The Titanic Euro and Italy's decline

Athens, 15 Feb 2017

Stefano Fassina
Sinistra Italiana
A brief background

2016 as 1989: a turning point of history.

1989: the end of real socialism and The End of
History.
2016: the unsustainability of "real neo-liberalism.
2016: in the pivot countries of neo-liberalism, Us and
U.K., the working and middle classes revolt against the
neo-liberal agenda and establishment.

2016: similar causes inflated the No in the

referendum for revising the Constitution in Italy on
December 4, 2016
A brief background

2016: Ms Tina (The is no alternative)

died.
2016: The alternative was born, but is
regressive

According to Mr Draghi, Ms Tina is

immortal in the Eurozone
A brief background

Note: U.K. and Us do not have the euro

The single currency is not the cause of our

problems. The Maastricht Treaty and the Fiscal
compact are aggravating factors.

As shown in the Lapavitsas&al paper, the Eurozone

is unsustainable. In a nutshell: mercantilism cannot
be for all. Internal devaluation, namely labour
devaluation by the economic leader, determines
chronically insufficient aggregate demand for all.
A brief background:

For geo-political reasons, for a long period USA

pinpointed export-led growth Eurozone.

USA: no more consumer of last resort. "American first"

with President Trump.
A brief background

Eu and the Euro-zone treaties are based on the most

extreme version of neo-liberalism.

Ecb only focuses on inflation. No mandate as lender of

last resort. No attention to employment.

Stability and Growth Pact and the Fiscal Compact

promote labour devaluation (direct and through
welfare cuts) and pro-cyclical fiscal stance (blind
austerity).
A brief background

The Eu Treaties and the Fiscal Compact deeply in

contradiction with the democratic constitutions
defined after WWII.
The former are based on price stability and
competition.
The latter are animated by people sovereignty and
labour dignity.
Up to a few years ago structural deficiencies of the
Eurozone were highlighted by "unconventional"
economists. Now the mainstream economists
agree: J. Stiglitz "The euro. How a currency
threatens the future of Eu".
What is going on in Italy?
Economic scenario

Political scenario
Political scenario: Main issues

After the triumph of the No on the constitutional

referendum (59%-41%) and the mutilation of the
electoral law imposed by Mr Renzi, the Democratic
Party in search of a strategy. Possible splitting.

All the key and celebrated "reforms" of the ex-

Premier Renzi are cancelled or mutilated ("Jobs
Act" under referendum).

Electoral law needed.

Political scenario: Recent polls

PD - Partito Democratico: 30.5%

Movimento Cinque Stelle: 28.1%
Lega Nord: 13.5%
Forza Italia: 12.1%
Fratelli dItalia An: 4.6%
Sinistra Italiana: 3.4%
Ncd: 3.3%
Altro partito: 4.5%

Voided: 2.1%; Undecided: 18.0%; No participation: 36.9%

Source: Emg (Feb 7, 2017). www.sondaggipoliticoelettorali.it

The possible way forward: the roadblocks

1.Muddling through and wreckage.

2.Treaties reform.

3.Selected strengthen cooperations (deepened

integration): euro-zone; intelligence, security
and defence.

4."Amicable divorce" of the euro.

5.Euro-exit: cooperative or unilateral.

The possible way forward: which strategy?

The paper focuses on strategy #5

Ok: the blackmailed and suffocating countries
urgently need a self defence mechanism. The
more effective it is, the less irrealistic is a
cooperative solution.

In July '15, Mr Schauble was right: Maastricht

Treaty (no debt haircut and no -exit) can be
inconsistent

Plan B: "amicable divorce"

Plan B: individual exit
The possible way forward: the roadblocks

The euro is not only an economic issue is

fundamentally a political issue.

Southern Eurozone countries should avoid to blame

themselves "(we are the problem"). The mantra in
mediterrean countries is: the system is fine, we are
lazy, corrupted, inefficient.

No economic problem, but a moral one.

The possible way forward: the roadblocks

Most people given the history of the southern Eu

countries feel instinctively external discipline is
useful, actually, needed for containing corrupt,
undemocratic, incapable domestic elites.

Italy, Spain, Portugal and Greece experienced

dictatorship in the XX century.

In Italy: better the suffering under Ms Merkel

than the risk of Mr Grillo or Mr Salvini.
The possible way forward: the roadblocks

The export constituency: largest companies

and related mainstream media, sections of
trade unions, financial institutions (banks,
insurances, ecc).

The cosmopolitical left, moderate and radical:

no euro implies sovranism, nationalism,
xenophobia. Focus on civil rights severed from
social rights.
The possible way forward: the roadblocks

The transition phase is painfull and the strategy

for development difficult to manage.

Implementation of Plan B requires not only

definition of technical steps but an adequate
political elite supported by large consensus and
a rooted party able to connect with the people,
expecially lower middle classes.

Efficient public sector.

The possible way forward: the roadblocks

Innaturale alliance of constitutional No-euro

parties

Trade unions, representatives of smes

Strategies for the media and social network

Large constituency for "Constitutional

patriotism" and domestic.