The political significance of Moody’s downgrade
The last week could have been lethal for Europe’s future. The collapse of the Italian and Spanish stock exchange, toghether with the downgrade (from “stable” to “negative”) of Germany’s outlook decided by the American rating agency Moody’s are a powerful warning to the European Union and Germany.
In future German Bundesanleihen (government bonds) could not be considered as secure as they were during the last turbulents months, in which they have been seen by the investors as a safe shore inside the economic storm that hit the European nations. This is the silent message that Moody’s decision sent to the German establishment. On the other hand Wolfgang Schäuble too, the Minister of finance in Merkel’s government, has made clear in differents occasions that an eventual collapse of Euro and a deepen of the government debt’s crisis will mightly afflict Germany’s economy.
Compared to the scenario that we’ve seen during the last months, the most recent one is different in a sense at least: the sellings are now hitting not only the markets of specific nations (even though they were focused especially on Italy and Spain), but also the Eurozone in general. The cause of this phenomenon has to be investigated beyond the financial speculation, which however plays a part in the game. The main reason that’s crushing Europe’s financial system is the loss of confidence among the international investors, who are now scared to put their money in any European government bonds. Everybody saw Greek and Spanish citizens running to the banks, withdrawing as much cash as possible: easy to imagine that a private investor in Japan or an American pension fund will choose other countries to put his own money in.
This is the reason why Moody’s downgrade is very interesting from a political perspective too. One point that European politicians should keep in their minds is the extreme carefulness they ought to use when issuing statements about Europe’s future. Finding a shared point of view is something Europe can avoid no more. A couple of hours before last week’s stock exchange crack Phillip Rösler, German Deputy Federal Chancellor, stated that Greece will not be able to fulfil his duties, and will consequently be forced to leave the Eurozone. This sounded as a clear denial of what Mario Draghi, ECB’s Governor, had made clear the day before: “Euro cannot be renounced. There is no possible comeback to national values”. It is evident that such a chaos is precisely what European politicians must avoid, in order to restore confidence among international investors. This lack of trust between European nations risk to neutralize the positive effects of the sweeping reforms that has been adopted by the western governments, often causing a strong discontent in the pubblic opinion.
Europe is now at a crossroads: either the national leaders collaborate, embracing a common point of view, and work together for the financial union to become a polical one (which means that the debt of the nations who are in trouble must be shared by every Eurozone’s country), or they should declare the failure of Europe-project. In the first case, the taking on of such a responsibility would probably encorage the investors to recover the lost confidence in the European market: the rise of Eurozone’s markets that we have seen since last Friday (27th July) is in this sense a direct consequence of the new statement issued by Mario Draghi and Angela Merkel, who made known a strong and shared will to save Euro and not lo leave any Eurozone’s country alone. If Europe is unite, even the usual speculation can not be too harmful.
In the second case, the widespread discontent among the citizens and the increasing poverty will probably bring Europe into a political scenario affected by a dangerous instability, in which the populist propaganda could easily find many ears eager to hear their slogans. If we want to avoid such situation, is time for Germany too to declare an undisputed will to save Europe, a project that many Merkel’s predecessors have contributed to build.
Riccardo Motti 31/07/2012
Why today’s Irish European Fiscal Pact referendum should be carefully observed
During the past weeks, we have seen two important signals which European citizens have given to their governments: in France, Hollande’s victory is a clear sign of the will of change that strongly spread throughout the country, asking for more social justice and a stronger welfare state.
In Greece, the rising of the parties who declared themselves against the fiscal pact wanted by Germany made the creation of a new government unfeasible. These two political occurrences have been correctly interpreted as a wind of change that begun to blow on the European political scenario: the citizens demand a new approach towards the crisis, different from the one that both Chancellor Merkel and former French President Sarkozy presented as the only possible way out.
Today (31st May 2012), another important decision has to be taken: Ireland will decide whether to ratify the European Fiscal Compact or not. Irish government, following advice from the Attorney General, has decided to hold a referendum on this point, and it is a only case in Europe. In these hours, Irish citizens are taking a decision which appears to be fundamental for the future economic and political balance inside the Union. An agreement on the Compact would mean a strong comeback of Ireland’s will to remain a permanent member of the Union, after the decision not to ratify the Lisbon pact in 2008. Moreover, it would be a little help for Merkel’s austerity plan, which has been weakened by the the results in Greece and France.
