Italy To Activate Its ‘Parallel Currency’ In Defiant Riposte To EU Ultimatum
The title above, comes from Ambrose Evans-Pritchard’s May 29, 2019 article he posted to London’s The Telegraph. I do not always agree with Mr. Evans-Pritchard; but, we agree more often than not; and, he is one of my favorite British journalists. I refer you to the May 29 Telegraph for Mr. Evans-Pritchard’s full article.
He begins his article by noting that “The Eurozone elites are looking staring down the barrel of an Italian economic revolt and a parallel currency. Subversive ‘minibot’ treasury notes are back in play.”
“I don’t govern a country on its knees,” said Matteo Salvini, after sweeping the European elections even more emphatically than the Brexit party. Note,” Mr. Evans-Pritchard writes, “the majestic “I.” “He is already master of Rome.”
“The Lega strongman can no longer be contained, even by Italy’s ever-ingenious mandarin class,” Mr. Evans-Pritchard observes. “His party commands 40 percent of the country, together with the eurosceptic confederates from the Brothers of Italy. It has erupted like a volcano in the Bourbon territories of the Mezzogiorno, now on the front line of the migrant flows, and left to fend for itself by [the rest of] Europe. Salvini can force a snap-election at any time.”
“By some maniacal reflex, the dying Commission of Jean-Claude Juncker has chosen this moment to draw up the first indictment letter of the revamped debt and deficits regime,” Mr. Evans-Pritchard wrote. “Italy faces 3.5B of fines for failure to tighten its belt. It has 48 hours to respond.”
“We are not Greece,” said Claudio Borghi Lega, Chairman of Italy’s House of Budget Committee. “We are net contributors to the EU’s budget. We have a trade surplus and primary budget surplus. We don’t need anything, from anybody. And, we are in better shape than France.” Which doesn’t say a lot these days, but I digress.
“Lega strategy is to offer the EU leaders a choice,” Mr. Evans-Pritchard wrote: “EU treaties to enable fiscal expansion and allow the European Central Bank to act as a lender-of-last-resort; or, face the consequences. Brussels says Italy has failed to make “sufficient progress” on debt levels, even though the chief cause of the slippage was a recession and a world trade slump. Its demands are marco-economic vandalism. It is ordering a country already in a slump — to tighten budget policy violently by 1.5 percentage points of GDP.” With an economy that is currently growing at less than one percent — that would be economic suicide.
“The prescription is futile, even on its own crude terms,” Mr. Evans-Pritchard eloquently observed. “Italy’s nominal GDP will deflate. The public debt ratio will ratchet higher through the denominator effect. But, law is law — at least for Salvini’s Italy, if not for Macron’s France.”
“I am not going to hang myself for some silly rule,” Salvini said. “Until unemployment falls to five percent, we have a right to invest. We have regions where youth unemployment is 50 percent. We need a Trump cure, a positive fiscal shock to reboot the country.” Salvini’s plan is a 30B Euro boost, led by a flat tax of 15 percent The Telegraph reported. One glaring thing left out here is the Trump deregulation. Excessive and onerous regulation in Italy and across other parts of Europe makes it terribly difficult to start a new business.
As Mr. Evans-Pritchard notes, “Italy is not a sovereign economic country, able to borrow on its own coin.” He adds, “Salvini’s plan is impossible under the current structure of the monetary union.”
Brexit was the first major salvo in the ultimate demise of the EU as we know it. Italy’s Salvini wants a “Trump-Style’ revolution in his country, for an economy that has been on life support for nearly a decade. More intrusion by the EU into Britain and Italy’s affairs is only going to accelerate the EU’s own demise. As Tyler Druden wrote on the May 24, 2019 edition of his blog, ZeroHedge.com, “A European Empire Is Not What Europe Needs.”
The EU’s financial and fiscal stance and behavior has led to a worsening economic landscape across the continent; and, is an albatross on the neck of its member states. We are likely witnessing the unraveling of this odious economic straight-jacket. Salvini’s Italy is on the right track. RCP, fortunascorner.com