What A Pantomime

The proposed stimulus package was bound to be disputed and, if implemented, to increase financial deficits among suffering nations.

Conte 2They’re behind you! Oh no they’re not!

Although Italy’s Finance Minister agreed the bailout [1] President Conte has not. “We will fight for eurobonds”, he said, “The ESM is a totally inadequate and improper instrument for the emergency we are facing.”

What he means is that although the terms for some of the €500 billion bailout fund will be eased, this applies only to what is specifically used to fight the covid-19 virus itself and anyway displaces funds that were intended for other purposes. Therefore Italy is to be treated like Greece has been and Conte knows Italians won’t stand for that, Mateo Salvini is hovering to take over the government and looks likely to win an election if it were held now; of course there’s a good excuse not to hold an election while the emergency lasts.

drowningItaly and Spain have begun to lift restrictions so that more workers can return to their jobs. All economies that have adopted a lockdown strategy will suffer huge damage to their economies but these two countries were already at their limit and have little choice but to attempt their own recoveries. They may share a currency with stronger neighbours but they don’t share a treasury: a floating currency such as sterling may help save the UK from drowning but the euro is like a block of concrete; the UK, the US and other countries must fund their own survival, so it seems must the eurozone countries. Monetary unions have never suited Italy, it had to break with the euro’s precursor, the ERM (Exchange Rate Mechanism) in 1992, and before that with several others [2].

Between 2003 and 2010 Germany introduced a series of tough ‘Hartz’ reforms to get people into productive employment. German citizens feel they made sacrifices to preserve the health of their economy so why must they now pay for others who didn’t? Meanwhile Italian citizens will not accept the tyranny of unelected foreign bosses running their lives if they are free to elect one of their own to find a better path for them.

The first act of the pantomime may be over but the programme doesn’t show how many will follow.

[1] Eurozone Bailout Agreed

[2] The Future of the Euro


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