ALL PROBLEMS OF EURO
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ALL PROBLEMS OF EURO |
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Italian |
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Euro is at the door but the European citizens still haven't learned to
love it. Apart from Italy where 76% of the electors are in favour of the
single currency, the EMU's advocates from the other EU countries are either
a very scanty majority or a minority. This scepticism is particularly widespread
in strongcurrency countries like Germany, Holland and Austria that mainly
fear that they will always have to pay for the madness of reckless governments
and take over the charge of their debts.
Germany and Holland's fears are based on a mixture of pride for the stability of their currencies, that have always set the example for monetary virtue, and diffidence towards their neighbours' currencies, chiefly those from the South, that were devalued five, six or even ten times over the years. “How can we be sure that a country that has always used competitive depreciation to remedy its unstable financial state has now finally settled down? How can we trust a country that has recklessly been going into debts for fifteen years to finance its current expenses and reached a liability and gross domestic product ratio countries had during wars, and that suddenly finds the path of virtue that we have been following for forty years? Who can guarantee us that after entering the Euro Italy will not go back to the perverted behaviour it had in the past, maybe with a government politically different from the one that started the country's reorganisation? We know that there is the stability agreement, that there will be the solemn sixpoint statement of the heads of State and government, that the situation will be incessantly monitored by the Commission, by the new European central bank and by the socalled watchdogs of rigour: as pressure keeps on increasing in Southern Italy, however, the situation might easily get out of control; and we, who already took over the charge of the German reunification, have absolutely no intention of paying for the madness of the Associated Countries too”.  If
these are the fears of the Right, so to speak, the opposing side shows
its deeprooted ones, too. The fear of the Euro, for example, certainly
influenced the turn towards the left that with the exception of Spain
marked the EU 15 countries in the last two years and that might even lead
to Chancellor Kohl's ousting next autumn. It is true that the national
governments' manoeuvre margins are limited due to Maastricht's deadlines
and that, apart from Italy and France's abrupt decisions to legally introduce
35 weekly working hours, no substantial differences between the economic
policies of the right and the left governments truly exist.
It is also true that some principles which exclusively belonged to the Right in the eighties, like the privatisation trend and the reappraisal of the welfare state, are today accepted even by the Left. However, people commonly think of the socalled Progressive parties as being more open to tackle the problems of the poor and of the unemployed, more open to protect the famous “conquests” achieved in the past two decades, and less supine to the policies of the central bankers. It is for this reason that it is legitimate to define the recent elections in France or in the German Laender as “defensive votes” against the dangers that many people stubbornly see in globalisation, in the liberalisation of the labour market, and in the progressive reduction of the social welfare; all topics, in other words, that are somehow linked to the single currency. The common people, be they in Palermo or in Munich, are right when they think that not only will the Euro force us to change the expenses' accounts but that it will also progressively revolutionise our way of living. The first novelty is the single states' loss of sovereignty that will be replaced by the nonrepresentative supranational body of the new European Central Bank. Italy (along with the other EMU's members) will not only lose the administration of its currency but also that of its economic and financial policy. One single currency will force all countries to have the some policy in order to avoid confusions that might seriously jeopardise the whole project. Those that will not toe the line will be so severely fined by Germany's inexorable “stability agreement” that any future rebellion will be discouraged from the start. Some examples? Devaluing a currency has been a common practice so far for countries whose labour costs had become excessively high and could not compete on international markets any longer, or for those that had to reorganise their balances of payments, or for those who needed to reduce artificially their domestic debts. From now on, on the other hand, the only weapon countries will be allowed to use will be flexibility: in the labour market, in the working hours, even in the wages. It is for this reason that the decision to legally introduce a shorter working time, in particular with 35 weekly hours paid for 40 triggered so violent a reaction and induced the leftwing economist and Nobel laureate Franco Modigliani to state that it is a major liability, like Italy's membership in the EMU. We'll see whether this is true or not only when the law comes into force; it is irrefutable, however, that the single currency reduced the manoeuvre margins even of welfare bodies to the minimum. Even the trade unions' oppositions to future contracts, to parttime or temporary jobs, to any solution to dodge the fixed work rule and help the companies' competitiveness, will finally be given up and they will have to keep up with all the others. The governments' hands will however be even more tied; the Italian government will be particularly affected when facing its responsibilities due to Maastricht's conditional entrance. When the European Commission, the European Monetary Institute and especially Germany and Holland's Central Banks rather