Avoiding to draw dangerous comparisons, we should nevertheless notice how the Irish economic situation is close to the one that occurred in Greece some months ago. The country can survive thanks to the 85 billion Euro bailout loans, allocated by the European Stability Fund after the main banks went bankrupt. According to the Irish observers, these similarity will bring the “Yes” supporters to victory. Hugo Brady, Irland-Expert of the Centre for European Reform, has stated that the referendum is “a decision between fear and rage”. This means that, even though a considerable amount of Irish citizens is angry towards the new fiscal measures that the austerity plan will imply, the fear of being involved in a downward spiral similar to the one that brought Greece on the verge of ruin is even stronger.
According to the latest polls, the 39% of the citizens is going to vote “Yes”, the 30% “No”, the 22% is still undecided. We know that in these times the voters’ mood can be highly fickle: that’s why it is not possible to hazard a prevision. My personal opinion is that Irish citizen will decide to ratify the Fiscal Compact, and fear will defeat rage. The main reason is that a possible “No” would not be seen as a request for a different way out of the crisis, like in Greece and France, but as a motion of no confidence towards the Irish future in Europe: but right now Irish people know how much they need the European support in order to survive.
Riccardo Motti 31/05/2012
Update 03/06/2012: the “Yes” has won with a wide margin
Political violence makes a comeback in Italy
Shots, screams, blood on the ground. It’s Monday 7th May in Genova, Italy. The man who lies on the ground is Roberto Adinolfi, managing director of Ansaldo Nucleare, a nuclear company which is part of Finmeccanica Group, big name of Italian’s Defence industry. He suffered severe knee wounds, caused by three gunshots fired by unknown perpetrators: this is a criminal action that is known in Italy under the name of “gambizzazione” (kneecap). It consist in shooting at a person’s legs in order either to punish him or to give a public message. This practice has been typical of the so-called “anni di piombo”, a period between the 70’s and the 80’s in which an escalation of political violence has caused an high number of homicides and acts of terrorism, ended in the kidnapping and execution of the former Italian Prime Minister Aldo Moro at the hand of Brigate Rosse, a pseudo-communist terrorist organisation.
Even though it would be misleading to draw a direct comparison between that dark period of Italian history and the present situation, some similarities brought Italy back to a 40 years old scenario. The responsibility for the attack has been in fact claimed by an anarchic group called “Olga”, which also made clear that other demonstrative actions are going to be carried out. Moreover, in the country a strong resentment is growing against the State Tax Agency, Equitalia, which is seen as an evil “Nottingham sheriff” and considered the moral responsible for the many cases of suicide that happened in the last months. Most of them were workers, small businessmen and freelancers crippled by debts towards Equitalia. Obviously, to blame such an agency for those deaths is like declaring that the guilt for a shooting is carried by the pistol, and not by the person who pulled the trigger. Nevertheless, one thing is for sure: there is a concrete risk of a dramatic escalation, which brought Anna Cancellieri, Italian Minister of Interior, to declare that the army is going to garrison a couple of strategic points.
This night at 4.30 a Molotov cocktail has been thrown against one Equitalia office in Livorno, and on 4th May one man with a gun held an Equitalia’s employee hostage for more than 6 hours, after bursting in his bureau. According to the Italian police, this situation requires a very careful attention, because it is already known that there is a strong connection between Greek anarchists groups and similar Italian organisation. The choice of “Olga” as the name of the group that attacked Adinolfi is in this sense not casual: so it is called one of the five Greek anarchists who have been imprisoned last March on charge of terrorism. After that imprisonment, a document written by one of the convicts has been able to come out from the prison illegally, in order to be translated and put out on the website owned by the “Conspiracy Cells of Fire”, an anarchic organisation. “Let’s attack the managers” is one of the instructions given to the “comrades of the outside”. So it looks like there’s at least one international group of armed anarchists which can be a threat for national security. But that’s just the tip of the iceberg.
