrenchments that are obligated as part of Eurozone membership.

Italy was going well before it surrendered its currency despite its alleged ‘corrupt and random culture’.

The last month has surely opened the eyes of the Europhile progressives who pine for reform and a pan-European democracy.

First, we had the fiscal statement from the new German Finance Minister Wolfgang Schäuble, oops, I mean Olaf Scholz. They are now indistinguishable in their pursuit of the schawrze Null.

Please read my blog post – Die schwarze Null continues to haunt Europe (May 21, 2018) – for more discussion on this point.

Second, that was followed by the Letter by 154 Economics professors in Germany who warned against any further European reforms that would render the EMU – in their words – a “liability union” (“einer Haftungsunion”).

If anyone thought that the new GroKo would change anything, then these two German inputs should immediately disabuse them of those thoughts.

Third, then the Italian drama unfolded with various diversions such as the feigned hurt over the overnight comments by the European Commissioner for Budget and Human Resources, German Günther Oettinger.

Oettinger had previously said (in 2013) that Italy was “ungovernable”.

The recent interview with – Deutsche Welle – has caused an uproar.

It went like this with DW asking him whether the latest Italian political drama proved he was correct in 2013:

Oettinger: We trust the Italian president who was pointing out to potential government or coalition partners the rights and duties that go together with membership in the European Union and the Eurozone. We also trust the new technocratic government and are relying on possible elections to produce a result with which Italy can be governed in a pro-European way.

DW: But given the strength of the populists don’t you think that these elections will produce a vote against the euro and perhaps against Italy’s EU membership? Wouldn’t another net contributor to the EU budget leave?

Oettinger: My concern and expectation is that the coming weeks will show, that developments in Italy’s markets, bonds and economy will become so far-reaching that it might become a signal to voters after all to not vote for populists on the right and left.

DW: You’re hoping for a market shock that would persuade Italians not to vote for the populist after all. That’s a vague calculation.

Oettinger: Even now developments on bond markets, the market value of banks, and Italy’s economy in general, have darkened noticeably and negatively. That has to do with the possible government formation. I can only hope that this will play a role in the election campaign and send a signal not to hand populists on the right and left any responsibility in government.

When I heard the interview I was not the slightest bit surprised. After all, he was just repeating the standard European Commission line and reiterating exactly the design principles that the Economic and Monetary Union are built upon.

The primacy of the technocracy and the markets over the democratic intent of the citizens in the Member States.

They will tolerate democratic freedom as long as it produces the ‘right’ result – a pro-European government. If the democratic process throws up something that challenges that aspiration then they will intervene and install one of their own until the ‘democracy’ conforms.

That is why I have been arguing for years that the European Union is fundamentally an anti-democratic technocracy.

You might like to read the Op Ed I wrote with Thomas Fazi to promote our book (March 8, 2018) – The EU cannot be democratised – here’s why.

Oettinger is just telling it as it is.

So why all the confected hostility and shock from Italian politicians such as Lega Nord’s leader Matteo Salvini?

Is Salvini so naive that he thought it would be all beer and skittles and what was a pretty lame attempt at challenging the orthodoxy – safely within the European tent – would go unchecked by the elites, who police dissent at every turn?

Oettinger was just being German and a Eurocrat.

His comrades like Jean-Claude Juncker and Donald Tusk, no less anti-democratic in their intent, knew Oettinger had probably disclosed the game to directly and made some appeasing noises.

Oettinger, himself, then issued a – Statement (May 29, 2018) where he said:

I fully respect the will of voters being left, right or centre and in every country. By referring to the actual market developments in Italy, I did not mean to be disrespectful and I apologise for this. Italy as a founding member played and plays an important role in European integration and I hope it will continue on this path.

Which, in part, is him lying to shore up the Groupthink look.

His earlier comments were the truth. If the people get restive a good dose of economic crisis is needed to bring them back in line – with fear and trepidation.

Remember back to April 2, 2016, when our friends from WikiLeaks released a new document – 19 March 2016 IMF Teleconference on Greece – that detailed the “Transcript of an Audio Recording of an internal IMF meeting” held on March 19, 2016 in Athens to discuss the next tranche of bailout assistance from the Troika.

