Last Chance to Save the Euro?

Yves here. European leaders, particularly the northern bloc led by Germany, have long opposed using the ECB or EU-level measures to provide for fiscal spending across the Eurozone. The EU can’t afford to fail to rise to this challenge, but history says it will blow what really may be its last opportunity.

By Marshall Auerback, a market analyst and commentator. Produced by Economy for All, a project of the Independent Media Institute

After a faulty start to the coronavirus pandemic, the European Union members appear to be getting their act together, as they all appear to have abandoned ruinous slash-and-burn austerity policies (including budget cuts to health care, education and other social services) in order to cope with the onset of a global depression. At least that’s the consensus view, now that both the European Central Bank (ECB) and the European Commission (EC) have temporarily given up the fiscal rulebook and given eurozone members full rein to deploy all available government spending measures to address the pandemic and ultimately help the region’s economy to recover.

The key word here is “temporarily.” Nothing short of a major permanent conceptual leap of imagination is required to preserve the European Monetary Union (EMU). The ECB already underwrites the solvency of the national governments via its bond-buying operations in the secondary market (although it comes with conditions on their government spending attached). Europe’s central bank must therefore move to the next stage, similar to one the United States federal government routinely takes as it allocates a range of funds to citizens across the states. As there is currently no EU fiscal authority, it is the ECB that must take on this quasi-fiscal function, by making annual distributions of funds to the national governments (credited to their accounts at the national central banks) on a per capita basis. That in turn will give the national governments the fiscal latitude to cope with the pandemic and engender long-term economic recovery.

To be sure, it would necessarily take a hard policy backstop for the more rigid financial players in Europe to go along with it; the ECB would have the right to withhold future distributions to members who fail to comply with deficit rules (so that one avoids a race to the bottom whereby the incentives are totally skewed to spending as much as possible). But it’s easier to withhold something than to take it back, as occurs under the system today. And if these distributions are done on a per capita basis, then no eurozone member could claim they were being penalized or that others were being given unjustifiably favorable treatment. Consider that as the biggest recipient of per capita distributions, Germany might find that particularly appealing. Cost offsets through mergers of EU member national infrastructure, like universities and advanced research institutions, airports, or postal systems, could provide a funding balance, and again strengthen the EU.

Absent something this bold, the existential threat to the euro becomes far more acute. At a minimum, countries under financial duress that the EU should have supported rather than starved two decades ago, such as Italy, will be eyeing the exits as Britain did. “Italexit” becomes a probability, not a mere possibility. In Italy today, as the Financial Times has reported, “there is a rising feeling among even its pro-European elite that the country is being abandoned by its neighbours.” That is important: If Italians begin to lose their emotional attachment to the idea of a broader European community, then the mindset becomes much more like Brexit, where the economic arguments are superseded by something far more profoundly visceral.

On March 26, the European Council (the European Commission’s governing body) released a joint statement from its members that supposedly constitutes Brussels’ Damascene conversion away from fiscal austerity:

The COVID-19 pandemic constitutes an unprecedented challenge for Europe and the whole world. It requires urgent, decisive, and comprehensive action at the EU, national, regional and local levels. We will do everything that is necessary to protect our citizens and overcome the crisis, while preserving our European values and way of life.

This statement followed an earlier March 18 pronouncement, where the ECB announced it was taking measures including a pandemic emergency purchase program (PEPP) as well as directing cash transfers at the national levels. The ECB’s role is key because, as sole issuer of currency in the eurozone, it is the only entity that can credibly guarantee the national solvency of all the euro member states.

That’s all fine and well, but as usual with anything relating to the European Union, check the fine print. When you do that, it’s harder to make the case that the commissars of Brussels have done a full-on conversion to Modern Monetary Theory (MMT), as some of the more enthusiastic eurozone advocates have recently suggested, writes economist Dirk Ehnts on Brave New Europe.

