Yanis Varoufakis: How the Italian Budget Fight Helps Brussels and Salvini, Hurts Europeans and the Eurozone

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:

  1. Continue with the introduce of a guaranteed minimum income and, in fact, speed it up
  2. 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.
  3. 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.
  4. 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.
  5. 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.


Our Duty

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.

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    1. Lou Anton

      I don’t see Universal Basic Income mentioned…see Jobs Guarantee though! Meaningful differences between those two.

  1. disc_writes

    Salvini, not Salvani.

    Not to mention that, for all the sympathy I have for Varoufakis, I am sick and tired of people calling wolf on “fascism”.

    1. BillS

      If you listen to what salvini says, there is a strong smell of fascism. Italians (and others) are right to call him out. He is a small (but sly) man with big ambitions, riding the tiger.

      Italy is a country with fragile institutions. It will certainly need help in maintaining its democracy. Otherwise, there is a real danger that the nation could resurrect the “strong man” leader paradigm that came to be fascism in the 1920s.

      1. disc_writes

        I am not sure you read in my previous comment: ‘I am sick and tired of people calling wolf on “fascism”’.

        And humor me: who is it that Italy “certainly” needs help from in maintaining its democracy?

          1. disc_writes

            I do not mean to pick a fight on the NK comment section about what fascism is, and whether the Lega is fascist or not. This is not the right place, and I am sure the moderators will not appreciate. However:

            – @BillS and @jsn, you are probably outside (American?) observers. Keep in mind that you are probably extending your mental categories onto a country where those categories do not apply.

            – Several important Italian journalists, authors and pundits have repeatedly dismissed as ridiculous the Salvini-fascism link, including former PM Gentiloni, left-wing philosopher and former Venice mayor Cacciari, left-wing historian (and Mussolini biographer) Scurati, former Corriere director Paolo Mieli, Il Fatto Quotidiano director Marco Travaglio, and Jewish author Moni Ovadia. These are some of Italy’s top intellectuals, none of them with right-wing sympathies. Please consider the fact that their opinion might be better informed than the misspelled platitudes in mainstream media.

            – How did fascist-shaming work out with Trump, Brexit or the AfD? It just infuriated “fascist” voters even further, and sunk institutional parties even further. So maybe you should stop calling them names and start debating them.

            I suggest you read Orwell’s What is Fascism:

            It will be seen that, as used, the word ‘Fascism’ is almost entirely meaningless. In conversation, of course, it is used even more wildly than in print. I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox-hunting, bull-fighting, the 1922 Committee, the 1941 Committee, Kipling, Gandhi, Chiang Kai-Shek, homosexuality, Priestley’s broadcasts, Youth Hostels, astrology, women, dogs and I do not know what else.

          2. Mcgardner

            @ jsn: Your link lost me at ‘conspired with Russia’ – before that however, there was a coherent description of fascism in the eyes of today’s left-wing. I can see how these stories could scare you into believing your president is a fascist. But assuredly, Trump will not be interested in suborning his business empire to the will and service of the government. Thankfully, that’s a bridge too far even for him.

            @disc_writes: ya hit the nail on the head. Bravo.

  2. Susan the other

    One of the reasons we go to war is because our financial structure runs out of opportunities and panic ensues. We are looking at the beginning of an EU MIC with all the industrialized EU members gearing up to produce and sell arms and some of them thinking Russia looks like a good target. In order to prevent financial collapse we go to war. It achieves nothing and today it simply causes more environmental devastation that we cannot recover from unless we stop doing what we have been doing for centuries. YV knows this and he sees himself surrounded by nationalists with fascist intentions. So naturally he wants to monkey-wrench the process. Who doesn’t? Brussels and Rome are doing business as usual and that’s very threatening. The first goal of European Spring besides open democratic representation and social progress is to set up the European Investment Bank. The purpose of which is to provide financing that circumvents the ECB and is much like a mutual social insurance corporation providing the necessary spending to stabilize EU society. It will serve to preclude that nationalist idea of separate sovereignty but provide a source of mutual sovereignty. But it isn’t sovereignty, it’s just a reasonable stop-gap against the ravages of the current financial system. Soros probably doesn’t like any of this because he is so entrenched in the financial system as it is… an eternal catastrophe.

  3. Mcgardner

    Is anyone surprised at Salvini’s rise? If you invite Africa at large to come join into your Welfare State, they will come. (And hold the argument about western invasions… I lived in Palermo, Sicily from 2010-2014. The vast majority of ‘fugees was from Nigeria, Ivory Coast or Ghana). And why exactly is it fascist if you’d rather not mingle with the escapees from the third world. Italy is for Italians and John Lennon is Dead. (And Bono is a Zombie).
    Instead of the argument that ‘We need someone to pick the fields’ why don’t you ket market forces take care of that problem. People will pay what they need to to eat. Raise the picking wages and voila, Italians will be headed to the campagna. Hopefully, Salvini is setting the trap, a la Edward Bernays, where citizens come up with the demand to leave the € of their very own accord.

  4. Kurt Sperry

    This makes a lot of sense. The ideologically incoherent Lega/M5S coalition is doomed and both the neoliberal EU status quo and the rising right-wing nationalist sentiment bubbling up across the heart of Europe demand a progressive response that is coordinated across national boundaries–an approriate antidote to the EU establishment’s picking off the weak from the herd singly and feeding on them. Lone regional/national movements cannot compete with the brute force capacity and carefully constructed organizational competentcy of the established neoliberal EU behemoth. Only an ideologically coherent and coordinated pan-European effort with popular backing across the continent can hope to go toe to toe and hold together under the pressure the EU can bring to bear.

  5. Golden Boy

    It is hard to take seriously an election platform in Europe that says nothing meaningful about the migration crisis and by its silence endorses NATO and the looming war on Russia.

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