We heard various top IMF officials plotting to create a new solvency disaster in Greece to get its way with its other Troika members, particularly the puppet master in the Eurozone, the German government (Merkel).

Three IMF officials who were “managing the Greek debt crisis” are recorded in the conversation.

It was full of bullying.

At one stage they talked about a “decision point” and said:

In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default. Right?

They then agreed that mid-April would be a good time to escalate matters.

The head of the IMF’s European Department, one Poul Thomsen replied:

But that is not an event. That is not going to cause them to… That discussion can go on for a long time. And they are just leading them down the road… why are they leading them down the road? Because they are not close to the event, whatever it is.

The IMF Mission Chief, one Delia Velkouleskou responded:

I agree that we need an event, but I don’t know what that will be. But I think Dijsselbloem is trying not to generate an event …

Nothing new in Oettinger’s candid remarks – when in doubt cause economic chaos and bend democracy to the pro-Europe direction.

I covered that IMF meeting in this blog post – The destruction of Greece – “only a down payment” according to the IMF (April 27, 2017).

The truthful part of Oettinger’s ‘apology’ is that the elites are scared witless that Italy might undermine the EMU. Unlike Greece, Italy is a founding member of what is now the European Union and a large economy.

If it goes pear-shaped – by which I mean starts talking of exit – then the whole ship will sink. Cannot come quickly enough in my estimation.

That was a diversion though in the main game.

The fourth Italian dilemma for Europe came when the Lega Nord and M5S coalition decided to nominate university academic Paolo Savona as Finance Minister.

Savona has occasionally made statements that paranoid European elitists would interpret as being anti-Europe and anti-German.

For example, he wrote in his most recent book that the euro was a “German cage” and spoke of the need for a Plan B (exit) to avoid ending up like Greece. Sensible stuff really.

He also correctly noted that the entry into the EMU was a huge mistake for Italy and that being anti-euro does not make him anti-Europe.

The conflation of the ‘euro’ and ‘Europe’ is always used by Europhiles on the Left to justify their dream of a united Europe with the euro. But Italy could leave the euro without leaving Europe. As if Italy could ever ‘leave’ Europe!

His nomination was one step too far for the paranoid lot in Brussels who were already having conniptions at the thought of the Lega/M5S coalition, despite the leaders of both parties affirming their support for the euro.

Solution? Invoke the Italian President Sergio Mattarella – a stooge of Matteo Renzi’s PD (Democratic Party) – to veto the nomination of Savona

He claimed the hidden agenda was that the new coalition wanted to “take Italy out of the Eurozone and that as the protector of the Italian Constituion and in the interests of the nation and its stability, he would not allow Savona to be appointed” (my translation from the Italian news service).

For his part, Savona went all ‘euro’ and claimed that all he wanted was a “stronger but fairer Europe” and remained committed to reducing the “public debt and deficit”.

The Brussels line in other words.

Next step was for the President to draft a conservative who will toe the Brussels line and take over government – none other than the former IMF economist Carlo Cottarelli.

Cottarelli has the nickname ““Mr. Scissors” (Source) – and it not because he is good at dressmaking.

He is “known for making cuts to public spending”. Just what is required in a nation that is languishing in near Depression.

Cottarelli has been “charged with establishing a neutral technocratic cabinet, and then holding new elections in early 2019”.

At the time of writing Mr Scissors had not formally taken up the invitation.

Mattarella’s plan is for Mr Scissors to push the 2019 fiscal policy statement through in October before the next election.

It might all unwind because even though Mattarella has the power to dissolve Parliament and thus can choose the timing of the next election (to some extent), the unelected technocratic government, if installed, is unlikely to survive a confidence vote on the floor of that parliament.

Anyway, is anyone surprised by any of this?

Not really. Remember back to 2010 when the pro-European central banker Lucas Papademos was installed as Greek Prime Minister.

When announcing the terms of the proposed bailout to the Greek people, the incumbent Prime Minister George Papandreou told them that he would take the last bailout to a popular vote. At that point his days were numbered.