For one thing, the arbitrary fiscal rules of the eurozone are being suspended, not eliminated. If anything, the temporary suspension of these rules (the duration of which is still left in the hands of unelected technocrats) reinforces the notion that this represents the ultimate bait and switch risk for countries such as Italy, Spain, or any other eurozone member state that avails itself of limited opportunity to spend whatever it takes to save its respective economy. In reality, lured by the promises of billions of euros to assist their decimated economies, the Mediterranean nations will find themselves trapped like a fox in a foot-clamp the minute the emergency measures are lifted and the countries are forced back into austerity hell.

Let’s take a step back and recall a crucial MMT insight: namely, states that issue a fiat currency that is not backed by any metal or pegged to another currency are in no way constrained in their ability to fund government operations. The money is literally created electronically via computer keystrokes. Hence, these governments are said to be “sovereign” in their own currencies. They can never run out of money, unlike a household or a private business. Nor can they face solvency issues (so long as they do not borrow in a foreign currency). To be sure, sovereign governments do face real resource constraints, but any perceived financing constraints are arbitrary and more apparent than real, given their powers as a monopoly currency issuer.

Of course, the eurozone doesn’t have this feature. The member nation states in the eurozone are “non-sovereign” because they are currency users, not issuers. Only the ECB issues the euro, which means that the individual eurozone countries (like a U.S. state or municipality) can go bankrupt because they are effectively borrowing in a “foreign” currency. To compensate for this enormous potential solvency risk, the members of the monetary union have belatedly conceded (arguably forced on them by former ECB president Mario Draghi after his “whatever it takes” speech) that only the ECB could credibly backstop the national debts of the individual eurozone states via its bond-buying program because only the ECB has unlimited capacity to create euros.

The ECB’s new PEPP program doesn’t attach the usual fiscal conditions (i.e., cuts in government spending in exchange for ECB support), which it had hitherto adopted in earlier bond-buying operations, but the suspension of those conditions is temporary. Other proposed lending programs have included the suggestion of using the €400 billion lending capacity of the European Stability Mechanism (ESM) that was originally established to help recapitalize eurozone banks in difficulty. Dutch and German leaders have been particularly enthusiastic advocates of using this mechanism. The problem here is that access to the ESM also has conditions attached to its lending provisions. And even if these limited conditions are temporarily suspended, they are not eradicated.

In part, these suggestions reflect a wild casting around of any available instrument because thus far the eurozone members cannot make the ultimate conceptual leap to “corona bonds”—yet another attempt to mutualize the European bond markets, in effect creating a supranational eurobond that would not expose individual nation-states to the risk of national insolvency. German and Dutch resistance to joint debt issuance appears insurmountable, as they view it as another form of free-riding by the so-called fiscally profligate economies that would ultimately undermine the northern eurozone members’ pristine credit ratings. There is little appetite there for a “Hamiltonian moment,” whereby the legacy costs of the individual nation-states are assumed by a supranational treasury with expansive fiscal powers.

So, let’s take the example of Italy to illustrate what could happen if Rome were to accept the “assistance” being offered by the European Commission. As a result of increased borrowing to deal with the coronavirus emergency, Italy’s debt-to-GDP ratio could exceed 160 percent, estimates Goldman Sachs. Once the conditions that occasioned the suspension of the eurozone’s rules diminish, pressures will inevitably grow to revert to the status quo ante. Absent continued unconditional ECB support, it is highly unlikely that Italy will be able to continue to refinance its growing debt on the markets anywhere close to prevailing market rates and will find itself experiencing classic debt trap dynamics.

At that point, there are three likely scenarios, as Italian journalist Thomas Fazi writes in a tweet responding to Dirk Ehnts’ recent article on MMT: “(1) ECB accepts to engage in permanent and *unconditional* monetisation of Italy’s debt” (unlikely, as Germany would never sanction it); “(2) as per EU rules, ECB accepts to do the above conditional on Italy entering an ESM austerity programme” (which would consign Italy to decades of economic depression); “(3) Italy leaves the euro” (which would likely lead to a broader breakup, as Italy is the third-largest economy in the eurozone and severance of that link would almost surely destroy the chain).

