European Union: growth pains

Mr. Berlusconi seems to be planning a comeback. And I personally found it a little bit surprising after his leaving power and after all those scandals. So, how good are the chances that he is back?

First of all you are never to be surprised with Mr. Berlusconi. He is used to this coup de théâtre, it is very sad but he is certainly used to say things and then go back from his words and so on. But the problem is very serious right now in Italy. The real news today, I want to start with this, is that downgrading of the Italian debt by the Moody’s International Rating Agency, Italy today had a downgrading of two notches going to Baa2 from A3. This means that now the Italian debt is about two levels above the junk, just one notch above Spain. This gives you an idea of the big crisis, of the real dramatic moment we are living in Italy right now.

We have just the new Government that came after Berlusconi last November headed by a very respectable person Mr. Mario Monti from the Commission of the European Union. He made some very, very bad cuts to the welfare, to the pensions, and some savings are about 20 billion euro of cutting just in six months. And this didn’t help very much because the state of the Italian economy, just remember the Italian economy is the third of the Eurozone, after Germany and France Italy is the third big economy, we are not talking about Greece, and it is still in the doldrums.

Everybody in Italy now got used to the term “the spread”, the spread is the difference between the ten years bond from Germany, Germany bonds in Italian’s, today the difference was 4.80 points. This means that the Italians have to pay about 5% more than the Germans to finance their debt and the Italian debt is very heavy, it is about 120-130% of the Italian general output. This is the real moment we are living in Italy. And you have note that Mr. Berlusconi was ousted from power last November 12 not only because of these scandals but because of the economic situation. We had some pressures from the European Union and from the other countries saying that to be helped to overcome the crisis we had to sacrifice Berlusconi. Berlusconi had to get out because they didn’t trust him anymore.

Berlusconi did something in his style, again another coup de théâtre, he said – ok, I’ll go back, I didn’t lose any elections, I’ve been winning elections since I’m in power but anyhow I’m getting out for the good of Italy. And you know, in these six months the situation didn’t get better, we just had some moments in we had some hope. Mr. Monti did a very good job going around all over the states in the G8, in the euro group to explain the new situation in Italy. He had a bad confrontation with Mrs. Merkel and finally just a few weeks ago it looks like he had won the help of the European Union for the growth of the economy. But now the situation grew stronger for the great statements. Just a few days ago industrialists had a forecast of a loss of 2.4% this year for the Italian economy, these are very, very bad news because a few months ago we were talking about 0.5-1%. So, this means that Italy is in recession and words don’t mean very much at this moment, I mean the real economy is this one.

In this situation Berlusconi thought he has a chance for coming back. I don’t if we can believe this as usually, nobody said that he was pushed by the business community for this coming back and he was pushed especially by the polls. Mr. Berlusconi believes very much in the polls. After he left the party, and he left the party to a very young fellow Mr. Alfano, he is 41 and Mr. Berlusconi is 75, so this rejuvenation of the party did not give any result. In the official polls a few weeks ago the party was down to 80% of the intension of voting. We have to say that above 40% of Italians are now saying that they don’t know who they are going to vote for. But the people that expressed that opinion were just 80%, in favour of the Peoples of Liberty, that was the name of the party of Berlusconi.

But yet this personal pollster made a new poll these days saying – what do you think about Mr. Berlusconi coming back and making a ticket with Mr. Alfano, the old and the young man, and this poll said that there were 30% of the Italians who said that they would be in favour, they would vote for a ticket like this. Well, we don’t know. The next elections are due in April 2013, so we don’t know what may happen in 8-9 months from now. But the party of Berlusconi is going behind this leader because they are afraid of losing everything without Berlusconi, not just without Berlusconi’s money but without Berlusconi’s, let me use this word – charisma – he has been in politics for 18 years, since 1994, he was three or four time the Prime Minister and he has some popularity, if he was elected it means that he has a backing in the country.

Of course his image was damaged by the scandals, especially the sex scandals but even now the sex scandals are losing their grip, I mean people now think about the other things. If there are more scandals that come up people look much more to the economy than to sex girls’ shipments. This may help Berlusconi to make these astonishing for many people statements of coming back.

But Mr. Oliva, from what you are telling me I have several questions. And of course one of them is, well we all know that Berlusconi is a great showman…

Oh, sure!

But if we look across the global landscape it seems that nowadays there are not so many real leaders who are capable of facing the global crisis which is looming, which is already on the way. So, if we compare the global landscape with something like 20 years back we know that there were real leaders at that time, what is happening to the political class, overall, not only in Italy?

This is a very good question, I’m asking it myself. I’m the right age to have good memories. I knew the people we are talking about, 20-30 years ago to used to be in Brussels with the European Union, I remember Kohl, Schmitt, Mitterrand and so on. I think that right now there is a growing populism and I also think that the crisis of 2008-2009 really messed up the things, and there was growing anti-politics, as we call it in Italy, movement. People have stopped the optimism that we all have seen in the 80’es and 90’es.

We started facing the reality of globalization, of losing overall, especially in Europe, in the world economy and politics. And we started to look at different ways at politicians and also the media in these years, I’m talking about Italy for example, give much more attention to what the politicians are doing. So these scandals… Even the Internet with the bloggers and the possibility for the people to get to different interpretations of reality gave a big blow to the credibility of the politicians. They kept talking their old way, they kept talking about baloneys as the Americans would say and people started to find it out. And then the people that could get into politics got afraid or they were kept out but the politicians started to defend their role.

Three years ago the last elections in Italy were ran with an electoral law, this was unbelievable because the people that were going to be elected, before then voters could chose in the list of names the party gave them the one they preferred, with the law, that now they are trying to change again, the parties nominated their own representatives. And they chose people, the leaders like Berlusconi but also the others, that were more likely to depend from them, to obey them otherwise they could not have been represented in the following elections.