Soon afterwards the Troika got rid of him and put one of ‘their men’ into the role, Papademos. It didn’t matter what the people who vote might think!

It is a pity that the Italian President plays a role of Brussels’ enforcer?

Remember back in 2010, Iceland soon learned that when your government is selling you out its only recourse is to get the titular head (president) to intervene.

That is what happened in Iceland when the President intervened – in line with the mood of the population – and refused to sign legislation passed by an out-of-touch government intent on big-noting itself on the world stage by pushing for EMU admission in spite of the obvious harm that would do to the nation.

The President of Iceland vetoed an act of parliament which would have seen the nation “repay” £3.4bn to Britain and the Netherlands. This repayment was in relation to the amount that the British and Dutch governments paid out in 2008 to their citizens who had deposits in a private Icelandic bank which collapsed during the height of the global financial crisis.

Go Prez (the Iceland one)!

The Italians however have no such president.

The interesting thing is that the latest polls (May 25, 2018) show that the Lega has risen sharply in popularity and the mainstream parties have lost further ground relative to the March 4, 2018 election polling.

It might all unwind still.

But then the elites will engineer the ‘markets’ to bring the Italian voters into fear and submission – that is Oettinger’s thesis.

Just like Greece.

Anti-democratic to the core!

Conclusion

So you Europhile progressives, how are your expectations for reform at present?

How is DiEM25 going to pull off their plans?

How are you going to de-Germanise Germany?

How are you going to launch your assault on the Euro tower and sort out the ECB, especially if Weidmann or similar takes over after Draghi?

And then how are you going to get rid of the likes of Oettinger and all?

Not a hope in hell!

As to George Soros. While he told the assembled press contingent how bad Europe is he then said he will pump money into a campaign to force Britain to have a second Brexit referendum because leaving Europe will be damaging (Source).

Soros revealed why he should be disregarded when he claimed that by remaining in the European Union, Britain “would also render Europe a great service by rescinding Brexit and not creating a hard-to-fill hole in the European budget”.

The British people should be looking Eastwards and thinking how lucky they will be that soon they will be free of the anti-democratic, corporatist mess that the EU has become.

At least then their destiny will be in their own hands.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

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    28 Responses to The assault on democracy in Italy

    1. RobertH says:

      “At least then their destiny will be in their own hands”.

      But unaccountably some among us are terrified at that prospect. A (small) majority having voted to get out of the EU, a (small) minority is hell-bent on sabotaging in every possible way accomplishing what that majority voted for. Their aim is (and has been since the day after the referendum) to reverse its result because – in eerie and apparently unconscious emulation of the way in which their beloved EU is run – they only recognise as legitimate poll-results which are in line with their own opinion. And they have the gall to proclaim themselves to be democrats (many – perhaps most – of them “progressives” into the bargain)! The perversity of human nature is astounding to behold.

      They will in no way be deflected from their wrecking-attempts by witnessing the mayhem being practised by Brussels puppets aiming to subvert the democratic process in Italy. In fact they will be encouraged by the spectacle because that’s exactly what they’re aiming to do in Britain.

    2. James Schipper says:

      Dear Bill

      It is really sad what has been happening in Italy since it embraced the euro. It has endured unending economic stagnation. Much of its industry has disappeared.

      In your translation of an Italian news report, you wrote, “to take Italy out of the Eurozone, and as the protector [..], he would allow Savona to be appointed.” Shouldn’t that have been “he would NOT allow Savona to be appointed.”

      Regards. James

    3. AlexHache says:

      I agree with the analysis, but I don’t think an ‘orderly dissolution’ is possible. In my opinion, reintroducing the lira would create a massive and durable mess that would *deter* other countries to follow that path.

    4. John Doyle says:

      I’m going to post this blog on WolfStreet where I already said it was a terrible thing that the president intends to put up a technocrat. This blog will spell it out.

    5. Mr Shigemitsu says:

      As Yanis Varoufakis states in his recent Guardian article, President Mattarella, was perfectly happy to accept
      the nomination of Salvino, who was proposing to expel half a million(!) immigrants – but when it comes to
      someone who opposes the Euro… then forget it.

