At the moment of paralyzed crisis in Europe what is Italy’s role?
I believe Berlusconi has become Europe’s Mubarak. There always comes a time when the ‘Strong Man’ becomes an embarrassment for those who have supported his grip on power and whose interests he has protected. It happened with Mubarak. He gradually became a crisis waiting to happen.
The problem is always that as his grip on power becomes more publicly detested and evidently corrupt and dysfunctional, and he becomes more and more of a liability it also happens in parallel that only he can keep a lid on the powers that oppose him. There is never anyone who can step seamlessly in to the shoes of ‘the strong man’. And so he is maintained in power even as he moves to the end game where he will be deposed by popular unrest or the unravelling of his political machine and power.
Berlusconi is increasingly an embarrassment for the bankers and also no longer the right man for the job that they need doing. BUT, there is no one else who can keep a lid on the problems that Berlusconi’s reign has stored up. If he goes it is clear that his monopoly on the media will crumble. And the great fear then is that when that happens the Italian people might start to hear voices and opinions they are not allowed to hear at present.
Worse, Berlusconi’s political power has meant that there has been a culture of lying throughout Italian politics. Specifically, and here I want it to be clear I am speculating and offering my thoughts for which I have no proof – I believe Berlusconi has overseen the transfer of a great deal of Sovereign debt to regions as far away from Milan as possible, where he knows no international auditors will ever deign to dirty their Gucci shoes.
I believe debt has been transferred to regions where it is essentially unreported. I think the fear is that when Berlusconi goes Italy may be torn in two. The Lega Nord ( the Northern League) will not want that debt to be returned to Milan from whence it came (bank debt taken on by the state). They will insist the debt never came from the banks in Milan in the North but is just evidence of the lazy and southerners. They will try to characterize Southern Italy as Greek in its corrupt fecklessness while they in the North are Germanic in their prudence and industry.
The South will want to prove how this was debt shipped down from the banks in the north with the connivance of local politicians corrupted by Berlusconi. Italy will suddenly seem as if it might tear itself in two. If I am in any way correct about this, and if others have already thought this through, then they will fear that the big Italian banks might well not survive such a period of crisis.
Thus at the G20 Greece must be bullied frightened in to voting ‘yes’ for austerity while in Italy Berlusconi must be tolerated in all his gurning buffoonery and maintained in power for a little longer. A successor must be found who will have the power concentrated in his hands to keep all the bodies buried in shallow graves in Italy’s southern regions from rising to the surface.
This I suggest is Italy’s place on the G20 agenda.
An important point to make with regard to your analysis is with regard to the Lega Nord. You are saying that the Lega will object to debt returning to the regions in which such debt originated: mostly from northern operations, you correctly say. However, once Berlusconi has lost his grip on government (yet again), the Lega will not be in any position to make any such decisions for Italy, as they represent only a small percentage of electors in Italy – 8% at the last election, which has fallen considerably since then. It is only Berlusconi that keeps the Lega in any position of power – as well the senior members of the Lega know. No Berlusconi; no Lega Nord – in a nutshell.
Of course, with the tight grip that Berlusconi keeps on the media, the real surprise is that so many people actually are getting to know a little of what the man actually represents – and its not good at all for Italy. But, we are talking about the man who declared himself to be a “part-time” prime minister just a few months ago. It is fortunate that Italy is so different to most of the rest of the western world insofar as personal debt is almost non-existent here – hence the ire of the credit card companies at Italy not being as much of a ‘cash cow’ as, for instance, the USA or the UK are – this is something that most Anglo-Saxon commentators gloss over, or just simply ignore.
Anyway, it’s good to see someone from “over there” passing comment.
Peter Gee,
Thank you for your comment. It is great to hear from those who are in a position to know more and know better. Anything you can say to help us understand better is wonderful.
Peter Gee – your assertion on personal debt -have you any figures/
In the UK we’re told its around £1.3 trillion. A figure that is debatable due to the lack of accountability surrounding it -ie whether mortgages are included and assuming they are whether the asset the mortgage supports are set off.
I ask because this is often used in the political arena as a factor which supports the political establishments stability.
I suspect it is a step to far to try to predict what will happen in Italian politics.
Oh no, the grammarians will be after me.