However, there is also a fourth option that might entail a less fundamentally abrupt institutional change such as the introduction of a “United States of Europe” style treasury: As I wrote 10 years ago, the ECB has historically responded to the European Commission’s Economic and Monetary Union (EMU) “solvency mess by conducting large-scale bond purchases in the secondary market (which, unlike direct purchases of government debt, is not contrary to the Treaty of Maastricht rules [that govern the European Union]) for the debt of the [member states of the EMU].” And, unlike corona bonds, it might encounter less resistance from the likes of Berlin.

Why? As noted earlier, the principal rationale for per capita distributions is that Germany would get the largest distribution of euros from the ECB. Its fundamentally strong position vis a vis other member states wouldn’t change, much as per capita distributions from Washington don’t fundamentally alter the relative economic positions of California versus, say, Arkansas. The distributions would effectively amount to swaps of national debt for reserves, which in turn would immediately adjust national government debt ratios downward (because as an accounting matter, reserves are not counted as national debt). This goal would be to dramatically ease credit tensions and thereby foster normal functioning of the credit markets for the national government debt issues. The governments in turn could use this newfound fiscal relief to pursue fiscal packages that revive their domestic economies (as opposed to using the mechanism for covert bank bailouts).

As I wrote in 2011 and 2012, the trillions of euros’ distribution would end up as reserves on the accounts of the national central banks, they could not be deployed directly for fiscal expenditures (as the Bank for International Settlements notes, bank reserves can only be used for interbank lending, or in settlements with the central bank). But the ECB distributions would enable the national governments’ sovereign bonds to be swapped for reserves. The resultant reduction of public debt on the national government’s balance sheet would in turn give fiscally strained governments additional flexible freedom to borrow and reconstruct their economies (the reciprocal would be reflected as a negative cash balance on the ECB’s balance sheet, but as the issuer of the euro, the ECB does not face solvency issues).

So in essence, the ECB ships money to Italy, Italy uses money to reduce its nominal debt load. That in turn gives Italy more room to borrow and spend on bridges, income support, coronavirus relief, etc. Given the current depression-like conditions, this activity is hardly likely to contribute to additional inflationary pressures either, as much of the spending will ultimately enhance the productive capacity of the affected economies.

Call this process gimmicky, but many forms of public accounting are predicated on similar gimmicks. The U.S. has a “Social Security trust fund” on its balance sheet, but in no way does the government have an actual trust where it stores dollars to pay for one’s Social Security payments. The existence of this trust fund on the U.S. government’s books does not in any way, shape or form enhance Uncle Sam’s ability to meet Social Security commitments.

The resultant flexibility on the size of the fiscal stimulus would in any case trigger growth, which in turn would likely reduce the deficits downward as the economies grow, tax receipts expand and less social welfare provision becomes necessary (it is also worth noting that even before the onset of this pandemic, net of its interest payments, “Italy has been running a fiscal surplus almost continuously since 1992,” according to the Financial Times; the country is hardly a fiscal profligate).

Furthermore, making this distribution an annual event greatly enhances the ability to enforce EU rules, as the penalty for non-compliance can be the withholding of these distributions, which is vastly more effective than the current arrangement of fines and penalties for non-compliance. Historically, fines have proven themselves unenforceable as a practical matter. It is much easier to withhold something than to enforce a take-back.

As I wrote a decade ago, “There are no operational obstacles to the crediting of the accounts of the national governments by the ECB. What would likely be required is approval by the finance ministers.” In theory, there should be “no reason why any would object, as this proposal [which will enhance the SGP] serves to both reduce national debt levels of all member nations and at the same time tighten the control of the European Union over national government finances.”

