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Tuesday, September 25, 2012

A German euro exit 'not science fiction' for Il Cavaliere

The Huffington Post has decided to go for a lengthy interview with Italy's former Prime Minister Silvio Berlusconi for the launch of its Italian edition. Il Cavaliere sticks to his form on the euro, firing a salvo at Mario Monti (the Italian elections are drawing closer after all), arguing,
"I would have been less servile than Monti to Germany, a hegemonic state which is imposing the rule of rigour and austerity on other European countries - claiming that one can reduce [public] debt through austerity. But this is an illusion: public debt can be reduced by increasing GDP, which means development and growth."
Despite coming from a different political family, this sounds very similar to what France's Socialist President François Hollande said throughout his electoral campaign.

Berlusconi also seems to have revisited previous claims that leaving the euro "wouldn't be the end of the world" for Italy. He now says "it would be hard to exit the eurozone today", adding:
"There are three possibilities. The first one: convince Germany that we can't go on with austerity only. The second one: Germany leaves the eurozone, which is not science fiction given that German banks themselves have considered the possibility of replacing the euro with the D-mark. And the third one: other countries leave the euro, which would, however, mean the end of the single currency and scrapping Europe."
He says he favours the first option. 'Buona fortuna', Silvio.

Asked about his recent criticism of the fiscal treaty - which his party supported in the Italian parliament - Berlusconi claims,
"As the head of the [Italian] government, I fought a solitary battle over the fiscal treaty in Brussels, because France was perfectly aligned with Germany's pro-rigour stance. I even vetoed the inital draft blocking the discussion...In [the Italian] parliament, we voted in favour of the fiscal treaty for sense of responsibility." 
Interesting claim, as Berlusconi stepped down more than a month before the first draft of the fiscal treaty was tabled..  

In other news, Berlusconi is still refusing to officially confirm his comeback.


Ian Campbell said...

As incredible as he is, he is right. These are the options. But for counties such as are in trouble to recover from here through GDP dynamism is simply not credible either.

Counties that have stagnated for years and only boomed when given free money to play with have no credible track record that can persuade the markets that Berlusconi' s preferred option can work.

We are now in the waiting game while the ECB warms up it's printing presses and noone wants to trigger the 'go' button. Because that will concentrate minds on just how unlikely it is to do Ny good.

Denis Cooper said...

Would it really mean "scrapping Europe" if some countries left the euro?

I only ask because I'm pretty sure that I remember a time when there was no euro but there was a "Europe".

I think I even learnt about it, "Europe", when I was at school, and that was before there was even an EU let alone a euro.

How would one go about "scrapping Europe", if it came to that?

Would it all be dug up and crushed and spread around other parts of the world?

That doesn't seem very feasible, and wouldn't it cost a lot to do even it was possible?

I think we should be told.

Rollo said...

What is certainly true is that the Euro is too weak for Germany but too strong, in varying degrees, for the rest. If Germany left, the Dmark would soar and the SEuro would plummet. Gernman exports would become expensive. Why does Germany try to keep them in? Because the other countries are a human shield to protect German exports. Never mind how much the cannon fodder of the southern Untermensch suffer. Only when SEuro economies become so poor that they can no longer buy German goods, or anything, will Germany cast them out.

Anonymous said...

Rollo is right. There is however, one further option for Germany to come to the eurozone's aid without Germanexit. Merkel could reflate the domestic German economy by slashing taxes and even borrowing to spend on infrastructure. She could capitalize on the foreign investment capital flooding in to Germany because of its " safe haven status" . As interest rates on German treasuries are historically low, there would be no downside. German consumers would come out to play at last, and suck in exports from languishing EZ exporters, providing Berlusconi's ilusive "growth". Inflation may rise in Germany but this will help it to converge with the southern Mediterranean economies for the first time since 1 January 2002.

Rollo said...

Anonymous: the Germans would buy nothing from SEuro except holidays. No german expenditure will change Greec or Portugal into the Ruhr valley.

Idris Francis said...

There used to be a theatre phrase "A Tragedy in Three Acts". This is a tragedy in three hundred acts, each worse and more tragic than the one before.

It surely cannot be very much longer before the curtains come down and the actors decide, like Major, that they have no alternative but to leave the stage.