Italy is the weak link in the eurozone system. The continuing stagnation of the eurozone economy means that the position of Italy in the eurozone system continues to weaken. Italy’s public debt pile of €2.14 trillion is the largest in Europe in absolute terms as well as the second largest in relative terms after Greeceʼs twice bailed out economy. At the beginning of April Italyʼs coalition government slashed its growth forecast for the Italian economy in 2019 to 0.2% – the weakest forecast in the Eurozone – from a previous forecast of 1%. Italy is already in a technical recession after chalking up two straight quarters of negative GDP growth in the second half of 2018.

The governmentʼs budget for this year was based on the assumption that the economy would expand by 1% this year. Now, it seems the economy may not grow at all; it could even shrink. One direct result of this is that Italyʼs budget deficit for 2019 will be substantially higher than the 2.04% of GDP Italyʼs government pledged to stick to late last year, and means that once the EU elections are out of the way and a new Commission is in office there will be renewed tensions between Rome and Brussels over the direction of fiscal policy.

Rome recently forecast that Italian public debt would hit a new record high of 132.6% of GDP this year. That record is unlikely to last very long given Italyʼs stagnating economy and the Italian governmentʼs determination to cut taxes, reduce the retirement age and introduce a citizensʼ basic income.

The Italian economy’s problems are chronic and deep seated.
[Click to read more…]

Be the first to comment

Almost fifty years ago in my late teens I discovered that the world was doomed and that an awful apocalypse was just around the corner. I learned this by reading books like ‘The Population Bomb’ by Professor Paul Ehrlich which predicted worldwide famine in the 1970s and 1980s due to overpopulation, and ‘The Doomsday Book’ by Gordon Rattray Taylor which said we faced a planetary environmental disaster that would within a couple of decades cost the lives of hundreds of millions of people and lead to the collapse of our civilisation. Both books used apparently impeccable logic, data and evidence and I was utterly convinced, and one of the reasons back then that I wanted to overthrow capitalism was to save the planet. I continued to believed that planetary doom was looming for the next couple of decades. This belief was nurtured by reading newspapers like the Guardian which seemed to be reporting an increasing number of looming apocalypses including, in 1974, that a ‘new ice age was coming fast’.

The book that told me nobody would survive the next thirty years – it was published in 1970

The Guardian January 29th 1974

Five decades later I am a grandfather, there has been no global environmental collapse, there were no planetary famines, civilisation has not collapsed and in fact using numerous and common sense metrics it is clear that globally human welfare has hugely improved since 1970. And yet on almost any day if I read any of the organs of liberal opinion like the Guardian, or the press releases of environmental NGOs, I can see endlessly repeated claims that we are facing planetary doom in just a few years. Now its not a looming ice age that the Guardian is warning about but the apparently terrible threat of Global Warming. The Guardian told me in 2008 that we only had 100 months to avert global disaster, by 2009 the newspaper was reporting that we only had four years to save Earth, and in 2018 it told me we only have 12 years to limit climate change catastrophe. We are always just a few years from the apocalypse.
[Click to read more…]

2 comments

Who has the UK been negotiating with? The Brexit ‘negotiating’ process since Article 50 was triggered has been described and analysed as a negotiation between the UK and something called the EU, but what is this EU? The EU does not have a political centre, or an explicitly hegemonic member state, it is not an empire and there is no imperial power centre. Ever since the Article 50 process was triggered the UK has been negotiating with no one.

The EU is a complex layer of institutions, bureaucracies, technocrats and elites that have been built on top of a very complex and permanent system of (almost exclusively secret) diplomacy. The result of this institutionalised and permanent diplomatic engagement is a complex series of interlocking agreements and rules which have been accumulated over time and which are codified in a series of treaties and a very large number of regulations all written up in the form of ‘laws’ policed by a supranational legal system and a special purpose Supreme Court.