Ten years ago, when I first made this proposal, it was considered too radical. For years, fears persisted that it would turn the entire eurozone into some bankrupt version of Greece. The concerns of the hyperventilating hyperinflationistas look increasingly less relevant today, especially at a time of a growing international crisis and mounting threats to the existing order. Trillions have been created out of thin air, and there isn’t a Weimar hyperinflation situation to be found anywhere. But what has become increasingly evident to many eurozone countries is that the ongoing use of fiscal conditionality has impinged on their ability to create economic conditions to sustain growth; likewise, national sovereignty has been more apparent than real. Through a series of hastily created programs (usually done in response to a crisis), the leaders of the eurozone have continued to patch up pre-existing institutional flaws, but there are no tangible economic benefits experienced by the vast majority of people.

Assuming of course, that these are flaws. From the European Commission’s perspective, the democratic deficit is the one deficit Brussels’ technocratic elites all seem to like, as it leaves considerable power left in the hands of unelected officials, who can readily override the aspirations and goals of national parliaments. They strengthen the EU’s oligarchic character, centralizing further power in the hands of anti-democratic institutions such as the European Commission, without bringing any concrete benefit for most citizens within the European Union as a whole.

But that’s a politically unsustainable stance amid a global economic depression and lockdown. It’s also bad economic policy, as the evidence relating to the costs that the EU’s austerity policies have built up and a whole generation has been lost. Perhaps the custodians of austerity are calculating that they will be able to continue with an ideology that has created so much misery for so many within Europe (with no corresponding payback). Like Shakespeare’s Macbeth, they are “in blood stepped in so far that should I wade no more, returning were as tedious as go o’er.” But that’s hardly a solid foundation stone to a prosperous and sustainable ever closer European Union. To the contrary, it’s a route to anarchy, more economic chaos and, ultimately, rupture. One hopes therefore that all of the individual member states in the single-currency union do whatever they consider it takes to buttress their overtaxed health systems and enable their economies to recover, and that the hardliners will ultimately experience a Damascene conversion toward rational economic policy-making and nation-building.

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  1. H. Alexander Ivey

    Why is staying or not staying in the Euro zone the same as Brexit? They are two separate deals. The Euro zone is an agreement on the money used in the European continent, the Brexit thingy is about regulatory agreement within the European continent.

    I know and understand the money problems inherent in the EU’s euro set-up, which Auerback discusses. But breaking up the countries that use the Euro does not mean breaking up the regulatory union that is the heart of what is now called the EU.

    1. BillC

      My first reaction to your comment was, “What’s the point? It’s a distinction without a difference.” But that’s wrong.

      EU membership imposes the toxic austerity dictates of the so-called Stability and Growth Pact regardless of whether a state is part of the Eurozone or not. However, a monetarily sovereign nation can thumb its nose at that “obligation” and issue the quantity of currency it deems necessary for its people and economy to thrive without necessarily assuming debt. That possibility is not open to Eurozone members.

      In 2018, when Italy’s 5-Star/Lega government was formed, the 5-Star Movement proposed Prof. Paolo Savona as minister of economy and finance. Prof. Savona was blackballed for that post because he had previously advocated Italy developing a “Plan B” to exit the Euro if events ultimately proved that to be to Italy’s advantage.

      If the EU continues to reject Coronabonds, PM Conti should immediately appoint Prof. Savona to head a blue-ribbon commission whose brief is to develop his Plan B within the three years that this blog has always asserted as the minimum time necessary to introduce a new currency. If Italy “planned the work and worked the plan,” I’d bet the obstinate northern states would relent within 18 months.

      1. curious euro

        Yes they would relent to gain time to do their own Plan B, a northern Euro or whatever.

        So after 18 months of relenting, Italy is at the same point again as before. Italy or the whole south is a lot weaker than the north economically. An there is lots of comments here what stronger states do with weaker ones when negotiating economic contracts.