      “Had Mattarella refused Salvini the post of interior minister, outraged by his promise to expel 500,000
      migrants from Italy, I would be compelled to support him. But, no, the president had no such qualms.
      Not even for a moment did he consider vetoing the idea of a European country deploying its security forces
      to round up hundreds of thousands of people, cage them, and force them into trains, buses and ferries
      before sending them goodness knows where.

      No, Mattarella chose to clash with an absolute majority of lawmakers for another reason: his disapproval
      of the finance minister designate. Why? Because the said gentleman, while fully qualified for the job, and
      despite his declaration that he would abide by the EU’s rules, had in the past expressed doubts about the
      eurozone’s architecture and has favoured a plan of EU exit just in case it was needed…

      …What is so striking is that there is no thinking economist anywhere in the world who does not share
      concern about the eurozone’s faulty architecture. No prudent finance minister would neglect to develop
      a plan for euro exit. Indeed, I have it on good authority that the German finance ministry, the European
      Central Bank and every major bank and corporation have plans in place for the possible exit from the
      eurozone of Italy, even of Germany. Is Mattarella telling us that the Italian finance minister is banned
      from thinking of such a plan?”

      https://www.theguardian.com/commentisfree/2018/may/28/italy-eurosceptic-far-right-technocrat-matarella-racist-populist

    6. Winston Smith says:

      “So you Europhile progressives, how are your expectations for reform at present?”

      I’ll take the bait. I consider myself a Europhile: I am a European and would rather see a cooperative future than a continent under periods of fascist rule and war as marked the previous century. I’m definitely not a €-phile: I believe the current monetary union is not conducive to the aforementioned desire. Your conflation of these meanings is also noted ;-), and I would reply that rather than contempt, “The Europhile Left” needs (re-)education, in how to be a more effective Europhile so to speak, as they too have been inundated for the past decades in the established economic doctrines, to the point where it is hardly possible to vote for a left-wing party that offers much more than bandaids to the prevailing neoliberal direction. Furthermore, this kind of policy is not limited to the EMU: politicians of sovereign currency issuers have demonstrated to be perfectly capable of things like harsh austerity during recession, contempt of unemployment, deregulation, privatisation, union busting, reduced taxation for the “job creators” etc., that are considered to be neoliberal. The US and UK are prime examples of this, and I’m still on the fence about whether the latter can truly consider themselves lucky, potentially trading one corporatist government for the other.

      With that said, my expectations for reform at present are below freezing.

    7. Tom says:

      If you are wrong all the time, you shouldnt even be considered a technocrat. =)

    8. Matt R says:

      Thanks Bill. Always refreshing to be reminded that I’m not necessarily a racist or an idiot for having voted for Brexit. Seriously, that is the message I receive from many (maybe most) so called “progressives” in the UK.

    9. Darren Pigott says:

      Hello

      I’ll confess instantly I’m a member of diem25, yet please don’t hold it against me!

      I have been trying to put the case for mmt into the thinking of their plans, especially in case of plan b which is an euro exit. I’m really not qualified enough to outline it all myself so I do try to push people’s questions to someone more suitable & capable of answering them.

      I am intrigued in something in the economic proposals of the European New Deal, namely the public digital payments platform 2.2.2 P12 & appendix 2 P34

      https://diem25.org/diem25-unveils-its-european-new-deal-an-economic-agenda-for-european-recovery/

      Is anybody able to give a constructive (& part laymans) description of whether this is feasible, what it’s benefits & drawbacks are.

      To my understanding, it does not create any net new currency, only exchanging euro’s for tax credits, which can then be re-invested by the govt into the productive economy to stimulate the economy.

      Is it possible with this system for a govt to create more tax credits than euro’s invested to buy whatever is for sale in its own nation (or those that need to pay tax in that country)

      Would it be an invaluable stop gap if the country left the euro?

      Leaving aside the federalism plans & the desire to maintain the Euro, is the PDPP able to create the massive amount of funding needed to reinvigorate nations within the eurozone & allay people’s economic concerns.

