Tag Archives: Five Star Movement

Making Italy Great Again, by Peter Schiff

Populist parties do what’s popular, almost by definition. Unfortunately, what’s popular doesn’t always make any sense. From Peter Schiff at europac.com:

This week, market watchers around the world are justifiably fixated with the high-stakes, high-drama political developments unfolding in Italy. While a political crisis in the world’s 9th largest economy (International Monetary Fund figures, 4/17/18) would normally not be enough to cause an international meltdown, given how thin the global economic ice has become as a result of ever-increasing debt loads, even small disruptions can create systemic problems. But from my perspective, what makes the Italian drama so interesting is that it parallels so precisely developments in the United States. It’s amazing that more Americans do not realize, that when looking at Italy, they are looking at a fun house mirror reflection of the United States.

Italy is currently dealing with the results of an election in which populist political forces scored a big victory over the establishment, which they had judged to be both corrupt and ineffective. In other words, the Italians replayed the 2016 Presidential election in the U.S. The big difference is that here the anti-immigrant tendencies of the right and the economic populism of the left were united in one person: Donald Trump. In Italy, those positions are represented by two separate parties that normally would be rivals. But politics can make very strange bedfellows, and the absurdity of the current economic reality has made them partners.

As a result, the top two finishers in their recent election, the left-leaning Five Star Movement and the right-leaning Northern League have cobbled together a contradictory political program that mirrors the Trump agenda. While both parties share nationalist goals to curb immigration and fight for greater autonomy from the European Union, Five Star’s secondary policy goal is to lower the (already low) retirement age and institute universal basic income for all citizens, while the Northern League’s secondary policy goal is to lower income taxes. In other words, their proposed coalition would look to spend more and tax less. That’s the Trump agenda with a little Parmesan cheese on top. Apart from the appointment of a conservative Supreme Court Justice, Trump’s major political achievements have been massive government spending increases and tax cuts that have significantly widened the projected budget deficits. The irony is that the governments of Italy and the United States are among the most indebted countries in the world. (2017 IMF figures) And the solutions being proposed by both countries are to go even deeper into debt!

To continue reading: Making Italy Great Again

Three critical lessons from Europe’s recent mini-meltdown, by Simon Black

Italy illustrates the important, and disturbing, interlinkages in the global financial system. From Simon Black at sovereignman.com:

Trying to trace the origins of the latest political crisis in Italy is like… well… trying to trace the origins of the decline of the Roman Empire.

There simply is no good starting point.

You can’t talk about the decline of Rome without a lengthy discussion of how destructive Diocletian’s Edict on Wages and Prices was in the early 4th century.

But you’d have to go further back than that and discuss all the lunatic emperors preceding him, all the way back to Caligula.

But you can’t talk about Caligula without bringing up the effects of the civil war between Octavian and Marc Antony… which was a direct result of the previous civil war between Julius Caesar and Pompeius Magnus.

Before long you’ve gone back in time more than 500 years trying to figure out why the Roman Empire collapsed.

Modern Italy isn’t so different. After all, this is a country so unstable that it’s had 64 governments in the seven decades since the end of World War II, averaging a new government every 14 months.

That has to be some kind of world record.

And to accurately diagnose how Italy ended up in such dire financial and political turmoil, you’d have to go back a -very- long way.

But for the sake of brevity, we’ll just go back to March. Italy held elections, and the “5-Star Movement” political party won the most seats… but not a clear majority.

This required them to establish a coalition with other political parties, which took weeks of haggling and negotiating.

But finally the 5-Star Movement was able to hammer out a deal and present a formal plan to Italy’s head of state, President Sergio Mattarella.

The President of Italy is almost purely a ceremonial role, like the Queen of England. But he does have the authority to reject key government appointments, including Prime Minister and Finance Minister.

And that’s exactly what he did– specifically opposing the nominee for Finance Minister, an economist named Paolo Savona.

Savona is a huge critic of the euro, and President Mattarella thought him too dangerous for the post.

Again, while the origins are more complicated than that, this is the basic plotline behind the most recent crisis.

Late Thursday night the Italian government announced a compromise, supposedly bringing an end to the uncertainty.

But to me, none of that matters. What I find -really- important is what an enormous impact this soap opera had across the world. And I think there are three critical lessons to take away:

1) On the day that the finance minster was rejected, financial markets worldwide tanked.

To continue reading: Three critical lessons from Europe’s recent mini-meltdown

The EU Strikes Back – Italy Coalition Rejected, by Thomas Luongo

The EU is showing Italians who runs Italy. From Tom Luong0 at tomluongo.me:

Italian President Sergio Mattarella just blew up the European Union.  His refusal of the coalition agreement between The League and Five Star Movement threw the best chance for the EU to face its burgeoning political crisis before it became a full-blown sovereign debt crisis.

With U.S. and U.K. markets closed today the full force of the damage done by the EU’s Hail Mary to prevent the Italians forming a government to their specification is actually muted.  Things like this always happen on a weekend where the powers that be have enough time to figure out a messaging game plan and reassure markets they’ve got everything under control.

But, let’s round up a bit shall we?

Italian bonds off 25 basis points (!). The euro flirting with $1.16. Spanish and Portuguese debt sold hard, off 5 to 12 basis points.  Gold is off a few dollars.

