If you’re a fan of the Euro and the European currency union you have a very flawed concept of what money is and the effects of Neo Liberal economic policy on income distribution, though I suppose you could argue that one cow token is just as good as another and the pocket it’s in doesn’t matter.
The problem is that trade disparity and lack of national flexibility in monetary policy have placed the bulk of Europe in thrall to the Deutschemark and Germany. In turn Germany, because of its history of hyperinflation, has induced a situation similar to that of the United States and Britain during the Great Depression under the Gold Standard. By pegging your currency to an arbitrary exchange rate with a commodity or imaginary goal you limit the amount available for investment (jobs) and Aggregate Demand (also jobs) and accelerate the accumulation of wealth by those whose only interest is in protecting their assets (rich people and corporations) by artificially reducing the value of assets held by the non-rich (demand) through dis-inflation while perversely accelerating the competition among the already wealthy for fashionable assets (Yachts, Mansions, Art, Jewelry, Tulips)- Asset Inflation.
In short wealth held by the common people declines in value while that held by the wealthy increases in value. Notionally. On Paper.
Societies like that tend to experience violent devaluation in fashionable assets, usually from the wealthy experiencing a haircut- one very close to the neck. Europe has avoided it so far in part thanks to their very generous social services, but it’s a Bread and Circuses kind of bargain that is already starting to fray in places like Greece.
The prospect of even Greece, one of the smallest portions of the European economy, leaving the Euro currency union brings the prospect of revolutionary financial losses (in fashionable assets) and redistribution of wealth to which the European Union has responded with bullying, just as they have with Brexit. Brexit is, by comparison, a lesser existential threat since they never participated in the common currency.
Greece has so far submitted to the whip meekly but as I said, they are only a small player in the overall European economy. Italy, on the other hand, is the 3rd or 4th biggest player, depending on how you count.
In the last Italian election the Five Star Movement and the Northern League emerged as the two largest political parties. Both have an expressed policy of abandoning the Euro in favor of the Lira so the Italian government can regain control over the national economy, devalue its currency to gain competitive advantage, and gain jobs through increased Exports- a strategy that would surely work.
It would be a fragile coalition since they disagree on almost everything else, yet they seem to be on the verge of a deal.
The European Neo Liberal elite is trying to steathily subvert this economic independence (in part by emphasizing the nativist elements of both party’s policy) but it is a very real threat to their privileged positions and could easily bring down the whole Eurozone system. Note this is different from Brexit in that they are not threatening to exit the European Union as a whole, so issues of border tariffs and transit and compliance with regulations does not apply.
Of course it’s gone mostly ignored in the U.S. because we’re “exceptional”.
Italy is close to finally getting a government but it could threaten the very existence of the eurozone
by Will Martin, Business Insider
After more than two months of deadlock, Italy is finally close to appointing a new government, led jointly by populist parties the Five Star Movement and the Northern League. A deal between the two is expected some time this week.
Five Star, which is the single biggest party in the Italian system, fell far short of being able to govern alone but will lead the coalition. The League will be an unofficial junior partner in what will be a ruling coalition unlike any seen in a major European economy for many years.
The coalition could, if circumstances dictate, end up pulling Italy out of the euro and threatening the stability — and possibly even existence — of the entire eurozone project.
It’s a slim possibility but one that cannot be ruled out, especially after a leaked agreement between the two sides showed discussions have taken place about Italy abandoning the single currency.
Matteo Salvini, the League’s leader, is thought to have been more forthright in his desire to abandon the eurozone, while Five Star’s 31-year-old leader, Luigi Di Maio, is a highly pragmatic leader who has shifted his political allegiances frequently.
Whether or not the parties push for an exit from the euro, the fact that such a proposal almost formed a part of their plan for government is a huge moment for the eurozone.
Italy is one of the three most crucial members of the eurozone project, alongside France and Germany. Italy is the third biggest economy in the group and the largest in southern Europe.
Perhaps the simplest way to imagine the eurozone is as a three-legged stool. Germany, France and Italy are the legs holding up the rest of the project. Remove any one of those three pillars and the stool falls over.
That’s a view held by Nobel Prize-winning economist Joseph Stiglitz, who back in 2016 said that a “disastrous” political event similar to the United Kingdom’s decision to leave the European Union could trigger the collapse of the eurozone.
“I think the most likely thing is something along the lines of a political cataclysmic event like Brexit,” Stiglitz said at the time. “In other words, the eurozone’s member countries are democracies and one sees increasing hostility to the euro, which is, unfortunately, spilling over to a broader hostility to the broader European project and liberal values.”
Now that such a government is about to take control of Italy, the possibility of the Italian exit from the euro cannot be ruled out.
While the coalition has ruled out an exit for now, Five Star has a track record of changing its political stripes at almost any moment if it seems that doing so will boost its popularity. The party in fact promised not to go into coalition with any other party when it was campaigning, something it now looks certain to go back on.
Five Star’s unique status as a party without a traditional left or right wing position allows it to be far more flexible, something it is keen to emphasise. It is variously anti-establishment, Eurosceptic, anti-immigration, and pro-green.
If opposition to the European Union increases further — Italy ranked 23rd out of 28 in terms of individual support for the bloc in a recent study by Berlin-based think tank the European Council of Foreign Relations (ECFR) — it would not be a huge surprise to see Five Star go back on its pledge to back the euro.