      I was thinking of how the system would be portrayed if the Italian election was re-run & diem put candidates forward

      Personally I don’t think the EU would accept the 7 economic proposals (or ultimatums) that are plan A, which leaves the PDPP as a precursor new currency (outlined in this article https://www.opendemocracy.net/can-europe-make-it/yanis-varoufakis/mera25-new-greek-political-party)

      I am good intentioned & if anyone doesn’t want their critique public I will respect that (just email me)

      Thanks.

      Darren

    10. cs says:

      Fantastic summary of what has been going on in Italy. I’ve been waiting for your commentary.

      I am currently reading a lot of mainstream Italian news sites and what I find breath-taking is the complete and utter lack of any counter voices to the usual narrative frame that goes something like this: ‘exit eurozone, massive inflation, mass unemployment, huge capital flight, Venezuelan chaos, Italian armageddon.’
      “Lo spread” rising is held up as some natural, unstoppable, cataclysmic phenomena that ordinary Italian citizens must defer to if they are to survive. One cannot under any circumstances act against the interests of ‘Lo spread’. Lo spread is the ultimate head of state who decides what can and cannot be done. It truly is astounding how the spread between Italian bonds and German bonds is used as some ultimate barometer of every political decision. When in fact the ECB can control “lo spread” whenever it wants to as Bill says. Someone without much economic training could be forgiven for thinking a jar of Nutella was in charge of Italy.
      Watching a few speeches by Cottarelli on Youtube, I heard him implore Italians to understand the the public debt was ultimately their problem and that they must ask themselves to make sacrifices, to accept cuts in public spending. For example, he says public transport is too cheap in Italy and Italian citizens should pay more for it. However, no mention is made of how such subsidy cuts would effect incomes and demand. He assumes you can cut spending and not have any effect on demand, that the economy will continue growing despite continued austerity. What also surprises me is that in the speeches no one in the audience ever seems to ask a difficult question about demand or multipliers or why the recipe hasn’t worked for Greece. Such is the groupthink.
      What perturbs me most is that when I sit listening to Borghi, Bagnai and other Lega economic thinkers I pretty much agree with them entirely about the Euro and deficit spending. I never thought I’d be in agreement with the Lega Nord. What are anti-austerians in Italy to do? They have no one really to vote for. Vote populist and as Varoufakis says open the way for inhumane immigration policy – which will be horrible stuff – listening to Salvini on immigration is blood curdling – his hatred for ‘zinagare’ and ‘clandestini’ – the slippery slope to massive human rights violation is apparent. Or vote PD and get austerity and the Euro. This is truly a mess and the tragedy is that we all saw it coming.

    11. William Allen says:

      Thanks Bill. This was excellent.

    12. Stavros N Karageorgis says:

      I, too, kindly request that the critique of DiEm25 be less “savage” rhetorically even as it remains incisive and unyielding substantively. The recent experience with regard to certain circuitist Post-Keynesians, during which I fought the good fight on the side of MMT, indicates both the value and the perils of heated rhetoric.

    13. bill says:

      Dear Stavros N Karageorgis (at 2018/05/31 at 3:22 pm).

      DiEM25 diverts progressives from the urgent need to abandon the Eurozone and restore currency sovereignty. As long as it does that – and defends its support from these dysfunctional structures with spurious economic and other arguments – they will be in the firing line.

      Sorry.

      best wishes
      bill

    14. Henry Rech says:

      I can’t understand someone like Varoufakis, who suffered at the hands of a hegemonic pan-European elite, wants to create another hegemonic pan-European elite, but of the alternative flavour. A hegemonic elite is a hegemonic elite. How he could characterize such a power structure as democratic I can’t understand. True democracy can only exist were there is devolved power.

    15. Hepion says:

      When Argentina abandoned foreign currency they had adopted, the american dollar, they contracted for 1 quarter and grew strongly following 10 years. That’s some real world history for you.

    16. paul says:

      I can’t understand someone like Varoufakis, who suffered at the hands of a hegemonic pan-European elite, wants to create another hegemonic pan-European elite, but of the alternative flavour.