I spent time in Italy looking for anything transferable to our (UK) textiles sector – broadly I was surprised how ‘backwater’ much if it all was there (92 ish) and on the lack of standards in their academy. They were clinging to jobs through ‘flexibility’. I wonder whether the Mubarak-Berlusconi metaphor is really feudal and similar to the Enclosures – the destruction of ways of life to fund absentee landlords in gaming casinos. The now old (1974) book on this was Lyotard’s ‘Libidinal Economy’ – a ripping yarn that might be ‘read’ by watching La Grande Bouffe. Italy was split north and south then and he UK the other way round.
The presence of Berulscoini and his ilk in politics and big business suggests that few real skills are needed in the industries beyond amassing bullying power through money. the corruption is deeper than we know – we are repeating the lies of the Athenian Treasury in the years of the Democracy. Deep in this are questions on how we all tolerate our versions of Berlusconi, fearing perhaps that we all need these bullies to protect us. I suspect economics is predicated in such fears and hiding them.
On Newsnight the other day the leader of Berlusconi’s party in the Italian senate said something truly chilling. When asked if the Italian government would take orders from the Troika, he said “No, they cannot tell us what to do, we answer only to the markets”.
So there you have it. Democracy is a stage-managed circus played out every few years to enable the corrupt to allow ‘the market’ to dictate terms.
I fear that if he follows his own advice it may be the end for Italy as the market lets rip. Then perhaps the Italian people, who have preferred bling over brains for too long, might finally wake up and choose leaders with integrity.
Neil, I’d just like to point out that there’s already a Neil on this blog (me), so perhaps you could modify your posting-name so that people don’t confuse us – we might not wish to be identified with each other’s remarks (not that I disagree with your post above)!
Hey! I’m Neil too! But I’m neither one of the aforementioned Neils. Maybe we should all have been given numbers instead of these confusing name thingies. 😉
Sooooo…. we Greeks “must be bullied frightened in to voting ‘yes’ for austerity” — really?
The isles of Greece, the isles of Greece!
Where burning Sappho loved and sung,
Where grew the arts of war and peace,
Where Delos rose, and Phoebus sprung!
Eternal summer gilds them yet,
But all, except their sun, is set…
The mountains look on Marathon–
And Marathon looks on the sea;
And musing there an hour alone,
I dreamed that Greece might still be free;
For standing on the Persians’ grave,
I could not deem myself a slave.
A king sat on the rocky brow
Which looks o’er sea-born Salamis;
And ships, by thousands, lay below,
And men in nations–all were his!
He counted them at break of day–
And when the sun set, where were they?
And where are they? And where art thou?
My country? On thy voiceless shore
The heroic lay is tuneless now–
The heroic bosom beats no more!
And must thy lyre, so long divine,
Degenerate into hands like mine?
‘Tis something, in the dearth of fame,
Though linked among a fettered race,
To feel at least a patriot’s shame,
Even as I sing, suffuse my face;
For what is left the poet here?
For Greeks a blush–for Greece a tear….
Fill high the bowl with Samian wine!
Our virgins dance beneath the shade–
I see their glorious black eyes shine;
But gazing on each glowing maid,
My own the burning teardrop laves,
To think such breasts must suckle slaves.
Place me on Sunium’s marbled steep,
Where nothing, save the waves and I,
May hear our mutual murmurs sweep;
There, swanlike, let me sing and die:
A land of slaves shall ne’er be mine–
Dash down yon cup of Samian wine!
Hate to drag us away from poetry to the jargon ridden complexities of a Zerohedge guest post …by one Jeff Snider
MF Global Shines A Light On Monetarism’s Incapacity To Enhance The Real Economy
http://www.zerohedge.com/news/guest-post-mf-global-shines-light-monetarisms-incapacity-enhance-real-economy
and the rip off uncovered…
http://www.zerohedge.com/news/someone-going-jail-mf-global-caught-stealing-hundreds-millions-customers
But the first link seems it might be shining a light on how the risk management game is actually played
“The transaction in question was a “repo-to-maturity” financing deal, collateralized with the troubled sovereign European debt that everyone has been talking about in the past few days. What is particularly striking about this is that a “repo-to-maturity” deal is accounted for as a sale, meaning that what is essentially an ongoing collateralized loan is, surprise, hidden off the balance sheet.”….
Anyone know what a repo to maturity deal is?