So, it is again, there was a reaction and they come to reaction between the politicians and the people, that block at the system. And the worst had the possibility to be elected, the best tried to work and to make their way into the profession. There were many of us, I mean I myself did the same thing, I was much more involved in politics but then little by little you get sort of this feeling that this is not worth to do. This is very dangerous I think. This answers partially your question.

Quite recently when I was following the news of EU expansion, despite the crisis, I ran into a series of reports about Croatia. And I was quite stunned by the headlines “Croatia has passed a crucial test for EU accession”. And you know what the crucial test was – they managed to hold a gay pride parade. Goodness gracious! But if we remember that Croatia is a traditional catholic country it gives me an idea of whether the political personality crisis is somehow connected with values’ crisis.

I give you another example, I lived a few years ago in Spain, in Madrid while Lopez was there, there was then Zapatero who also was this big person, now we already understood what a damage he did for Spain. Well, his points were just about the gay marriages or the number of male and female ministers, the things maybe going back in history about the civil war, things that had nothing to do with the reality, I mean maybe also important but it is not all. But he played all his politics, all his government on this kind of things.

And I followed also the entrance to the European Union of Romania, Bulgaria and other countries in 2004, believe me it was a market, everybody was sponsoring one country, everybody was trying to get image. We’ve got 27 countries and most of them have nothing in common, it is not a common market. This is a big problem, you know. Putting some target very high, I’d say in the sky, and I’m even talking about Croatia, everybody talks about Yugoslavia, even Moldavia, even Ukraine. They said they know the European Union is in crisis but the solution they think is just to enlarge it and more with countries that again have very little in common right now.

Mr. Oliva, but the whole turmoil which not only Italy is facing, but we all know Spain and Greece… France is balancing on the verge of serious economic matters. Is it systemic? Is it somehow connected with that limitless stretching of the Eurozone and the EU?

I think it is very systemic, yes. I think that now the real solution is when they understand that this is not a problem of just a few countries but of the whole community. Some mistakes were made at the beginning of the euro. In 1992 when everybody had the famous Maastricht parameters, when everybody was supposed to respect some fundamentals of economy to get into the euro and then they decided to overcome them for political reasons. And they don’t have the courage to either stop or to go back, or to go further. I mean you cannot have a common land without a common political economy. All the time you have somebody who is going too far and somebody who thinks he is going bays back. I mean you have to have the courage, to stay in the middle does not help much, it is going to give more and more problems.

Just imagine what would happen if Italy or Spain have a default. I’m not talking about Greece, unfortunately Greece is a small country and everybody now is sure it is not going to stay in the euro. But just imagine what happens if Italy or Spain defaults, what then they are going to do? Are they going to make a European Union with two, with Germany and France? Even France with Mr. Hollande is rethinking this politics. They are not the masters any more, they are not the good boys of the class as Mrs. Merkel and Mr. Sarkozy tried to pretend. We need a restarting, remodeling of the EU I think.

This for example is something that Berlusconi is saying. And this is very interesting. Berlusconi a few weeks ago made a scandal again because he said – we should go out from the euro. Just the other day he gave an interview to the German newspaper saying – no, we just want to rethink the union. And many people are very sensible to this. In Italy two years ago in what they called the Euro Barometer, they had these polls that the EU did every year to see the feeling of the people about the union, Italy was always 80-90% in favour of the EU. If you’ll make a poll now, as they did, you’ll see that now the majority of people are having many doubts, not to say worse, about the EU. And this is very shocking I’d say in a country that has always been as we say europeist.

But if we consider the good of not the EU but the good of its individual members, what is your vision? Would it be better perhaps for them to sail on their own?

I don’t think so. It is too late, now it is impossible. Right now, especially with the globalization each country is a small country. In Europe who is now the strongest as used to be? But going by ourselves would be a mess. I remember the time before the euro, unfortunately, there was a big competition between the countries. Any time we had a problem we made the devaluation of money, we had the lira to be competitive with the German mark. Since in Europe we are in the common market, just imagine what would happen if everybody would go by himself with devaluation, with agreements with other countries trying to sell… There is too much integration now among our economies to say – no, let’s start again.

Even the stock exchanges now are common, are run by the companies that work in different countries. I think now it would be impossible. I don’t know if it is better or worse. I think it is worse. I’m afraid this way the scenery of a breakdown of the euro area, of the European community I think is driving for us. It is very bad for my grandchildren, I wouldn’t wish this for my grandchildren.

Mr. Oliva, as an expert with all your experience, what do you think might pull the European Union and Europeans out of the situation?

I hope we are going to stop one inch before the edge because we are getting close to that. Germany has to make a big effort, it is not just Mrs. Merkel who reflects the feeling of the country. Germans have always been defenders of their money since the crisis before the Nazism. So, they have to be convinced that they cannot do everything by themselves and they have to help for their own interests saving the EU. And it is very important, they have to give their powers to the common bank to operate in the market. And we cannot have the common bank, like we have in Frankfurt, without the power of doing its job. This is unbelievable if you think of it. It is something out of this world. All of us but especially the Germans have the courage in the long run to do this kind of reforms.

I absolutely agree! And this is just the impression, which you have described, is something from another world because if you look at some of the decisions being made and some of the approaches, they really contradict what we are accustomed to, I mean the good sense, the moral values.

It is unbelievable. We will talk for hours about this kind of things. And I think it is very good that you talk about it. I appreciate your job and I appreciate your efforts to make people understand the problem because this problem is not just of the EU, this is a world problem, so we have to talk about it.

Mr. Oliva, thank you so much. And just to remind you our guest speaker was Franco Oliva – a well-known Italian journalist coming to us all the way from Rome.