The situation is actually more complicated: until now the economical crisis which is afflicting the capitalistic system has been faced by the most influential European governments with measures that are thought to help banks and big companies, in spite of giving to the people a new hope for the future. This dynamic caused a strong disaffection towards the usual ways to be engaged in politics, which are now widely considered ineffective. The first remarkable effect is the rising of the parties which have always been on the edge of the political scenario, either because of their unclear affiliation, like the Piraten Partei in Germany and Movimento 5 stelle in Italy, or because of their extremism, like the Front National in France and E.LA.M. (Golden Dawn) in Greece. The second effect is the returning on the scene of such terrorist groups which has been active in the past, and have patiently waited until the economic and social situation allowed them to commit their usual demonstrative actions. Even though there are no clear signs that such actions can bring more people to a subversive cause, it’s a risk that European democracies should not take. Personally I don’t think that police and the army’s array can be considered as effective measures to resolve this problem: the only way to keep people far from terrorism is to give them the possibility to believe in a future in which the sustainability of the economic system won’t be just an engaging slogan, but a concrete reality.
Riccardo Motti 15/05/2012
The general elections held yesterday in France and Greece are significant not only in relation to the new political landscape that will now occur in those countries, they are very important for the European Union’s future too.
In France, the triumph of Hollande means a deep change of the French role inside the Community. If Sarkozy has always been Merkel’s first ally, dictating to other countries the policies they were expected to enterprise in order to face the international finance crisis, Hollande’s opinion is quite different. Since the very beginning of his election campaign, he said that his idea of reacting against the crisis is based on a necessary collaboration not only with Germany, but also with countries like Spain and Italy, that were not really involved in the decision procedures until now. Moreover, the new Elysée’s guest has a new approach towards the economical measures that must be adopted in order to stop the rising unemployment and, at the same time, to give a believable answer to people’s request for a bigger buying power and better living conditions. The austerity plan imposed by Germany is based on uncontrolled liberalisations, big cuts to the welfare state, a protraction of retiremen age and the revocation of important worker’s rights. Hollande, on the contrary, has won the elections by saying that this kind of policy cannot be accepted as the only possible strategy to seek a way out of the crisis: his rescue package includes the creations of jobs, a block of the maximum pensionable age (60 years) and, in a general sense, the defense of worker’s rights. Is this proposal realistic? We are going to find it out in a close future. In this regard, one thing is for sure: a failure would mean a big risk for Europe’s political stability. The astonishing success that Marie Le Pen’s National Front has had in the first turn is a clear signal of how much such an Euroskeptic and neo-nationalistic propaganda can be tempting for a big share of the electorate.
For the same reason, we ought to observe very carefully what’s going on in Greece: yesterday’s results are in fact pretty clear. In a country that has been dramatically hit by the economical crisis, all the parties who formed the past caretaker government have been the victims of a strong elector’s disaffection. The two main Greek parties, Nea Dimokratia (right-wing, 20%) and Pasok (left-wing, 13,2%) are not able to form a coalition because of the huge loss of votes they had to face. A third member is needed, that according to Greek observers is nowhere to be found: the only party that could be appropriate in this sense, Dimar (Left-wing, 6,1%), has already made clear that is not going to be involved. Starting from today Nea Dimokratia, first Greek party, has a three-day deadline to form the coalition. If this attempt will fail, the second Greek party is going to have his own chance. And here comes a big surprise. The real winner of this elections is in fact Syriza (16,76%), an array of radical left and green groups. “Merkel should worry and Europe should hope in us”, so the leader Alexis Tsipras during an interview with “The Observer”. Why should Merkel worry? First of all, because this party gained such a result by following and inciting a strong popular opposition against the politics of austerity, wanted by Germany and implemented by the caretaker government. Greece voted against the old political establishment, considered guilty of the economical collapse and, even worse, entirely dominated by Merkel’s government.
This sounds like a strong warning for Italian politics too: even though the situation of the two countries is not comparable, some similarities should not be ignored. Monti’s caretaker government is in fact losing public consent day after day, and society is showing a big disaffection towards the parties that decided to take part in it. Moreover, a large decline is still affecting Italian economy, and the request of social equity and sustainable development, similar to the Greek’s one, is clearly rising.
It seems like a wind of change is blowing in the sails of the vessel “Europe”, a wind who speaks of hope and social justice. It remains to be seen whether it will be able to bring the ship in safe waters or nationalism and anti-Europeanism will rock the boat.
Riccardo Motti 07/05/2012