SINOGRAPH Save the euro, bomb Rome! By Francesco Sisci
ROME - It is possible that the ongoing European Union summit on the European
debt crisis, which is threatening to kindle a global economic meltdown, will
manage to patch together a reasonable solution regarding Greece, the country
that started the problem.
However, it is unlikely that much will be accomplished regarding Europe's
greatest issue, Italy, the country whose debt is too large to be bailed out by
any individual EU member.
Observers and markets are skeptical that the shaky Italian
government, which took long and precious weeks to decide on the appointment of
a new central banker, will be able in just a few hours to present a convincing
plan that will cut debts and jumpstart growth.
Nor did the European governments seem able to force Italy to change its old
inward-looking government practices and accept the reforms necessary to save
the country and the continent.
In fact, the ongoing crisis appears to be a failure for the fathers of the
Maastricht treaty, the one that paved the road for the monetary union.
Those politicians - Germany's Helmut Kohl, France's Francois Mitterand and
Giulio Andreotti of Italy - explicitly refused to conceive a way out of the
euro for individual members, and in so doing, they believed that in any crisis
there could be only one solution: moving forward with more political unity.
The idea then was to construe an economic deterministic mechanism that would
effectively push for a real union that would be very hard to achieve otherwise.
Therefore, they believed crises would actually be helpful to achievement of the
ultimate European goal of political integration. But no road forward was
clearly indicated, just as it is not clear how to get out of the euro.
In fact, in this crisis, it has been hard to think of expelling single
delinquent EU members like Greece, for instance. But is also proving very hard
to find a way forward for the union, and it has been even harder to impose the
will of the majority members on the delinquent minority.
Certainly, there are also broad economic considerations that discourage
expulsion from the union. Germany would lose the long-term benefits of the
union if it were to expel Italy, its largest potential industrial competitor in
Europe. Italian manufacturers could be boosted by a return to the lira,
undercutting German exports. But these broad interests lose importance if Italy
is unable to reform itself, and Germany is expected to shoulder most of the
humongous 2 trillion euro (US$2.78 trillion) Italian debt.
Italian ruling politicians, who have been in power for years, in fact have no
short-term interest in drastic measures to solve the Italian debt problems.
Necessary measures, from cuts in expenditures to liberalization to
kick-starting growth, would harm many interest groups and prove to the people
that the politicians now in power did not act for years, even though they knew
fully well the problems.
Benefits would conversely take years to reap.
There is therefore a fundamental contradiction between long-term national and
international benefits of European integration and the short-term interests of
those in the Italian ruling class who owe their power to the present status
quo. Their short-term interest is in encouraging a different, growing popular
sentiment: that Italy would be better off without the euro and with a return to
the lira.
The lira, which could be devalued, would offer an easy way out of the problem
that would not touch the powerful interest groups but would throw all problems
on the lower classes who would have to live through a period of high inflation,
as happened many years ago. The lower classes would be nominally compensated
for their sufferings with symbolic pay increases.
This idea in Italy is almost heresy officially, but it is resurfacing after
years of lethargy, and the contradiction between the long and short-term is at
the root of the present problem.
The Italian situation is in fact not worse than it was a few years ago, and its
debt ratio has not dramatically deteriorated. However, Italy's failure to give
markets prompt answers as the Greek crisis was ravaging the continent led to
the belief that Italian rulers would be unable to act if the contagion struck
their country.
The events that followed proved the markets right, as for months markets have
shot warning salvos about the Italian debt while the Italian government has
failed to respond effectively.
On the other hand, the other European governments failed to impose the
concerted European will on the recalcitrant Italians and also stopped short of
any real political mechanism forcing Rome to obey Brussels. Here, there is
another contradiction: between the interests of the majority and the minority
in the union.
There is a lack of political tools in Brussels to impose the majority's will on
the minority, even if that minority can sink the whole European boat.
Maastricht's Europe could have worked if economic distances between states had
shortened, as Kohl or Mitterand had believed would happen. They didn't - and
they possibly grew larger. This broke another Maastricht assumption: that all
union members' interests would be aligned and thus member states would have an
interest in avoiding difficult confrontations and finding compromise.
Here, we are at the core of the problem. Economics can help politics but can't
provide political and systemic solutions, especially since different states
pursued different economic policies over the years and each state looked only
after its own domestic affairs.
National leaderships were in fact elected only by their own local
constituencies. Local issues, or at the most national concerns, dominated
political agendas, which proceeded separately over the years. Overall European
policies conversely did not make a candidate win or lose an election.
Political decisions and strategies differed greatly in the various European
countries over the past 20 years and did not bring national economies closer
together. This was because one of the Maastricht assumptions was wrong:
economics alone cannot shape political union, as the European founding fathers
seemed to believe.
Political decisions brought economies further apart, and different national
economies - without the necessary politics but constrained by a single currency
for many different states - make the situation explosive, as it is presently,
without providing any ready, viable solution.
However, in the present situation, things have gone too far to let any country
out of the euro, and so there needs to be a political solution for Europe first
and for Italy second.
Italy has proved unable to extricate herself from the present bonds. In other
times, Italy could be left to its destiny, ie the return of the lira. But given
the present difficult global environment, letting Italy out of the euro could
trigger a second economic crisis. Here the present economic difficulties are,
in the classic pattern, bringing about social turmoil and political shifts.
This is already happening and the violent protests in Rome on October 15 could
be just a sweet aperitif to the much more bitter meal that will be dished out
to Europe in the coming months if a comprehensive political solution is not
found.
Then Italy must be saved despite herself. It must be "invaded", and there is
little time for anything else.
How? It will require concerted efforts from the European capitals and from
Washington. Libya, which did not pose a major risk to anybody, was subverted
and bombed. Nobody wishes for bombs to fall on Rome, but major political
changes must be imposed on Rome - within the government and to the whole
Italian ruling elite who led Italy to the present disaster.
Francesco Sisci is a columnist for the Italian daily Il Sole 24 Ore and
can be reached at fsisci@gmail.com
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