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Friday, March 01, 2013

Anti-euro party? Grillo's advisor says leaving the single currency would be "an absurd mistake"

Everyone is trying to figure out the enigma that is Beppe Grillo and what his Five-Star Movement actually wants.

On Europe, for example, where this isn't at all clear. As we've noted, Grillo himself has been very critical of the euro in the past, and toyed with the idea of a return to the Lira - although he is now keen to point out that he never explicitly said that Italy should leave the euro. But his party might be a different matter.

Italian Professor Mauro Gallegati, who is considered one of Beppe Grillo's closest economic advisors and one of the people responsible for writing the party's economic policies, said in an interview with today's Corriere della Sera,
[Italy's euro exit] would be dramatic, an absurd mistake which would reduce Italians' income by 30-40%. If anything, what's needed in Europe is a real political union, as in the US, with a central bank which can devalue the currency.
In other words, the Five-Star Movement can't quite be described as an 'anti-euro party' (as we've said before, see here and here). In fact, 'Europe' doesn't even feature in its manifesto. And remember, the Five-Star Movement is a very fluid construction - what Grillo says in public, or writes on his blog, doesn't automatically translates into 'party policy'. What we do know is that the party is definitely anti-austerity, which inevitably brings it into 'Europe territory'.
If you have not yet done so, watch a short video summary of our breakfast discussion yesterday, in which we sought to decode Grillo in particular and the Italian election results in general.


Rik said...

They should make their mind up. Not simply saying: 'we solved our spending problem you will pay for it'. Things donot work that way.

Rik said...

You see that a lot with 'solutions' proposed by macro-economists.
They simply forget to ask themselves the preliminary question in these 'Germany pays' scenarios: if Germany wants that?; if it is in Germany's long term interest? and alike. They simply assume that. I or anybody else could create heaven on earth that way just assume that everybody cooperates.

Same with the austerity discussion. Nobody tells were the money for a not-austerity scenario has to come from. Often solved by assuming that it comes from the CB while assuming (again) that that printing exercise has no consequences for the other parties involved.

jon livesey said...

I don't think we should be surprised if conflicting signals come out of the Five Star Movement.

One reason is obvious. It is an insurgency, not a regular political party, so it doesn't have a long history of party discipline.

And there is a deeper reason. If you run on a platform of overturning the current parties, well, they are the parties who got Italy into the EU and the euro. So if you aren't ant-EU or anti-euro explicitly, you are implicitly, since the over-priced euro is one of Italy's real economic problems, as you can see from their stalled export numbers and very high current account deficit.

And as for the suggestion that a political union and devaluation would help, I think that the answer is yes in the short term, but beyond that we need to remember that Italy's problems go back further than the euro.

Over the past twenty years, Italy's GDP/head has declined from 115% of the EU average to 100%. Twenty years ago Italy's GDP was - arguably, since some funny accounting was involved - larger than that of the UK, and now it is 15% smaller. This indicates structural problems that are bigger than the euro.

jon livesey said...

I see Grillo's new idea is a non-binding on-line vote on the euro. Very clever. It provides evidence of what Italians want without committing the politicians.

Then the politicians can tell the rest of the euro-zone "See how the voters spoke, and now give us the help we need to convince them to stay in the euro, otherwise...."