Yves here. It’s too easy to assume that if someone is behaving badly, the party opposed to him must be a good guy. Yanis Varoufakis argues that in the fight over the Italian budget, Brussels and the Italian government are serving their own interests rather than trying to increase citizen’s prosperity. He describes how economically, even though the EU fiscal rules are deeply misguided and destructive, Italy’s budget has misguided priorities and won’t boost the economy much. So the Italian debt overhang would probably get worse, confirming the Eurocrat’s claims that deficit spending is a bad idea.
By Yanis Varoufakis, the former finance minister of Greece, Professor of Economics at the University of Athens, Visiting Professor at the Lyndon B. Johnson Graduate School of Public Affairs, University of Texas, Austin and co-founder of DiEM25. He is the author of Adults in the Room: My Battle with Europe’s Deep Establishment. (Bodley Head, 2017) and Talking to My Daughter About the Economy: A Brief History of Capitalism (Bodley Head, 2017). Originally published at his website
Ladies and Gentlemen, we are here because Italy is being torn by two destructive forces: Brussels and Salvini. By the failed establishment of Renzi-Merkel-Juncker-Moscovici and by the reckless, racist anti-European Salvini project.
Tragically, Brussels and Salvini are working very well together against the interests of Italians in particular and of Europeans in general.
- Salvini is Brussels’ greatest supporter. Juncker, Merkel, Macron et al are hanging on to power with the argument: “Whatever mistakes we have made, après nous… ”
- Brussels is Salvini’s greatest supporter. By imposing on Italy rules that guarantee Italy’s stagnation and falling income and prospects for a majority of Italians, they enable Salvini’s sortie into xenophobic populism.
On the Italian Government Budget
Both Brussels and the Lega-5S government are profoundly, and intentionally, wrong.
- Brussels is wrong to impose on Italy fiscal and banking rules that guarantee Italy’s stagnation – rules that were agreed to by the, now, collapsing Italian establishment. The EU’s revamped fiscal rules are analytically baseless. They are forcing Rome to introduce new austerity at a time when growth has fallen to zero – on the false assumption that it is possible to compute Italy’s growth-neutral structural deficit. If the Italian government were to reduce the deficit to 0.8% (as the rules specify), Italy’s debt-to-GDP ratio would rise, not fall, as the result of the certain fall in GDP that would follow.
- The Lega-5S government is wrong too. Its budget will not boost growth sufficiently to make a difference to most people, the result being a deficit overshoot without much benefit. Cutting the top tax rates will not boost growth: When the rich receive a tax reduction they either save it or send it to… Luxembourg, Switzerland etc.
Even worse, both Brussels and the Lega-5S government know that they are profoundly wrong. Brussels is choosing to be wrong because they are more interested in maintaining a semblance of control over our countries than they are in shared prosperity across Europe. And the Lega-5S government is choosing to be wrong because Salvini and Di Maio are more interested in maintaining their precarious alliance that in the prosperity of the Italian people.
Our Present Moment
So, here we are:
Italy stagnates because its centrist establishment agreed to EU rules that choked Italy, causing its own political demise and paving the ground for Salvini.
- The ancient regime (including Renzi and his patrons in Brussels) and the Lega-5S government are two faces of the same debased coin. Brussels and Salvini will continue to reinforce each other while Italy sinks, while Europe disintegrates.
- The oligarchic establishment (PD, Forza Italia etc.) caused the problem and cannot pretend to be offering the solution. Renzi et al lack the ideas, the credibility and the integrity to make a difference.
- Salvini is exploiting the establishment’s fragmentation and logical incoherence to bring, via his rabid xenophobia, a new Fascist Moment in Italy.
- 5S is increasingly discredited as a crutch on which Salvini is leaning to take over government completely.
We Must Act. Now!
Italy has an urgent need for a new progressive alternative to the implicit but destructive alliance between the oligarchic establishment and Salvini’s nationalism.
Italy, however, does notneed yet another sad leftist alliance of the usual suspects. Italy does not need another Frankenstein list that stitches together dead parts of what used to be Italy’s glorious left. The last thing Italians need is another list of leftist candidates lacking a coherent program of change and united only by a desperation to get elected on the basis of vague promises, wishful thinking and high-minded rhetoric.
