“A quarter of Italian industry has disappeared. Our currency is overvalued and there is nothing we can do about it within the euro.”
That was Five Star movement co-founder Gianroberto Casaleggio in an exclusive interview with the UK Telegraph’s Ambrose Evans-Pritchard, describing the incompatibility of Italian membership in the Eurozone.
The tepid austerity in Italy has done nothing to stop the debt from spiraling upward, growing faster than the economy, in which growth has been non-existent.
The Italian economy shrank 2.4 percent in 2012 and 1.9 percent in 2013, while government debt grew by 4.3 percent and 4 percent, respectively.
As a result, Italy is suffering under a debt to Gross Domestic Product ratio of 135 percent — set to rise to 145 percent next year — while growth itself remains in negative territory. In 2014, the economy is expected to sink another 0.3 percent.
While Evans-Pritchard pretends the problem was the austerity, one look at the lackluster recoveries in debt-laden Japan and the U.S. tells another tale. There’s so much debt that it’s hard to grow.
Casaleggio was echoing sentiments of Beppe Grillo, Five Star party leader, who at a weekend rally said, “We must leave the euro as soon as possible.” Five Star is pushing for a non-binding referendum on the issue and also action in the Italian parliament.
Italy’s departure from the Eurozone would be the financial and political equivalent of an earthquake, and might lead to a break-up of the entire monetary bloc.
But that it is Italy’s salvation is beyond dispute. One presumes upon returning to the Lira, Italy would fire up its central bank to settle its debts, using devaluation to get its balance sheet in order. In other words, to inflate the debt away.
It would be a de facto default, underscoring that the real problem for debt-burdened economies like Italy is one of basic solvency.
But for Casaleggio and company, if that’s the path that best serves the people of Italy, so be it. The decision has to be in the hands of the people, not foreign bureaucrats. He told Pritchard, “I don’t give away my sovereignty to anybody. My grandfather fought with the partisans for three years. If you want my sovereignty, you have to come and take it, not by waving some letter from the European Central Bank. You have to come well-armed, as they tried once before.”
In August 2011, the European Central Bank used the threat of government bond purchases to force reforms on then Italian Prime Minister Silvio Berlusconi. In the aftermath, the purchases were halted, interest rates went to the moon, and Berlusconi was removed from power.
Now, with Italy’s economy still in ruin, all blame falls on the solutions imposed by Europe.
Casaleggio and Grillo’s assertion of nationalism in Italy marks a widespread rejection of transnational rule across the continent. Marine Le Pen in France, Nigel Farage and the UK Independence Party in Britain, and also, Syriza in Greece all reject European rule. Once thought of as an anomaly, these new parties over the years have proven their staying power, and now threaten to topple the existing order.
Financially, the choice may be between austerity or default, but politically, the choice is between servitude to creditors, or a restoration of sovereignty. Something to keep in mind here across the pond.
Robert Romano is the senior editor of Americans for Limited Government.
