Riccardo Bellofiore on why Italy’s stagnation could be future for Euro Zone
From The Guardian
This summer Italy fell into a triple-dip recession. After the 2008/09 collapse, the economy stagnated, heading back into recession during 2011 and never really recovering. The philosophy of Giulio Tremonti, who was the economic minister at the time, was to wait and see, until speculation killed Berlusconi’s government. Prime ministers Mario Monti and Enrico Letta followed Brussels’ self-defeating diktat for fiscal rigour, but even with moderate deficits the public debt/GDP ratio soared. The situation remained under control only thanks to the zero rate of interest and rhetoric by the European central bank president, Mario Draghi. Then came along Matteo Renzi, and Italian economic policy was all talk, talk, talk. While turning the screw of authoritarian parliamentary and electoral reforms, future lower taxes and liberalisations are promised to compensate for public cuts and to attract foreign investments. The €80 monthly tax break to lower-paid workers did not raise household consumption, and was instead spent on tariffs and local taxes. Yet in the past few weeks the outlook has changed, with 2014 second-quarter data showing France flat and Germany experiencing negative growth. Greece, Spain and Portugal registered rosier figures only because they were recovering from severe austerity. The eurozone cannot but be driven by the three biggest economies alone. This is a continental crisis within an anaemic global economy. However, an old Gramscian truth about Italy must be remembered: the “backwardness” of its capitalism is paradigmatic. Europe’s exit from the crisis needs the same policies that Italy needs, and without them Italy’s stagnation is the future for the entire continent.Read rest here.