No, what Italian voters need, and deserve, is a progressive list with a single, coherent, credible program that everyone agrees has genuine, implementable answers to the problems keeping people up at night and making them fear for their children, for their future, for the future of Italy and Europe.
This is why we are here today. To announce such a list and such a single, coherent, credible program.
Who Are We?
Last March, colleagues from DiEM25, myself, comrades from Poland, Denmark, Portugal, Benoit Hamon from France, we met in Napoli under the auspices of my friend Luigi de Magistris, Napoli’s Mayor, and announced that we are beginning. That we are constructing a single paneuropean list with a single program for Italy, for Greece, for France, for the whole of Europe – a program that we will put to the people of Europe in May 2019 in the European Parliament elections. This program is now complete, after many months of very hard work. It is the progressive, ecological, feminist, humanist, rational program of the paneuropean coalition that we now call EUROPEAN SPRING.
What Do We Propose viz. the Italian Budget?
Today the Italian budget is in everyone’s mind. So, here is what we propose. Here is the only pro-Italy, pro-Europe solution that we propose. A European solution that work for Italy and an Italian solution that help Italians and Europeans in equal measure:
- Continue with the introduce of a guaranteed minimum income and, in fact, speed it up
- Scrap Salvini’s top tax rate cut and the tax amnesties (including those to owners of illegally built housing): When you give handouts to the rich, they either save it or take it to Switzerland, Luxembourg etc.
- Use the money saved from Salvini’s tax cuts (about 8 billion euros) to fund a growth-enhancing green investment. To this sum add another 12 billion euros, taking the deficit to the Maastricht limit of 3%. The total public investment of 20 billion euros would then be spent on: (a) Industrial and ecological transition; e.g. to address problems such as ILVA in Taranto and the offshoring of low-added-value manufacturing; (b) Environmental safety, including a plan for earthquake preparedness; (c) Investment in infrastructure, to avoid a repetition of the Genoa disaster and to invest in sustainable transport.
- Call a EU Council Summit to propose that any reduction in deficits from 3% to the limits of the enhanced fiscal compact be conditional on a Green Investment New Deal for the Eurozone, amounting to 5% of Eurozone GDP. In short, the Italian government’s 20 billion investment fund (see above) can be replaced by the European Green New Deal funding, allowing Italy to reduce its deficit to 0.8%, as per the prevailing fiscal rules. How will the European Green New Deal be funded? The EU Council gives the green light to the European Investment Bank to issue bonds of 500 billion euros each year for five years, with the European Central Bank ready to buy those in the secondary market if these bonds’ yields rise above a threshold.
- Until and unless the EU Council approves the European Green New Deal, Italy will unilaterally fund its public investment by boosting government deficit to 3%.
What Do We Propose for the European Union?
DiEM25 has helped produce the EUROPEAN SPRING’s comprehensive New Deal for Europe program that we shall present it to European voters across Europe in May 2019.
Ladies and gentlemen,
Austerity for the many and socialism for the bankers has given rise to the present Fascist Moment in Italy, to the collapse of the political centre everywhere, to the reactionary, divided Europe that Donald Trump was hoping for.
Today, here in Rome, we are saying: Enough! We are saying: Another Italy, another Europe, is not only possible. It is here in the form of our transnational movement with a SINGLE COHERENT PROGRAM that people can believe in – because it makes sense and because it can be implemented.
Today, we are here to announce that DiEM25 is moving ahead on the basis of the only rational plan for Italy, the only rational plan for Europe. The Brussels-Salvini duet is wasting no time to wreck Italy, to disintegrate Europe. There is no more time to wait for our partners to complete never-ending internal deliberations. So, DiEM25 is moving ahead.
During November we will stage three large events across Italy to announce our list and begin our primaries. By 1stDecember we shall begin collecting the signatures necessary to contest the May 2019 European Parliament election.
The DiEM25 Italia train is leaving the station, slowly and with its doors wide open for our partners to jump in. We invite them to do so.
The European Parliament elections are only a start. They give us an opportunity to have this debate. We shall use the May elections to transcend the fake conflict between Brussels and Salvini, between the authoritarian incompetent establishment and the misanthropic Nationalist International.
DiEM25 Italia is here. With an economic agenda. But also as a political force.
We are here to bring to the people of Italy a scent of next May’s European Spring.
Italian progressives are no longer alone.