In many ways the EU is an entirely new, unusual and unique political system. It does not operate, and cannot operate, like a normal partner in an international negotiation. The EU can of course engage with external entities and negotiate arrangements, especially in relation to trade and commerce, but it can not do so quickly, adroitly or with agility. It’s own byzantine diplomatic foundations preclude this. All formalised external EU agreements and treaties have to be painstakingly crafted step by step with constant testing and referrals back to the EU’s own dense political system of internal treaties and it’s complex system of rules by which it functions and by which it governs itself. The default bottom line for external EU negotiations is that any external agreement must not disturb or undermine it’s own internal system of delicately codified and institutionalised diplomatic agreements.
[Click to read more…]

Be the first to comment

I voted remain. I didn’t do that because I think the current European project – the European Union – is a good project for Europe. I don’t think it is. I think that the EU project took a wrong turn at Maastricht, that the single currency as it was implemented has been a disaster for European social democracy and that the Lisbon treaty capped a decade of wrong turns. But nevertheless it is in the UK’s national interest to stay inside the EU (and outside the single currency) and that all possible versions of the UK outside the EU are sub optimal.

I also think that, once the UK voted for Brexit, it was going to be extraordinarily difficult to get the EU apparatus to accept the need to rethink the EU’s architecture so as to accommodate a new sort of off-shore affiliate even though keeping the wheels of commerce turning with the world’s six largest economy, a very significant trading partner which is home to Europe’s richest region, and the home of Europe’s main financial centre, would seem like a common sense sort of thing to do. Unfortunately the mistakes in building the EU has left the European system being run by a rigid rule based apparatus that is very inflexible in any negotiation with countries that fall inside its arena of hegemony.

However even given the fact that all possible variants of leaving the EU are sub-optimal for the UK, and even given the fact that having a real process of negotiation about a leave deal was going to be very, very difficult given the way the EU operates, the UK could have done better. The mistakes happened right after the referendum and were partly the fault of the political chaos the referendum result unleashed, partly the result of Brexiteer’s magical thinking and largely the result of the failures in the the leadership of all the political parties.
[Click to read more…]

Be the first to comment

On the 14th September2018 Yanis Varoufakis´s delivered the keynote address at the OECD offering an analysis of the roots of the 2008 financial crisis and some proposals for a new International New Deal.

I think his analysis is broadly correct but weak in parts, and the proposals for what might constitute an International New Deal are very weak.
[Click to read more…]

Be the first to comment

An interesting discussion between Paul Mason, Dr Faiza Shaheen, Anthony Barnett, Dr Johnna Montgomerie and Laurie Macfarlane about whether radical social democracy offers a way out of the crisis of neoliberalism, and what this means for economic policy over the next decade.

The debate is part of a new series by Paul Mason exploring what radical social democracy means during the next decade. Paul’s first essay in the series can be read here

 
Personally I was most interested in the contributions from Anthony Barnett and Dr Johnna Montgomerie

Dr Faiza Shaheen is Director of the Centre for Labour and Social Studies (CLASS)
Anthony Barnett is co-founder of openDemocracy and author of The Lure of Greatness.
Dr Johnna Montgomerie is Deputy director at the Political Economy Research Centre, Goldsmiths University of London.

Be the first to comment

 

The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear

Antonio Gramsci

Politics is going through an odd phase. Things seem to be changing in some profound ways and yet the old institutional configurations seem to linger on, weaker but not yet dead. The remark of Gramsci quoted above has never seemed more appropriate. In the UK it feels very much like all the old certainties are unravelling and that the broad consensus established by Thatcher, and which had replaced the preceding post war ‘Butskellist’ consensus, is finally cracking. While English politics now seems more polarised around a two party system than at any time since the early 1960s, with support for both the Tories and for Labour running at almost record high levels, at the same time there is a strong sense that the depth of support for Labour and the Tories is quite shallow and fickle, with much weaker tribal loyalties. There is also an all pervading sense of people being fed up that so much in public life seems so dysfunctional. At the same time Scottish politics seems to have sheered away completely from English politics with the SNP seemingly safely ensconced in power and, now that the possibility of actual independence has receded, happily ruling as a more or less competent, and non-corrupt, centrist coalition which whenever it wants to inject a bit of fizz into its supporters can wave the nationalist flag (a bit like the way ‘socialism’ functions on the Left).