  2. PlutoniumKun

    I’d just add to this that there is another political dimension to this in addition to individual countries interacting with each other and the EU Commission – the formal and informal political alliances in the European Parliament and elsewhere. The reason why I am (relatively speaking) more optimistic that a Coronavirus may become a reality is that the major power block within Brussels – the centre right European Peoples Party – is now firmly split on the subject – the unity of the EPP across Europe on austerity was an important dynamic in the post 2007 crash world. The EPP parties of course work on regional and local bases, not just national, so even within countries like Germany and Austria there will be regional interests who will scream against austerity. And on the left, the vichy left forces have been more or less wiped out across much of Europe and replaced with pretty haphazard mixes of more radical populist left and green groups with demoralised ‘establishment’ centre left groups.

    So the political dynamic is very complex. When you look at what is happening in the German economy – VW is losing buckets of cash (as no doubt are other car makers), and China (and possibly even the US too) is rapidly disappearing as a market, then this can’t be failing to force a lot major rethink. Here in Ireland the establishment centre right has become a major proponent of corona bonds (normally they would be meek and subservient to the northern European mainstream view).

    So we are looking at a fundamental paradigm shift – the question is which direction it will take. The EU being the EU, it will not be a clean process. But I’m not convinced that the opposition shown by the Dutch and Germans now is not a form of kabuki, intended to satisfy their intended domestic audience, while they are preparing the grounds for a retreat. They will need oceans of cash soon, just like everyone else, and they can’t raise it domestically. Having said that, the ‘inside’ view so far as I’ve heard is that the Germans will back down, but the Dutch may not. I’ve no insight to Dutch internal politics, but I really wonder if they could stand up alone against everyone else on this. Nobody wants to go down in history as responsible for destroying the Euro.

    1. curious euro

      If they can’t raise the needed cash domestically, where are they getting it? From Uncle Musk at his martian villa?

      If the “rich” eurozone countries can not raise the cash, then no one can. The recession/depression isn’t a european thing, it’s global. Either countries can raise the cash on their own, or there is no cash to be had at all. Sure, eurozone countries can help other eurozone countries to raise cash, cheaply or at least cheaper than they could on their own. That is what this eurobonds thing is about. But in the end, if they do it as they did before, they will sell bonds to the, mostly domestic, ultra-rich to make them ultra-richer. Just like 10 years ago

    2. David

      I’d just add that of course the Euro has been a deeply political issue since the beginning, and for reasons that go well beyond questions of economic policy. Part of its complicated parentage was the idea that national differences were dangerous within Europe, because they could be exploited by unscrupulous demagogues to inflame tensions and start wars. So the idea was to try to flatten and ultimately abolish these differences, through abolition of frontiers and freedom of movement, encouragement of regions at the expense of nations, standardization and harmonization etc. The Euro was part of this: even the name was chosen to have absolutely no historical significance at all, as were the designs on the banknotes. Indeed, the Euro is part of a project to effectively abolish the past (except for things like colonialism and the slave trade) and start anew with a grey, featureless, homogeneous Europe where the different regions are indistinguishable from each other. There would then be nothing to fight about. If you think that’s excessive consider the changes made after the French Revolution (Year 1 and so forth) which are their historical antecedents.
      Of course the abolition of national currencies was widely unpopular, but the political expression of that unpopularity was limited to the fringes. The fact that Marine Le Pen has talked about restoring the Franc is enough to convince large parts of the European political class that only the Euro stands between the continent and a repeat of the 1930s.

      1. Clive

        Interesting observation on currency design in terms of physical properties. I love examining “things that we encounter in everyday life but lull ourselves into completely ignoring because of their ubiquity” but I’d never considered this. Obviously the UKs are replete with every conceivable patriotic nationalistic cliche you could ever assemble on a small piece of paper:

        … and so on. It’s truly remarkable isn’t it? It’s like a cream tea and the Changing of the Guard at Buckingham Palace all made into currency. I suppose the tradition started in trying to evoke solidity, stability and the full force of the state standing behind the currency. But it’s more than that, isn’t it? It’s trying to make these pieces of paper (or polymer, now) an intrinsic part of the nation, the people, the culture — so much of the imagery raids the stash of national identity baggage for inspiration.

