Italy Wonders Where Europe’s Solidarity Is As Coronavirus Strains Show; Will Italy Be The Next Country To Leave The European Union?; One By-Product Of The Coronavirus May Be The Demise Of The EU Itself
I have been writing ever since 2016 when BREXIT initially passed, that the United Kingdom would indeed, leave the European Union (EU). My argument then as now was, a country cannot subordinate its sovereignty to an outside, distant, bureaucratic entity in Brussels. Over time, resentment builds, and the enduring desire to be free — even if it costs economically in the short-term — is overpowering and inevitable. Thus, it was predictable that the U.K. would eventually separate itself and return to its ‘Great Britain’ status. Italy may leave the EU — for different reasons, financial and neglect.For the full article, I refer you to the FT.
The Financial Times is reporting this weekend that Italy, “the Europeam epicenter of the coronavirus, is running out of hospital beds, and doctors have been instructed to aim to guarantee intensive care treatment to patients with the greatest chances of theraputic success. With the grim task of selecting patients who are unlikely to survive, Italy’s health authorities have pleaded with the countries’ friends and allies for emergency supplies. On Thursday [of this week] they finally arrived — from Shanghai.”
“Beijing’s gesture has reinforced a percieved [the population’s view] lack of support from Europe, compounded by a communication’s blunder by European Central Bank President Christine Lagarde, who implied on Thursday it was no longer her job to keep Italy in the Euro,” the FT wrote. So much for subordinating one’s sovereignty for the greater good.
“When Italy asked for medical supplies under the auspices of a special European Crisis Mechanism, no EU country responded,” the FT noted. “Fearful of its own shortages, Germany initially banned the export of medical masks and other protective gear. 3M, a producer of medical masks, said the German restrictions had made it impossible to supply the Italian market. Berlin subsequently relaxed the export rules; but then Austria closed its borders to people arriving from Italy, unless they could prove they were vurus free.”
“The rebuffs are nourishing resentment that Italy has been abandoned by its European friends,” the FT observed. “t is a perception that has taken root over a decade, of a currency union that lacks collective solidarity and stifles growth, as Italy confronted migrant flows from Africa and the Middle East. This [sentiment] in turn, has fueled the rise of European nationalists such as the far-right firebrand, Matteo Salvini.”
“It’s back to the future, where Italy is on its own,” said Nathalie Tocci, Director of the Institute for International Affairs in Rome. It was the case with the eurozone crisis. then the migrant crisis of 2015-2016, and now the coronvirius crisis. It is the same old story, and the implications could be massive.”
“Italy needed help, and instead it has been given a slap in the face,” Matteo Salvini said. “The only help that has come from Europe, has been to cause the collapse of the stock market [after Ms. Lagarde’s statement], and to make the spread go crazy.”
“Ms. Lagarde’s comments exposed an “underlying vulnerability in the eurozone, centered on Italy’s precarious economic position,” said Kenneth Wattret, Chief European Economist as IHS Markit “To fix the economic damage of severe travel disruption and quarantine restrictions would require the ECB to monetize Italy’s debt, or a bailout.”
“it is the elephant in the room, and this crisis is bringing it home — because Italy is now at the heart of the crisis in Europe,” Mr. Wattret said.
Kyle Bass, Founder of Heyman Capital Management was interviewed on CNBC’s Squwak Box this morning/March 9, 2020 for his observations and thoughts on the geostrategic impact of the coronavirus. See my blog post on that interview, which I posted last week. Mr. Bass said, with respect to Europe, “European banks were never recapitalized in the aftermath of the 2008 financial crisis. So if you look where European banks are trading today, and where they will be trading in six months — Europe’s going to have a real problem. Italy’s banks in particular are going to become insolvent pretty quickly. Italy has north of 130 percent debt to GDP, and they have no capital in their banks. This coronavirus, black swan event could be a knock-out punch for Italy and the European Union. Either we’re going to see Italy default on their loan obligations, or the ECB, with German support, is going to have to provide more fiscal stimulus for Italy to get back on its feet.” Another scenario of course, is that Italy becomes the next country to leave the EU, so that Italy can return to having its own currency again.
“The Rotten Heart Of Europe: The Dirty War For Europe’s Money” 1996, by Bernard Connolly
I have written many times on this blog that I did not believe the U.K. would stay in the EU; and, the entire structure may well collapse if Italy follows in Britain’s footsteps Subordinating one’s sovereignty to another country never works in the long-run. As the old saying goes — “there is no such thing is being a little bit pregnant.” The EU, is a doomed romance — destined to fail, in my opinion.
Bernard Connelly, an Oxford educated British economist, known for his pessimistic outlook for the Euro, and the European Monetary Union; and, helped birth the Euro and European Union we have today, contends the monetary union — which is at the heart of this grand Euro experiment — is rotten at the core.” His 1996 book, “The Rotten Heart of Europe: The Dirty War For Europe’s Money,” is a sobering and realistic assessment of the consequences and pitfalls that plague the Eurozone — as a consequence of pursuing a continent-wide monetary union. And Mr. Connolly should know, he was there for the “birth” of the Euro and was partly responsible for where Europe is today. Depression and recession are widespread across the continent as toxic nationalism and profound unemployment — especially among the youth are pervasive.
Mr. Connolly argues, “that this destructive pursuit is making the economic situation in Europe worse than it would otherwise be; and, this “forced harmonization” is engendering “distrust, resentment, ridicule, contempt and even hatred,” amongst and between the people’s of the European continent. Yet Mr. Connolly notes, “the people who put this together (some of whom are in leadership positions today) hail the EURO and EU as a success.” “They call Spain a success [these were the unemployment/economic figures back in 2013 at the time Mr. Connolly gave an interview to CNBC), and they have 27% unemployment. Greece is called exceptional; and yet, youth unemployment there is a staggering 67%.” He calls this belief in the promise of a monetary union either crazy or disturbing. Those who originally proposed a European Union thought this was the path to prevent a third European civil war. The reality” Mr. Connolly says”, is a reversal of the post-WWII economic revival.”
“We have an elitist, bureaucratic, corrupt, authoritarian, repressive institution and leadership on one side and, a demoralized, lost generation of youth who see an “unaccountable, undemocratic, illegitimate and ultimately repressive super-state” that is digging Europe and themselves into an even deeper hole. Not surprisingly, he sees ultimate failure for the European Union and even disaster, the longer those in charge in Europe pursue this feckless endeavor. A deadly cocktail of unintended consequences. You may or may not agree with Mr. Connolly; but, it is hard to dismiss, or ignore him and his thesis — would be a failure itself.
I believe the damage has been done with respect to Italy; and, certainly other members of the EU who have a growing nationalist movement will find little solace in how the EU has responded to the crisis in Italy. One by-product of the coronavirus may be the demise of the EU itself; or survive — but, become a shell of its former self. RCP, fortunascorner.com