      Then you should read and listen to what he says.
      He has a desire for orderly reform of euro structures as he fears the consequences of a disorderly disentigration.
      From what I know, he has a game theory background, and recognises the chinese finger trap that is the eurozone.
      Greece had a gun to it’s head,locked and loaded by insiders within and without.
      Neither wanted to lay down arms and game theory would suggest stasis,stalemate which is what has occurred.
      Unfortunately the third player, the sub technocracy (formerly the electorate/population), remains hostage, dying slowly and shorn of its dignity.

      He does not see any resolution but that the former 2 parties reform themselves and return(?!) to nourishing the third.

      Maybe I have got it wrong*, and I think yanis is a good guy, but I cannot see how DIEM25 will actually work out. The former 2 parties are making out like bandits,and bandits do not surrender their guns.

      *we have a thing called the council tax, this used to justify local services. To ensure local services,locally elected councillors have the burden of being educated, I asked one of my councillors what this entailed.
      It turned out to be attending a talk with the glamorous Yanis, (about risk and that sort of bullshit), fancy hotel and what did the councillor learn?
      “He’s such an intelligent man”.

      If there is a good lord, now is a good time to help us

    17. Schofield says:

      This is a brilliant article by Bill. He clearly shows up the politicians in the EU to be a bunch of liars at least as far as the Eurozone is concerned. Bill writes :-

      “At the time, a number of ECB’s official members gave speeches claiming that the SMP program was within the realm of normal weekly central bank liquidity management operations. Of course, that was nonsense. They were were trying to disabuse any notion that they were funding government deficits. This was to quell criticisms, from the likes of the Bundesbank and others, that the program contravened Article 123 of the TEU, which in essence it clearly did.”

      Article 123 of the Lisbon Treaty clearly states the following is prohibited:-

      “purchase directly from them (Member States) by the European Central Bank or national central banks of debt instruments.”

      http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html

    18. RobertH says:

      Bill:- “As long as it does that – and defends its support from (sic) these dysfunctional structures with spurious economic and other arguments – they will be in the firing line”.

      Meaning (inferentially) that until it unconditionally comes into line with orthodox MMT teaching I (Bill) will give it no quarter. That sounds – including the military metaphor – disturbingly like the ultimatum given by the Bolsheviks to all other parties of the left.

      Staunch and unswerving upholding of an inspiring idea (if MMT can justly be so described) may be very admirable in itself, but not at *any* price I suggest. Why spit on potential allies because their ideas aren’t “kosher” enough?

      Added to which, promoting leaving the EZ to priority #1, before which achieving any other objective must perforce accord precedence is an arbitrary personal preference. Realistically, it isn’t going to happen any time soon anyway so I can’t see what’s to criticize about going for other objectives meanwhile.

    19. bill says:

      Dear RobertH (at 2018/06/01 at 3:54 am)

      No-one that I know of is “spitting’ on DiEM25 (for example). It is not about being “kosher”. It is about not becoming co-opted to a power that eventually corrupts.

      Your contention that it is better to compromise within a larger disaster is unsupportable in my view.

      That strategy is why Labour (or so-called progressive) politicians and activists speak relentlessly about fiscal rules and generating bigger surpluses than the conservatives. They become more neo-liberal than the ‘neo-liberals’ and, when and if, they ever gain office, they turn out to be like Tony Blair, or all the other neo-liberal Leftists that have led the charge on austerity around the world.

      They become co-opted by their desire to achieve small gains while ignoring the root cause.

      It is like one of those plants (Oxalis) which are easy to keep at ground level (the green part) but keep coming back and coming back stronger. The only solution is to dig the bulbous root structure out. No other strategy gets rid of the malaise.

      We discuss that descent into compromise in our book Reclaiming the State.

      I reject it as a feasible strategy for root-and-branch change.