The more general points he goes on to make are closer to what is being said here…
” Somewhere in that mathematical pursuit of maximum fractions, the very goal of finance changed, as if traditional banking was no longer sufficient to support the pursuit’s ever-growing ambitions. So the financial economy has broken away from the real economy, using the ironic cover story of enhancing price discovery to the process of intermediation – complexity is good!”….
…”The Occupy Wall Street crowd sees this as a problem with capitalism. I believe that they are correct in their target, but wrong in their diagnosis. This is not a problem of capitalism since Wall Street is a practitioner of monetarism. A real capitalist system works through real intermediation creating positive opportunities for productive enterprises (scarce money is actually vital here). Our current system of repo-to-maturity and gold leasing is nothing but empty monetarism’s habit of regularly forcing the circulation of empty paper. And when the system begins to doubt itself, as it did in 2008, the answer is always about finding a way to restart the fractional maximization process yet again, which means disguising the real risks inherent to that process. There is no real mystery as to why prices and values have seen such a divergence, and why that is a big problem to a system that depends on appearances.”
All that credit has strong effects upon every economy…… none of it good!
Berlusconi is simply emblematic of massive and cheap credit, anyone connected will do well then, but when the credit is withdrawn we find feet of clay. Well Berlusconi and the Greek/Italian system have been a joke for a long time.
Now we have to dispose of the joke as the credit is exhausted. All those who attained power will try to keep it but the tide is against them all. The longer it takes, the more Japanese will be the results. Yakuza and Mafia? Similar causes and both will take a role.
Lack of standards in the rule of law in all these countries were exacerbated and helped to cause the credit bubble and will all have to be addressed as the credit dries up. These countries thrive on such chaos. Flexibility indeed! No rules: no long term investment!!!!
Argentina did not invent default, David, these countries did!
Berlusconi’s griip on power becomes more dysfunctional?
Let me premise here that I am not an apologist for the Berlusca as he is affectionately known. Though Italian, I was forced to leave the country in order to find gainful employment because I have always refused to sign up with political parties and unions- two prerequisites in order to find employment in Italy.
With that out of the way, let me also premise that Berlusconi was elected to power not once, not twice but three times over fifteen years.
Berlusconi doesn’t bother me any more than all previous the fucks that had the job before him did. Having grown up in what would be described as a liberal leftist environment surrounded by artists, I can remember dissatisfaction with one leader or another as far as my earliest memories. But somehow, all the people that have always been traditionally dissatisfied with the establishment seem to be particularly incensed about Berlusconi. Today, most of these people seem to forget the treachery and the duplicitous nature of Andreotti for example or Cossiga that they were already bitching about then. When I ask these folk what it is about Berlusconi that upsests them so much, the consensus seems to be that he is uncouth and lacks social graces.
So, though we in Italy have been raped and pillaged by our leaders ever since the end of WWII, Berlusconi, now on his THIRD term in office by election I remind you, seems to be grating particularly harshly on the public and the reason seems to be his hoofish nature rathern than what he does.
My usual observation to any Italian I happen to chat on this subject with is that we don’t mind so much taking it up the @ss from our leaders but we do strenuously object to the absence of vaseline.
You will of course forgive my French.
Anyway. The problem is not Berlusconi, Sarkozy or any other politician you care to mention. The problem is electoral politics. The logic enshirned in electoral politics guarantees that power must gradually concentrate in the hands of select interests. And guess what drives this concentration of power… why, you guessed it… the choice of monetary system.
Electoral politics goes hand in hand with DBFM. It is a symbiotic relationship. Afterall, in the absence of electoral politics, the banks would not need bother with DBFM because society would not have a say anyway. DBFM guarantees that, in time (as we find ourselves in today) society no longer has a say.
Berlusconi as Mubarak – that’s a good analogy. I sometimes wonder if Mobuto, from Zaire, wouldn’t also be a good one. The state as Kleptocracy; one could go a long way with that argument.
Here’s a brief quote from The Economist;
“Set aside for a moment the squalid allegations of bunga-bunga parties. Mr Berlusconi’s greatest failing has been his inability to reform the Italian economy despite ruling with a comfortable majority. Some saw him as a new Margaret Thatcher, but his economic liberalism was shallow; he perpetuated the old clientelism without the old parties.”