unwillingly gave Italy the green light to the Union, they pitilessly touched all its sore points and virtually imposed it the great directives of next decade's financial laws. We will have to replace the measures that allowed us to undergo the humiliating admission exams with structural measures to reduce the expenses, that is with a new intervention on pensions. We will gradually have to go from a 3% deficit of the GDP to a balanced account both in order to meet the new canons of the financial virtue imposed by Europe, and to recover a debt that our partners rightfully consider as being excessive (not only is it twice the debt Maastricht's criteria allow, 121% of the GDP instead of 60, but it even accounts for 27% of the overall European debt). We will have to work in order to avoid inflationary pressure even when, as everyone hopes, the economy will get healthier, we will have to defeat some atavistic vices of our society. The greater burden for the Italians in the next decade consists in reducing the debt: the reorganisation of the First Republic's squandering in the past ten years will have to be carried out. To enter the Euro with the first group, the government had to prepare a plurennial project to collect money that was so protracted over time to look like a prophecy. Beyond the commitment to go under 100% of the GDP over a sixyear period (a decrease by 3% every year, about 60,000 billion lire), the Ministry of the Treasury presented the European partners two scenarios with which it plans to meet the required standards: in the first, the most optimistic of the two, there is a nominal growth of the GDP by 4,5%, a basic surplus by 5,5% and an average cost of the public debt by 5%; with the second, more pessimistic, the growth would be by 3,5, the basic surplus by 5,5, the cost of the debt by 6%. With the first scenario, that will have to be helped by a whole series of positive circumstances, Italy will settle its accounts in 2009, with the second not earlier than 2015. The meaning of all this is that, meanwhile, it will be impossible for us to resort to that deficit spending that John Meynard Keynes also codified and that many countries, before the EMU, resorted to whenever they wanted to relaunch their economies. In particular, it will be next to impossible to get that huge public appropriation that the Lefts have always asked to cope with unemployment, social injustice and to help Italy's southern area, a situation that will likely to trigger repercussions inside the government's majority. The key point of this reasoning is in the socalled basic surplus, that is in the difference between earnings and expenses net of interests. In 1997, when our efforts to meet Maastricht's criteria were at the zenith, it even reached 130 thousand billion lire, equal to 6,8 of the GDP, but it should stay around 110 billion lire for various years before being reduced along with the “service” of the debt. In other words, it should continue to be the highest of the entire EMU at least for the next decade, taking resources away both from structural investments and from the decreasing process of the fiscal burden. The only tool we have to loosen the grip a little consists in resorting to a privatisation process in a more incisive and faster way. The privatisation process should not only involve the shares of ENI (the National Hydrocarbon Corporation), of ENEL (the National Electricity Board) or of the Banca Nazionale del Lavoro, but all the huge and normally unused State's real assets wealth. Should everything be included in this process 4 to 500 billion lira, accounting for about one fifth of the overall debt, could be collected. Proper financial instruments might give a benefit to the privatisation process by drastically reducing the debt and consequently the interests in a rather short period of time. It would also have the advantage of absorbing a part of the liquidity that the Treasury Bonds investors now give to the Stock Exchange. However, to carry out such a project, it would be necessary to have an extremely strong and resolute political will that today seems unachievable by a majority that still has a Communist component in itself. Will our country manage to reconcile development needs, particularly strong when international competition further gets harder, with those pertaining the public accounts' final reorganisation? Will the various elements that have to play a key role in the success but that cannot completely be controlled by us be present throughout the collection project? These are the doubts upsetting our “virtuous” partners and that we too must never stop considering. Today, in fact, the advantages of the Euro for Italy are clear and the support that the policy of sacrifices obtained was almost unanimous. This mood might change however, because it is clear that the EMU will last only if it continues to improve its inhabitants' wellbeing, favouring the growth of the incomes and of employment within a context of social cohesion. Should all this fail in Italy and in the other countries, too a reaction would be triggered: maybe demagogical and instrumental but, for this reason, more dangerous for the stability of the new establishment. We should not forget, in fact, that the EMU, although it is an important step forward towards the continent's unification, is still an instrument having no democratic leadership and this makes it particularly open to protests. The protests might come, following the scheme at the beginning of this article both from the right (if the Euro resulted a weaker and more unstable currency than those it is about to replace) and from the left (if, due to the excessive strictness with which it is handled, the single currency should halt growth and force the Europeans to a change of their life standards that they are not willing to change). Presently, all we can do is cross our fingers, and make the analysis of the countless novelties that the Euro will bring in our everyday lives another time.  ....................... |
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