      And history tells us that the Bolsheviks achieved their aims rather more quickly than if they had stayed compromising with Julius Martov’s Mensheviks and Leon Trotsky. One doesn’t have to support their specific aims to recognise they pursued a superior political strategy.

      best wishes
      bill

    20. Adam K says:

      I am not sure whether there aren’t any hidden legal issues but I have an idea how the Italians can easily fix their public debt. This will effectively totally subvert the whole superstructure of austerity and what is important, no animals or humans will be harmed in this process.They can do it by minting enough one billion Euro golden collector coins (these can only be legal tender in Italy but this is enough), depositing them in already struggling local banks and then using the balances created by this operation to buy back the bonds. The only way Günther Oettinger can block this operation is by ripping off the whole TARGET2 system. I doubt that Giovanni Tria is going to address social inequality but the alternative is to keep muddling through what is even worse. Does the minting idea sound insane? Yes it does but the idea of implementing even more austerity and risking a very well-known unknown of the emergence of local Donald Trumps (or worse) is even more insane.

    21. cs says:

      I would be interested to hear Bill’s views on the mini-BOT proposals of Claudio Borghi and Savona’s Plan B (which I understand would be more of a surprise currency change to prevent speculation for months).

      How exactly do the Italian’s transition to a new lira or fiorino. What’s the best way to do it?

      Just how bad would the devaluation be etc. Many euroskeptic Italian economists I’ve listened to say that a currency change would be a lot less difficult than the fearmongers make out and compare the potential devaluation to what happened to the EURO during the gfc. I get them impression Italians don’t like the euro but they fear the transition to a new currency more.

    22. Henry Rech says:

      Adam K,

      “They can do it by minting enough one billion Euro golden collector coins…”

      Interesting. More interesting would be where they would find the US$600billion to buy the gold (assuming half an ounce per coin).

      Or perhaps they could raid the sacristies of the Catholic churches in Italy.

    23. RobertH says:

      Dear Bill

      I accept that your logic is unassailable, and your argument persuasive.

      However (whilst it’s a bit off-topic) I wouldn’t accept for one moment that the fact the Bolsheviks “achieved their aims more quickly” is a criterion which any democratic humanist (of any political persuasion) ought to use to judge their “success” – considering what those “aims” were: namely nothing less than the brutal crushing of all opposition, of any kind, through the use of terror, and the imposition of a pitiless dictatorship. Calling anything that leads to that “a superior political strategy” is to judge it in a moral vacuum; I refuse to believe that you seriously believe that the price paid in blood and suffering could ever be justified, *on any grounds*.

      Secondly, to “ignore the root cause” (assuming for the sake of argument that MMT alone is capable of identifying that) while going for “achieving small gains” may be a contemptible strategy viewed in the abstract, but its cumulative effect can in practice succeed in building-up a critical mass in support of more radical change.

      You, on the other hand want it all in one go, which might well mean you get nothing. How successful has MMT been so far in dethroning neoliberalism (which by the way not only MMT adherents are attacking, so whatever success may have been achieved results from the combined efforts of *all* opponents)?

      What if the only approach you countenance gets nowhere? What’s next on your agenda – revolution?

    24. bill says:

      Dear RobertH (at 2018/06/01 at 9:26 pm)

      You might be on more solid ground if there were signs that over the last few decades gains were being made against the neoliberal onslaught.

      I would suggest the opposite is the case. And, moreover, the political parties that workers have relied on in the past to protect their interests have morphed into neoliberal machines that in some cases have led the charge on austerity, privatisation, deregulation etc.

      Those parties no longer serve their original purpose.

      And the more we compromise the more they move to the right and become virtually indistinguishable from the conservative parties. In the meantime, we get disasters like Trump being elected because the Democrats were so toxic to normal voters.

      So I see no role for your “small gains”. Tell me how DiEM25 (for example, because it started this discussion) will make “small gains”. What will they be like? Do you know what they are seeking to achieve?

      Do you know what obstacles are in front of them?

      Do you think it is the slightest bit possible that 28 Member States will all come together at the same time and suddenly decide to push through Treaty change that overcomes the technocratic framework of the EU?

      Not a chance in hell! So why bother and become co-opted in the process as most of the social democratic movements have become because they have refused to state a bold, regime-changing alternative and have rather opted for your ‘iterative’ reform.

      best wishes
      bill

    25. Paulo Marques says:

      Germany has been stating (and preventing) there will be no meaningful change to the EMU. 26 years after Maastricht and almost 2 centuries of Deutschland uber Alles, why does any one still hope for reform when any minor criticism gets stamped upon with tyranny?