Looming above everything in the UK is the issue of Brexit and the tortuous process of a minority government negotiating a deal. Given the very deep fractures in the Tory party over Brexit and given their weak parliamentary position as a minority administration it is curious and disappointing that Labour seem so incapable of making mischief on a bigger scale on the issue, and utterly incapable of even thinking about building a cross party parliamentary bloc to push through a good Brexit deal (let alone to stop Brexit).
[Click to read more…]

Be the first to comment


 
These two articles are very interesting and both are basically arguing the same thing – which is that the obsession, by the Democratic Party and a lot of US left/liberal commentators, with Russian meddling in the election of Trump is a massive distraction. Trump got elected for reasons and one of the big reasons is that the Democratic Party abandoned the working class. Trump may be an incompetent bigot but he got, and still has, a lot of support from precisely the sort of working class constituency that the Democrats have lost connection with. The main issue is not Trump or Russia but the reconstruction of the Democratic Party as a social democratic party.
[Click to read more…]

1 comment

The French president Emmanuel Macron has been pushing the case for ambitious reforms of the eurozone, and the EU, proposing a separate EU budget (shifting spending from member state national budgets upwards to an integrated EU budget), an EU finance ministry and a European monetary fund for the eurozone (to act as permanent mechanism to assist member states who get into financial difficulty). It was always unlikely that such a plan would be supported by Germany who would be the main provider of funding for such a scheme.

Now a document leaked by the French newspaper Libération (Google translation here) has revealed that Commission President Jean-Claude Juncker has sided with the conservative German position by offering an alternative and draconian plan for Eurozone reforms. The essence of the proposed plan would be to bring to the entire single currency zone the same sort of program that was imposed on Greece. In the account of Yannis Varoufakis of his time negotiating with the Troika (‘Adults In The Room: My Battle With Europe’s Deep Establishment’) he claims that Wolfgang Schäuble explicitly told him that his ambition was to ‘bring the Troika to Paris’. Schäuble’s views are those of the conservative right and centre in Germany which views the design of the single currency as deeply flawed, an unfortunate and dangerous concession forced out of Germany in return for allowing reunification, and in need of urgent and deep reform. The aim would be to remodel the entire Eurozone along German lines, in particular France.

A document leaked by the French newspaper Libération has revealed that Commission President Jean-Claude Juncker has attempted to appease the most conservative of German politicians by offering draconian Eurozone reforms. These, in summary, would amount to the entire single-currency area being subjected to the same model that Greece has been labouring under since its first memorandum with the Troika. Greece was in many ways an ‘austerity laboratory’ which helped to test and generate methods which the German conservative block would like to be exported to the rest of the Eurozone.
[Click to read more…]

Be the first to comment

In this video founder of the Democracy in Europe Movement 2025 and former finance minister of Greece, Yanis Varoufakis, talks about the concept of “Debtors’ Prison” and the economic ideas of John Maynard Keynes.

Worth watching for the explanation of Keynes extremely interesting, and still highly relevant, ideas about how to create a more stable international economic system.

In addition Varoufakis explains the double standards of the European Union regarding the enforcement of economic rules amongst different member states. The EU is repeating the same mistakes made in the 1930s, which is placing all the onus for correction on the deficit countries when the problems are caused by the surplus countries (see my earlier post “The delusions of Mr Dijsselbloem“).

Be the first to comment


 
While the tedious and absurd Brexit drama unfolds, at the other end of Europe, the people of Greece continue to endure the relentless grind of European Union ‘solidarity’ as the Troika (the EU, the European Central Bank, and the IMF) continue to enforce a program of yet more spending cuts. The next batch of pension cuts, set to come into force within the next two years, will take total losses for pensioners since the start of the bailout period in 2010 up to 70 percent.