They, The Economist, have often written that the fundamental problem isn’t Berlusconi but simply that he is the most brazen example of the old way of managing things, just as Guido, above, has written. Clientalism is very deeply entrenched in italian society, and it is very resistant to change. Here the conduits of power flow upwards to a coterie of old men who, having climbed the greasy pole, aren’t about to make radical changes.
When the Venetian and Florentian banking houses closed up and moved north, first to Netherlands and then to the British Isles, they brought with them not just a reverence for lucre and duplicity, but indeed a whole system of social control based upon manipulating the weakness’ and defects of the rulership. Refining this system through the centuries, their inheritors now control the destinies of every citizen of the EuroMerikan zone.
Having guided the transfer of power from landed classes to mercantilist ones, on two continents, the “rulers” who they dangle in front of the public are little more than court jesters, operating as a form of theater by which the true hierachy of power deliver their dictums.
It is lost upon me why we continue to suppose the gyrations of puppet princelings to be anything other than that. All of these people leave the stage when their usefulness to their masters is over. To that extent, I agree with your thesis. But I think you entirely underplay the question of who the string pullers are. They are not just “bankers” – rather, they are social engineers of the most nefarious description. The significance of that distinction will soon play itself out in the public arena. Please be warned.
Take a long hard look at the Vatican Bank – that’s if “Il Papa” will permit.
I think that Italy may go ugly. According to this book, Cosa Nostra dumped the Christian Democrats as their political muscle in favour of ‘the guy in Milan’ around 1992. So, if Italy has no private debt, only public debt where did the money go? Siphoned off to local councils run by mobsters? I don’t know, but robbing a bank with guns is not as easy as placing your educated son on the board and having him dish out endless credit.
http://www.independent.co.uk/arts-entertainment/books/reviews/the-last-godfathers-by-john-follain-864385.html
(The original Neil, that is)
Telegraph:
“Italy’s borrowing costs have hit new euro-era highs of 6.343pc, and are teetering closer to the 7pc level widely regarded as “the point of no return”.
At those levels, Italy has to borrow more just to service the interest on its loans rather than paying anything back.
This is the same point that prompted Greece and Portugal to seek bailouts” [I wonder what’s happening in Portugal, btw, which seems to have been largely forgotten about.]
And Ambrose Evans-Pritchard writes:
“Italy’s press reported the drastic steps to be pushed through by decree being discussed last night may include levies on bank accounts, as occurred during the ERM crisis in July 1992 as a last-ditch move to save the lira.
Such one-off moves do nothing to lift Italy out of its stagnation trap. The country is suffering the delayed effects of a 30pc to 40pc loss of labour competitiveness against Germany within EMU, an overvalued euro externally against China, and a 70pc collapse in foreign direct investment (FDI) flows into Italian plant since 2007.
Capital flight from Italy has become a grave threat. The central bank reported a €21bn (£18bn) exodus in August, following a €20bn loss in July. ”
I wonder where all that capital is flying to…
Greek Prime Minister George Papandreou is expected to offer his resignation within the next half-hour, sources in Athens have told the BBC.
Mr Papandreou will meet Greek President Karolos Papoulias immediately after an emergency cabinet meeting has finished.
He is expected to offer a coalition government, with former Greek central banker Lucas Papademos at the helm.
“But state TV reported that Mr Papandreou insisted during the meeting that he would not resign.”
Just listening to the ECB rate meeting. Their answer to all this? Europe must speed up its reforms in the way of market liberalisation. Wages and empoyment rights must be liberaised and ‘tailored to what best suits the firms operating in those areas’. Privatisation of the public sector must be speeded up and the opening up of previous closed professions to market forces and wage changes.
So basically the answer is to privatise the public sector and get Europeans working for a dollar a day is it?? Oh and one other little detail of course, backstop the banks.
I feel much better now. Greece won’t leave the Eurozone and it won’t break up. Because ‘it’s not in the treaty.’ Thank god for that.
Also the ECB becoming a lender of last resort for governments won’t work, what will work is those governments (Italy, etc) implementing the market reforms and austerity needed to sort out their own crisis.
The ECB can’t have any impact on Italian Bonds. Indeed, apparently, no external forces can! Only Italy and her government can have any impact on Italian Bond yields whatsoever. And it seems all these pesky governments need to do is privatise and sell off everything not nailed down and then we’ll be fine.
Thank god there are such great minds at work in the ECB fixing all this for us.
But if Berlusconi was Mubarak, then who was behind Berlusconi?