    26. Adam K says:

      Dear Henry Rech,

      Even the existing commemorative coins do not have intrinsic (melt) value equal to the nominal value. The Italians could mint a 1kg coin denominated as 1 billion euros and put a microchip into it (this would be difficult but doable). These coins would not be supposed to be in circulation, they are tokens to be deposited in a bank (since they would be legal tender in Italy a bank could not refuse accepting them). They are to exploit a loophole in the Euro monetary system that is the fact that the old seignorage privilege of the governments has not been fully extinguished. The idea of issuing short-term euro-denominated bills which could also be used to extinguish tax liabilities is similar.

      Someone simply needs to have balls to do it.

      By the way we need to understand how things work in Europe even if we find it abhorrent and bizarre for quite obvious reasons. They have found a “solution” to the problem of China not importing plastic waste for recycling any more. Plastic waste is trucked from Western Europe to Poland and stored there. Then when enough accumulates, “unknown people” torch dumps which then burn, releasing toxic fumes. But the problem is “solved”. I am not kidding. Please watch “Płonie wysypisko śmieci w Zgierzu” on youtube. They say 50000 tonnes of plastic has been “recycled” that way last week. The total mass of recyclable waste produced by UK households in 2016 was 12192 tonnes. (according to Department of Environment Food and Rural Affairs).

      Or how they made Volkswagen cars with Diesel engines comply with the emission standards. I simply don’t believe that even thinking and talking about “reforming” the European system makes any sense. The EU superstructure is a white-collar mafia and you cannot reform mafia. You also cannot remove them, they are already there until the next mega-collapse like WW1 (exploited by Lenin) or WW2 (exploited by the US), which hopefully won’t happen during our lifetime. One can deal with the EU only in the same way Jarosław Kaczyński and Viktor Orban are dealing. People like Yanis Varoufakis have spent too much time in the West and they have accepted the Anglo-Saxon way of understanding things, the shallow philosophy that what you have been told, the funny “rules”, somehow represent the reality, the unbelievably naive belief in the so-called democracy. Game theory does not apply to people playing with marked cards. I think they have already unlearned the implicit Eastern and Southern European knowledge about unspoken true rules and deep networks of interests. Current Polish “leader” Jarosław Kaczyński has managed to dismantle the independent judicial system in Poland and his PM Mateusz Morawiecki has started the re-nationalisation of public assets and successfully applied a kind-of balanced fiscal stimulus, reducing unemployment to 6.3%. Are they progressives? Absolutely not. Jarosław Kaczyński rules the country with iron fist (with a little help from Father Rydzyk), despite failing health. What did the EU officials do? They issued a few vague condemnations and spoke about a slight and gradual reduction of fiscal transfers from the EU to Poland. Nobody in Germany will risk an open conflict on the Eastern flank. But they can do whatever they want with Greece because the Greeks are afraid of Erdogan and Turkey. As simple as that. How did the Islanders fend of the British in 2009 during the GFC? Someone simply mentioned that Russia could bail them out (and install their gear on the strategic outpost there). The next day the crisis was solved.

      Will anyone have balls in Italy and Spain to stand up to German bankers and defend the interests of Italian and Spanish bourgeois? I bet that person won’t be a progressive, let’s only hope he (for sure he not she) will not be a true fascist jailing the opponents, just a little-bit a conservative nationalist like Kaczyński or Orban. And will like cats like Kaczyński… this is the human face of the soft-authoritarian system in Poland.

    27. RobertH says:

      “And will like cats like Kaczyński… ”

      My favourite criterion too.

    28. RobertH says:

      Dear Bill

      Thanks for your forbearance (no irony intended).

      I concede all your arguments. But, however irrationally, I still revolt against adopting as to 100% the tactical position which you adopt as the only one your arguments mandate. Intuitively I feel that to leave no “wiggle-room” is a mistake, and one which may prove disabling if not fatal to hopes of ever reaching an MMT “promised land”. I predict that somewhere and somehow the baby will be discovered to be missing, having unknowingly been thrown out with the bathwater along the way.

      I can’t prove that, it’s just my own gut-feeling (and I suggest that there are historical precedents).

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