        Conversely, the anodyne, anonymous euro notes are, as you point out, folding spendable Benzodiazepines for the psyche. They come from everywhere and nowhere. They and their designs say so much, without realising it, about what their creators were thinking about and what they wanted to do.

        1. Johnonomous

          Clive, to your point(s) just google “notgeld antisemitism” and hit the images tab for samples of messages people are willing to convey on their currencies.

        2. Tom Bradford

          Yes. I can remember as a child treasuring much worn pennies with Queen Victoria’s head on one side and a year of 18-something on the other. Rewards from parents for chores done or gifts from grandparents. When a penny could still buy a cream bun or an ice-cream in a cone. Your comment made me realise for the first time how decimalisation stripped away that tangible link to another, greater, Britain – a national identity.

          I suppose that was the intention.

      2. flora

        Part of its complicated parentage was the idea that national differences were dangerous within Europe, because they could be exploited by unscrupulous demagogues to inflame tensions and start wars.

        Yes. The 1950’s European Steel and Coal Community was the beginning. (Correct me if I’m mistaken.)

        “It was formally established in 1951 by the Treaty of Paris, signed by Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. The ECSC was the first international organisation to be based on the principles of supranationalism,[2] and started the process of formal integration which ultimately led to the European Union. ”

        The 5 northern countries, ex Italy, make up the Euro northern bloc. The northern bloc, especially Germany, seems to want to ‘have its economic cake and eat it, too’. That never works. My 2 cents.

  3. Jesper

    Which is least possible?
    -new (old) currencies are introduced?
    -the euro survives (whatever that means, as of yet undefined, possibly that the financial sector is nationalised and shrunk)?

    The introduction of parallell currency appears to have been deemed to be so difficult as to be impossible, Greece could have started such a project five years ago and if it had then it would have been five years closer to such an introduction. But, as far as it is known, it was deemed impossible so the project didn’t even start.
    So is one of the outcomes impossible?

  4. Colonel Smithers

    Thank you, Yves.

    With regard to “the EU’s oligarchic character”, sheds some light on how the oligarchs and their 10% support network go about their business. Having worked alongside Fleishman, Avisa and G Plus, these channels are the tip of the iceberg.

    “From the European Commission’s perspective, the democratic deficit is the one deficit Brussels’ technocratic elites all seem to like, as it leaves considerable power left in the hands of unelected officials, who can readily override the aspirations and goals of national parliaments.” It’s not just officials in Brussels. This fails to mention lobbyist input, including their writing of EU rules. Lobbyists are often former officials. They are often in the media to scream TINA. A Brussels post is a meal ticket. The comprador class and oligarchs don’t (need to) get their hands dirty.

    My employer’s CEO sits on the CDU’s council of economics advisers and is in regular contact with the CDU’s EU allies, again preaching TINA. Our heads of government and regulatory affairs often hail from business families. One is cousin to a Bundesbank president, the Tietmeyer family. Another is an heir to the Grindlay’s banking fortune and sat in the House of Lords until most, but not all, hereditary peers were kicked out.

    1. chuck roast

      I keep thinking about the European Coal and Steel Community. It seemed to work quite well and managed to neutralize the worst impulses of the French and Germans…after two plus centuries of abusing their neighbors. Why not strip away all exploitative supra-national nonsense and and go back to the ECSC? The elites could still have their lucrative, extractive toy while still enjoying their Davos holidays. And the lumpen could generally go about their business without being abused. I keep thinking that I have to read Tony Judt’s Postwar. Maybe one of these days.

  5. The Rev Kev

    Rather than a breakup of the European Union, perhaps they should dial the whole thing back to the early 90s when it was simply a Common Market. Sure that organization had its own problems but I do not remember situations where through obstinacy, they were willing to blow the whole thing up. Gradually eliminate the Euro and temporarily supplant it with a parallel system of digital currency like digital Lira, digital Francs, digital Marks, etc. until the real thing can one more be reproduced. Heck, maybe the UK would be willing to rejoin if it was just the Common Market once again. I know that it sounds stupid but if it came down to a choice of a break-up of the European Union and a reversion to the Common Market, would not the later be more tolerable?

