Fabrizio Goria - business and finance correspondent of the Italian online news site Linkiesta - has recently taken a look back at the Italian crisis towards the end 2011. An English version of the article is available on the LSE's Europe blog. With Italian borrowing costs reaching record highs, he writes that European Commission President Jose Manuel Barroso instructed the then Interior Minister Roberto Maroni (of Lega Nord) to "unplug" Silvio Berlusconi, who was the Prime Minister at the time.
Goria writes:
"In those dark days, with the 10-year Bund-BTP spread close to a historical peak, a unique incident occurred. During an institutional meeting, the then minister of internal affairs Roberto Maroni received a phone call. It was towards the end of October. People attending that meeting, a select group of associates, reported that he turned pale. The call came from José Manuel Barroso [who] was very clear with Maroni: “I don’t want you to take this personally. Neither you nor all other members of the government. But you need to “unplug” Berlusconi.” And in that moment Barroso revealed what the strategy was: a flurry of declarations against the then prime minister. From all fronts, from every European policy maker. The message to be sent was one and one only: Berlusconi is inadequate."Ten days later, Berlusconi resigned.
It was extensively reported at the time that German Chancellor Angela Merkel and then French President Nicolas Sarkozy (who are obviously much more powerful than Barroso) were putting enormous pressure on Berlusconi to take a hike - and it was always assumed that Berlusconi's departure was at least in part due to European pressure.
However, this would be the most explicit intervention known to date. Now, we haven’t seen this reported anywhere else – and given that it is evidence that the EU fell just short of toppling a democratically elected leader – we'd expect it to be all over Italian and international media.
So we take it with a pinch of salt – but, as always, we’re keen to know what our readers think…
Italy is running a primary surplus so a strong leader could credibly threaten the new nobility (senior finance 'professionals') with a default without causing much, if any, suffering for the Italian people. Interest rate spikes might have provoked a strong leader to make that threat.
ReplyDeleteBerlusconi is independently wealthy and a strong character. A person like that is difficult to predict and almost impossible to control. I'm quite sure that his person isn't very popular around the powers that('d like to?) be.
I doubt that other sovereign leaders would endorse anything against a fellow sovereign leader - what goes around comes around.
The ones who might benefit by the removal of a national leader are more likely to be found among the ones trying to create an European superstate (taking power from national leaders) and among the new nobility (senior finance 'professionals').
Conspiracy theories are fun but until they are proven they are only that: Fun theories :-)
@Jesper
ReplyDeleteIt is not that easy. Italian bonds are mainly held by Italians. Meaning that a default like situation means:
-Italian banks will take a huge hit (most likely go under), first because of the repo problem (not able to put down bankrupt country bonds as collateral at the ECB). They have tried to buy time by having local banks buy a lot of the crap. This is part of the 'bill' for that.
Second because of the write off/haircut.
As things are now an Italian default means the banksector goes belly up and you will get bankruns. Make Cyprus look like a kindergarten party.
-Interest income will fall away with the locals and so reduce GDP and effectively a negative stimulus. Guess 2 to 3% interest income at a multiplier (imho around 0.5-0.7, but according the IMF much higher). This has probably to be compensated.
-Exit will most likely make external finance for both the government and the private sector impossible (private sector guess say 2 year, government likely longer). Also meaning that imports have to be financed differently (not only a deficit problem, but also a cash flow problem (importers will have to pay earlier than exporters receive).
The Italians and a lot of other people will have to learn that it is either democracy and take the consequences of voting for an idiot like Berlusconi and having a corrupt dysfunctional system or do what your creditors tell you if you want more credit. Little to do with the standard EU undemocratic stuff. They have the right to elect any buffon they want only take the negatives when it turns out bad.
In that respect Berlusconi was totally unacceptable for any creditor be it EU/EZ or anybody else. And as a consequence any solution at that time requiring outside (further) credit simply required that he resigned. Little to do with democracy a lot by having financially your house not in order.
NO: surely not? Do you mean that this unelected dictatorship in Brussels would use its powers to influence the judiciary in subject states? The next thing you'll be telling us that the Pope is a Catholic. The only way out of being colonised by the EU is to get out of it; and quick.
ReplyDeleteThe EUSSR is a criminal gang, and it has a stranglehold on Europe -- the ACTUAL Europe, as opposed to the delusional political EUSSR-made "Europe."
ReplyDeleteWe need to round up every Eurofascist -- from the most vile Kommisar to the lowliest useful idiot-- in Brussels and across the world up and put them on trial for their many crimes against humanity.
Rik,
ReplyDeleteprimary surplus means that there is a surplus before paying interest. Italy can continue operating without changes even during a default. Creditors have little leverage against someone whose only need for borrowing is for paying interest.
A default can be anything from not paying back any borrowing at all to forced rollovers of existing debt at zero interest. Italian banks would survive a soft default. Devaluation of currency is the same as defaulting against ones own citizens. Many 'experts' recommend leaving the euro and devaluing a new currency, somehow that kind of default is ok...
What does British pensioners and other Brits on fixed (pound) incomes think of the lost value of the pound?
Whether or not Italian debt can be used as collateral at the ECB during a possible default is an open question. Recent history indicates that if there is a will there is a way.
If true, typical of the EU.
ReplyDeleteAnti-democratic and lawless to its fingertips