Fiscal madness in spaghetti land: Is Mario Monti killing the patient?
By Richard Cottrell
Contributing writer for End the Lie
If one runs a very large and prestigious independent university dedicated to the study of economics, the assumption would naturally be that that anyone hailing from such lofty heights would not attempt to bleed a patient who is clearly on the point of expiry.
I am sorry for the mixed metaphors, but I am trying to demonstrate how Mario Monti, the unelected technocrat premier of Italy, believes that it is possible to enforce austerity measures on a country which is descending headlong into a slump. This is chiefly because Italians have superglued their purses and wallets.
Ergo, domestic demand has collapsed.
Now, before he was chosen by the Bilderberg/EU glitterati to run Italy, Monti was the top dog at the Bocconi independent university in Milan. This is a veritable cathedral of small government, the Austrian School type of thinking.
The revered high priest is Friedrich August Hayek, author of The Road to Serfdom, which is apparently where Italians feel they are heading right now.
However, should Hayek miraculously re-incarnate, he would be the first to inform Professore Dottori Monti – politely – that he is, frankly, nuts.
It is not only household budgets that are under pressure.
Italian companies are de-stocking their inventories on a huge scale in the belief that a big storm is coming. The shops are empty of customers. Nearly all discretionary spending has stopped.
This makes nonsense of silly forecasts that the Italian economy will shrink by just 1.5% next year. I would put the shrinkage in the higher order of 6% and may be even 7%, once the good doctor has severed the patient’s arteries with his austerity razor.
Italians love Christmas, but this year Santa will not be getting the usual welcome mat.
The slump started in the very season that is generally buoyant, despite domestic uncertainty about the economy.
The brief Monti honeymoon in the wake of the disgraced Silvio Berlusconi’s eviction is well and truly over.
Earlier this month, he presented a budget that hitched together €30 billion of tax hikes and spending cuts. This was far more severe than Italians had expected.
The main casualties will be small and medium-sized firms (the backbone of the Italian economy) and those who work in them.
Now, Monti was catapulted to power in order to drain the swamp containing Italy’s fiscal imbalances, or so the story line read.
Or else, so we were told, the country’s financial mismanagement was so atrocious, it had the capacity to destroy the euro.
I have pointed out previously in End the Lie that Italy’s general problems with indebtedness are less troubling than those of Spain, if we speak about household and business debt.
Public debt at 120% of GDP is about double that of Spain. But it did not seem to keep the former president of the Central Bank, the elegant Bilderberger Mario Draghi, awake at nights.
Indeed having supervised this ballooning of debt to these proportions he went off to become President of the European Central Bank at the same time as the Mario Monti putsch.
Nothing to see here; move along.
The new story line is different altogether.
Behold, the austerity measures are necessary because of the “deteriorating growth outlook.” Well, blow me down. The economy is sinking to the floor and so you kick it in the most sensitive parts.
The financial commentator Michael “Mish” Medlock (a true Austrian if ever there was one) had the best line at his own website. “Only on Bizarro World would one need tax hikes and austerity packages ‘because of a deteriorating growth outlook.’”
Quite. Well, another question altogether is: did the great professor indulged in a rather revealing slip of the tongue?
Is he the surgeon who is actually supposed to kill the patient, rather than save him? Because otherwise his remark makes no sense whatsoever.
I have an uncomfortable suspicion that I may be on to something.
There are many observers who believe that we are watching a controlled demolition of the world economy in order to justify the emergency measures that will be necessary to rush the new world order into being.
It stands to a bizarre brand of reasoning that countries like Italy will be drained of jobs and purchasing power into order to collapse the economy.
Since this is likely to provoke uproar, an unelected government may take whatever draconian measures that it deems necessary – in those famous words – to “restore order.”
There is another clue that I might be right, this time coming from Spain.
It is reported that tax revenues declined in the order of four percent this year, which is of course a logical factor of stagnant consumer demand and the reluctance of industry to invest.
The new government of Spain is committed by the EU to fast track a fiscal debt reduction target of 4.4% in 2012.
This means Prime Minister Mariano Rajoy will have to cut €40 billion from the state budget in next year, which no-one thinks he can achieve without hacking away at the sacred groves of social expenditure.
Perforce, if he does there will be uproar. The more one thinks about this prospect, the more one suspects that the austerity crisis was deliberately engineered to invoke the maximum pain in certain selected countries.
Note that so far the imposition of either technocratic governments like we have seen in Greece and Italy or one like Spain’s, rushed into office by early elections, are picking on the EU’s so-called soft underbelly of Sick Med states.
Now consider the following. Belgium’s public debt equates to an eye-popping 99% of GDP (close to Italy), but no-one has the temerity to insert a techno Gaulieter in the host state of the EU.
At least, not as long as Herman von Rompuy, the current president of the European Council, has anything to do with it. He’s a Belgian you see.
What is even more interesting is that Belgium has managed to cobble together a government after more than 550 days without one, the result of the usual frenetic ethnic squabbling between French and Flemish speakers.
Surely that would have been a splendid opportunity to impose one of the thousands of EU bureaucrats to fill the vacant seat?
No, it’s the southern states that are getting kicked in the teeth because they are seen as weak and expandable.
One is starkly reminded of the carpet-baggers who sucked Old Dixie dry after the American Civil War, and their counterparts who are looting America today.
As always, it is the weaker and more exposed elements of society who will be squeezed until the pips squeak.
Mark Twain wrote that history has a tendency to repeat previous experiences with a fresh inspiration.
He was right. The proof is all around us.
Edited by End the Lie