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Italy: ’Plan B’ is Being Discussed as Rome is Affected by Spanish Contagion
18 June 2012
The Spanish bailout has infected Italy. Although Rome may not have to file for EU aid soon, as Austrian Finance Minister Maria Fekter mooted on June 13, Italy is back to square one, despite — or rather, helped by — Mario Monti’s brutal austerity measures. On June 14, three-year bond yields skyrocketed to 5.3% from the 3.91% of the previous month. A terrified Mario Monti said in a public meeting that, "We were on the edge of the cliff, and moved away. But the crater has expanded and now we are on the edge of the cliff again." Monti’s metaphor is correct but he is incapable of seeing that the expansion of the crater is unstoppable, no matter how fast he flees from it. The crater is the immense debt of the financial system, which Monti himself and his masters in the EU and the ECB have enlarged through bailouts and so-called "fiscal programs." And instead of seeing the truth, more of the same medicine is now being proposed. The result is that in the first four months of 2012, industrial production in Italy plunged 6.6% in comparison with the first four months of 2011. Thus, those same financial markets which demanded high refinancing rates last year, because of the "unsustainable" deficit, now again demand high rates because of the recession caused by a "sustainable" deficit! However, the wind has suddenly changed in Italy. The announcement of the EU100 billion loan to Spanish banks has been the straw that broke the camel’s back. Suddenly, Italians realized that they are now being asked to put EU19 billions in the EFSF pot to bail out foreign banks, on top of the EU48 billion Italy already paid for EU bailouts, and on top of all taxes and income cuts that have been imposed under EU-ECB-dictated programs. Now they are beginning to realize that this is an endless bloodletting. Thus, whereas one year ago, a majority of the population were still for the euro, recent opinion polls show that 70% of the population believe that the euro is a problem. A public discussion on whether it is worthwhile for Italy to stay in the euro system has now broken out on TV talk-shows, and figures such as Prof. Paolo Savona, who has been calling for a "Plan B," are now receiving deserved, major attention. On June 15, Savona was interviewed by Italy’s newspaper of record Corriere della Sera on his "Plan B" proposal. "Europe as we know it has been a failure. Therefore we should move quickly." "In order to stay in the euro, we should radically reform European institutions," Savona said. Otherwise, "under the current conditions, if Italy stays in the euro, it will lose its wealth step by step every year. An increasing impoverishment which Italians, as I know them, will relentlessly adapt to." Better to have a shock. The shock is a return to the national currency. "Regained sovereignty and the possibility of issuing currency would allow us to recover in a few years." To those who claim that a return to the lira would unleash a run on deposits and capital flight, Savona answers: "What are the guarantees that they won’t occur anyway, if we stay in the euro without a solid parachute? The costs of remaining in the Eurozone are under everybody’s eyes: a constant fall of GDP and employment, with a consequent economic degeneration." Italy’s real assets have already lost 15-20% of their value, and financial assets 30%, Savona said. A new lira would devalue by 30% and inflation "could reach 18-20%. We experienced that already, in the ’70s, after the oil crisis. It passes." Savona’s interview has had a major impact. Among others, it was reported that former Prime Minister Silvio Berlusconi, upon reading it, began considering a "shock and awe" action to go for early elections on a "Plan B" program. Berlusconi is an opportunist, but he can smell the wind. His intentions have prompted a reaction from Eurofanatics inside his own party. Maurizio Lupi (PDL), Vice President of the Chamber of Deputies, and PDL faction leader in the European Parliament Mario Mauro, issued a joint statement saying "Leaving the euro would be suicide." More serious than Berlusconi is the "Plan B" put forward by Movisol, the LaRouche movement in Italy. On June 9, national dailies such as Corriere della Sera and La Repubblica covered in words and pictures a protest set up by Movisol representative Flavio Tabanelli in Mirandola, an epicenter of the recent earthquake in Northern Italy, and Tabanelli’s demand for "banking separation," "issuing of productive credit," and a call for a "new FDR and new Mattei," referring to Enrico Mattei, the leading representative of the Italian national economic system in the postwar reconstruction. |