Before detailing what the reality of this means for the people of Greece it is crucially important to understand the larger context to the Greek pension problems because so much disinformation about it is spread by Brussels and Berlin, with claims that the Greek pension system is unsustainable and bloated, in other words that the Greek pension crisis is an internal Greek problem.
[Click to read more…]

1 comment

Click the video to make it play – you may get an advert first.

Be the first to comment

Both the Irish and UK governments say that they don’t want a closed border in Ireland and both would like the post Brexit border to be as open as it is now.

There is more at stake than just the border in the north. The UK is by far Ireland’s largest trade partner (see the charts below) so any interruption of, or obstacles to, bilateral UK and Irish trade would have a major, possibly devastating effect on the economy of Ireland (still carrying a huge debt burden). In addition there is the fact that two-thirds of the major exporters in Ireland ship goods via Britain on their way to European and global markets, according to the Irish Exporters Association. Transiting through Britain allows Irish companies to take advantage of short sea crossings from Ireland, extensive UK motorways and the Channel tunnel to France. Crucially, the absence of border checks saves trucks time at British ports. But with the UK government committed to leaving Europe’s customs regime, there are concerns that longer queues and higher costs could damage an Irish economy that still bears the scars of the financial crisis.
[Click to read more…]

Be the first to comment

Sometimes one is overwhelmed by the sheer tedium of ubiquitous irrationality, especially if you read about anything to do with the environment or climate change in the liberal press. The capture of the important pillars of liberal opinion – such as the Guardian and the Observer newspapers – by green ideologues means that one is constantly confronted not just by rigorously promoted untruths but untruths which could be fact checked by a just a few minutes of simple research.
[Click to read more…]

2 comments

 

These three graphs make a convincing statement about how the Brexit vote changed UK politcs. Comparing the two election results it is clear that the breakdown of the 2017 results by age was an almost exact clone of a similar breakdown of the referendum result. Basically younger voters voted Remain and switched to Labour, and older voters voted Leave and switched to the Tories.

Be the first to comment

The bailout costs ten years after the crash

August 25, 2017

It’s ten years since the the financial crisis started in 2007 when some key interbank credit markets froze setting in motion a cascade of failures in the credit system and eventually the insolvency of many large financial institutions. The resulting financial crises not only precipitated the Great Recession, which caused the economies of the developed […]

Read the full article →

The truth about the Irish recovery

August 20, 2017

  Ireland is the Stakhanovite of the Troika. The accepted narrative is that the Irish, unlike those untrustworthy Greeks, realised the errors of their ways, accepted an EU/IMF Programme of Financial Support and implemented difficult reforms, and have since been rewarded by a surge of economic growth. Ireland began to post impressive figures for GDP […]

Read the full article →

The probability of a fourth Greek bailout

August 9, 2017

  You cannot rescue a bankrupt by lending them more money. The only way to move beyond bankruptcy is to default on existing liabilities, push losses onto the creditors and thus reduce significantly the debt burden. This basic reality has been ignored by the Troika (the EU, the ECB and IMF) in its dealings with […]

Read the full article →

Some recent items of interest

August 4, 2017

  Anthony Barnet has published a brief extract from his forthcoming book “The Lure of Greatness: England’s Brexit and America’s Trump”. Its entitled “I’m Not English. Oh, yes you are!” and is a critical reply to an article by Paul Mason entitled “As an English person, I would like to declare up front: I do […]

Read the full article →

Running out of steam?

July 1, 2017

At the beginning of 2016 a lot of observers and economists were expecting a global downturn. The reason a recession was expected was because of shifts in the Chinese economy. The reason that the global recession did not occur was because China changed course and reversed its reform program. Its reform program had been designed […]

Read the full article →