  6. lou strong

    Interesting article but I miss some aspects of Auerback’s proposal.
    AFAIK since the QE start 15% of the Italian public debt has been purchased by Bank of Italy , hence “sterilized”.
    The problem is neither in the EZ financial creativity to bypass the institutional constraints, nor in the difficulty to apply fines , but in the political will to bypass basic flaws, for the reason that these basic flaws were useful in order to freeze if not enhance internal hierarchies .As an example, the manouvre on spreads has always been managed with the aim of disciplining debtor countries politics.
    I’m not even sure that Coronabonds, if they’ll ever be established, which I doubt, are the right battle for EZ.
    Maybe the issue of Coronabonds will be the sign of a tactical withdrawal to win the battle of maintaining all the other basic flaws and hierarchies. In absence of a federal Europe , for instance,and I’d bet a true federal Europe is out of discussion in the next 100 years, my first thought is that EZ should be sustainable only with a bancor-like system, which means to take head on the problem of the internal balances of payments.
    The covid emergency is once again focusing the attention on sovereign debt financing alone , which is an enormous issue , but if Ez will not break on this cliff the future will sooner or later see the rest of flaws getting to the surface .

  7. Synoia

    As has been discussed at length here in NC, breaking up from the Euro is a massive, lengthy and large, multi year, IT project.

    One country, Greece, could not attempt it. How could the the whole Eurozone splinter back into national currencies, even if all the countries agreed on this multiparty divorce?

    Amount all those large IT projects at least one must surely fail, than whet?

  8. Fergus Hashimoto

    “Over the last 10 years, 37 billion euros have been cut from the budget for Italian public health, and that’s not peanuts: in practice every year, like every aging nation, the amount of money spent on health care increases, but in Italy it does so very slowly. Of those 37 billion, 25 billion euros were cut between 2010 and 2015, and 12 billion were cut between in 2015 and 2019: in those 10 years Italian politics has ben dominated by the Democratic Party [i.e. the former Italian Communist Party] (under the cabinets of prime ministers Letta, Renzi and Gentiloni) plus a technocrat cabinet (the Monti cabinet). Consider that on average the increase in public health expenditure in OECD countries has been 37%, while in Italy this average was instead just 10%! Italy has gradually lost ground to other countries: in 2009 Germany only invested (only!) 50.6% more than Italy on public spending; in 2019 it invested 97.7% more than Italy! According to Eurostat [the EU statistical agency] and OECD data, between 2000 and 2017 Italy lost 30% of its hospital beds, reaching the paltry figure of 3.2 hospital beds per thousand inhabitants (Bulgaria, ladies and gentlemen, has 7.2 per thousand inhabitants, and Germany has 8). That a ruling party, the Democratic Party, is now promising assistance for public health is nothing short of laughable, since that party, together with [the right-wing] Forza Italia, has been the main ruling party for the past 25 years.”
    In morte della capacità critica. Il coronavirus, lo stato d’eccezione e la recessione economica (che già bussava nel 2019), di Ludovico Lamar, Sinistrainrete, 07 April 2020

    Meanwhile, it turns out that the extraordinarily high covid-19 contagion and death rates in Bergamo province, northern Italy, are the direct result of refusing to close down businesses, thus making social distancing impossible. The business sector, largely dominated by middling and small firms, and relying on the lobbying of the Italian capitalist lobby outfit Confindustria, prevailed on local government to keep on business as usual. In neigboring Lodi provinge businesses were closewd on 24 February and 2 weeks later the infectoin rate flatteneed out. In Bergamo by contrast the increase in infection rates was exponential until businesses were finally closed on 23 March.
    The article contains a graph comparing infection rates in Lodi and in Bergamo.

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