Mattarella, nominally, did this because he didn’t like the choice of Finance Minister, a man who was in favor of Italy leaving the euro.  Whatever, he found an excuse.  And someone in one of Berlin, Brussels or Washington told him to give a non-hacker the reins to try to form a government.

As Zerohedge reports this morning, that’s simply a non-starter. There is no way that the Italian parliament will approve another technocratic Vishy government on Italy, circa 2011 and Berlusconi’s ouster during the last flare up of Europe’s intractable debt problem.

No, this has to be about something else.  This is simply yet another instance of Europe kicking the can down the road.

Sanctions Uber Alles

Look, at the risk of sounding like a guy with a hammer looking to pound in some nails, I have to think that the re-authorization of the EU sanctions on Russia in July is what prompted this desperation move.

But, if a re-vote in Italy can be put off until August (convenient that) then that gives the Trump Administration another six months to exert maximum pressure on our “allies” on trade and tariffs.

It makes sense that Washington is mostly behind this, but don’t underestimate the stupidity of people like Donald Tusk and Jan-Claude Juncker who will literally burn the continent to the ground before giving up their dream of an Europe united in their Orwellian Nightmare.

To continue reading: The EU Strikes Back – Italy Coalition Rejected

 

Hotel Europa, by Raúl Ilargi Meijer

“You can check out any time you like, but you can never leave.” The EU bears a striking resemblance to the Eagles legendary hotel. From Raúl Ilargi Meijer at theautomaticearth.com:

On Friday, in This is the End of the Euro, I said: The euro has become a cage, a prison for the poorer brethren. The finance minister proposed by 5-Star/Lega and refused by Italian president Mattarella, Paolo Savona, has called the euro a German cage.

There are now stories spreading that the coalition, Savona first of all, were secretly planning an exit from the euro. A series of slides Savona prepared in 2015 on how to exit the euro is used as evidence of that secret plan. But the slides are not secret. Yes, he has said that it’s good to have a plan to leave ‘if necessary’. But that’s not the same as secretly planning such a move.

Every country should have such a plan, and you would hope they do. A government that doesn’t is being very irresponsible. But it’s true, this is how both the EU and the euro have been designed: not just as a prison, but as a prison without any doors or windows. No way to get out. And that will prove to be its fatal flaw.

It has more such flaws, for sure. The inequality of its members, which allows for the richer to feed on the poorer, is a big one. The US founders were smart enough to provide for transfer payments from rich to poorer, the EU founders couldn’t be bothered with that lesson. They must have studied it, though, and rejected it.

Credit were credit’s due: Yanis Varoufakis said it best when he compared the EU to the Eagles’ Hotel California. A few lines:

Mirrors on the ceiling
The pink champagne on ice
And she said “We are all just prisoners here, of our own device”
And in the master’s chambers
They gathered for the feast
They stab it with their steely knives
But they just can’t kill the beast

Last thing I remember
I was running for the door
I had to find the passage back to the place I was before
“Relax,” said the night man
“We are programmed to receive
You can check-out any time you like
But you can never leave!”

The EU was set up as some kind of eternal prison, a concept most familiar to us in the way Christian churches depict Hell, or the ancient Greek mythological story of Prometheus, who, as punishment for providing man with fire, was condemned by Zeus to being tied to a rock, with an eagle feeding on his liver every day, for eternity.

To continue reading: Hotel Europa

Italy’s Pro-EU President Flouts Voters, by Soeren Kern

Political and financial chaos reign in Italy. From Soeren Kern at thegatestoneinstitute.org:

  • The political situation reflects the stranglehold on power wielded by the pro-EU establishment, which is evidently determined to preserve economic austerity at the expense of democracy.
  • “We need to prepare a plan B to get out of the euro if necessary… the other alternative is to end up like Greece.” — Paolo Savona, a former industry minister who has called Italy’s entry into the euro a “historic mistake.”
  • “In Italy, there is a problem of democracy. In this country, you can be a convicted criminal, convicted for tax fraud, under investigation for corruption and be a minister… but if you criticize Europe, you cannot be the Minister of the Economy in Italy.” — M5S leader Luigi Di Maio.

Italy’s new populist government-in-waiting resigned on May 28 after its choice of a eurosceptic finance minister was rejected by the country’s pro-EU president — who instead asked an unelected technocrat to form a pro-EU government.

The political wrangling ends a bid by Italy’s two anti-establishment parties — the left-leaning Five Star Movement (M5S) and the center-right League (Lega) — to form a populist coalition government, which would have been the first of its kind in Europe.

The political situation reflects the stranglehold on power wielded by the pro-EU establishment, which is evidently determined to preserve economic austerity at the expense of democracy.

Italian president Sergio Mattarella refused to accept the nomination for finance minister of Paolo Savona, an 81-year-old former industry minister who has called Italy’s entry into the euro a “historic mistake.”

In his latest book, “Like a Nightmare and a Dream” (Come un incubo e come un sogno), Savona called the euro a “German cage” and warned that “we need to prepare a plan B to get out of the euro if necessary… the other alternative is to end up like Greece.”

Mattarella, who was installed by a previous pro-EU government, said that the “uncertainty over our position in the euro has alarmed Italian and foreign investors who purchased our government bonds and invested in our companies.” He added that “membership of the euro is a fundamental choice for the future of our country and our young people.”

To continue reading: Italy’s Pro-EU President Flouts Voters