Italy

Is Reform Possible?

Mark Noonan38 Comments

Javier Milei was elected President of Argentina yesterday and the global Left is having a conniption fit, as per usual when someone not Left-approved gets in. There is much positive to be said about Milei as his proposals work out to a wholesale rejection of the Social Democratic order imposed around the world since WWII. He is saying everything a populist Right politician should say. And it will be a great thing if he’s able to carry out his reforms. The big question: will he?

Last year Italy surprisingly elected Georgia Meloni Prime Minister and the global Left also had a fit about her…but in her tenure illegal immigration to Italy has massively increased. This was the issue that brought her to power – it is what the people of Italy elected her to do: stop illegal immigration. It has increased. In other words, had Italy elected a Left-approved government, it would have been no different on this issue. The latest step she’s taken is to come to an agreement with Albania (which is not an EU member) to take in the migrants as they are processed. This is being slammed on the populist Right as a betrayal…mostly because it is. It is a concession that the people flooding from Africa to Europe have a right to do so and the only thing Europe can do is play around the edges and maybe stop some small number of them on one pretext or another and only after some sort of judicial review.

My bet is that after her election those people in the West who fund and organize the migrations (I have no proof of this: but penniless Third Worlders cannot cross thousands of miles without massive support…someone is backing the movement) put it into overdrive to put Meloni on the spot. This has worked. Her plan to send them to Albania won’t do a thing to stop the migrations, it just adds another step to the process.

Italy does have a Navy – a pretty modern one, too. Plenty of patrol craft can ply the waters between Libya and Italy to intercept the slow moving migrant ships and simply send them back to Libya. Just a few weeks of aggressive patrolling will put a lid on it. Nobody is going to make an effort to cross when the almost invariable result will be interception by the Italian Navy and return to Libya. They’ll find some other country to go to or go back to wherever in Africa they hail from. If there is a concern that some of them are genuine asylum seekers, then Italy could open up a consulate in, say, Benghazi protected by the Italian military just for processing asylum requests…with the asylum-seekers remaining in Libya under Italian protection until their case is heard. The Prime Minister of Italy controls the military; she could just order the Navy to do this. She didn’t. She just worked out a bogus plan to make it seem like the migrant crisis is being solved but which will do nothing to stop the migration.

Why did she opt for bamboozlement rather than a solution? Almost certainly because Italy wants EU cash. From what I’ve read, Italy is trying to get 90 billion Euros in aid…and EU aid always comes with strings attached. What we have here is the Ruling Class paying the piper and Meloni dancing to their tune. Such it always is, right? He who has the gold makes the rules. To be sure, Italy could cut itself off from the EU, engage in deep economic reforms – suffer a massive recession and then take about five years for the economy to recover. This would be the wise and patriotic thing to do and by telling the EU to get stuffed, Italy could also solve the migration crisis as the people of Italy demand. But there’s a catch: do that and all of the sudden the people will switch from wanting the migrants kicked out to wanting their EU-funded welfare checks. In other words, Meloni’s party would likely be wiped out at the next election if she did what was right for Italy. She should still do it…and if she were a true patriot, she would. But she’s in office and once someone gets in office their primary concern almost invariably becomes staying in office (especially with all the perks being in office provides these days – seriously, guys; look it up – those who get into office are coddled in luxuries that even kings of olden days couldn’t dream of).

And, so, now we’ll see how Milei does. Like a lot of populists he’s talked a great game. He has first rate proposals. But like all populists the global Ruling Class hates him and will do everything it can to undermine him. Right now, Argentina is pretty much an economic basket case – a century of Progressive policies have turned what was once a First World nation into a joke. It will take massive reforms at all levels to get Argentina out of its plight. If Milei is a true Argentinian patriot (as Nayib Bukele is a true El Salvadoran patriot) he’ll damn all the critics and just get the job done for his country. In other words, he won’t be worried about staying in office, but about saving his country. He’ll have a smile on his face as he contemplates near-certain defeat at the polls as he goes about saving his country. He’ll know that even if his people hate him for what he’s doing, he’s doing what is right and one day the people will understand that. Audacity is the key for any real reformer; to just press ahead…to move so fast and on so many levels that the critics are left in confusion…shouting in impotent rage about the last thing done while you’re already on to the next. I wish Milei well and I hope for a new Argentina.

But make no mistake about it, the chances that Milei will win are low. He’s now going to be in office and from the first minute he’ll be submerged in all those temptations. The global Left will be working behind the scenes to make economic life even harder for Argentina. Just about forget any foreign loans unless you’re willing to torpedo your own reforms. Make no mistake about it: this can be done. Argentina is a nation slopping over with wealth – large territory, huge natural resources, educated population. In just a few years the whole thing can be turned around and real prosperity set in. It is getting through those few years that are the trouble…that usually cause populist reformers to fail.

For reference, see what was done to Trump. Pretty much ever lever of power around the world was turned against him – including and especially those Constitutionally under Trump’s control. Rely on it that the bureaucracy of Argentina – sitting fat on the government – will do everything they can to save their own bacon. But on the plus side, Milei is saying his priority is to get rid of the bureaucracies. That might be the key – if you get rid of those within your own government who are against you then your reforms can proceed unimpeded. If Milei is able to pull it off, it will only be because he got rid of his fiercest enemies: his own government. If so then the lesson for us should we in in 2024 is that job one is simply to fire everyone. To get rid of them; they can whine and complain about it all they want, but they won’t have any levers of power to use against us.

We’ll see, won’t we?

Germany Wants 50% Default for Greece

Mark Noonan3 Comments

From Zero Hedge:

…the debt rollover plan has imploded and means that the entire Greek bailout has collapsed as some had expected. And now that it is clear that contagion is threatening to sweep through the core, it is back to Germany to prevent the gangrene, no longer contagion, from advancing beyond the PIIGS. However, in order to prevent a full out revolution, Germany’s economic elite has said it would agree to an EFSF expansion and hence installation of European firewall, but at a price: a “controlled” default by Greece and 50% haircuts for private bondholders (as German banks have long since offloaded their Greek bonds).

This means that “Lehman” is indeed here: just like back in 2008 Paulson et al thought they could contain the adverse effects of a Lehman bankruptcy, while the financial system ground to a halt 4 days later when money market funds broke the buck, so now Greece is somehow expected to remain in the eurozone even as it files bankruptcy…

The bottom line appears to be that the Europeans need to come up with $2 trillion to keep their financial system afloat – that is, to keep the bad news confined to the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and keep it out of France. What Germany seems to want – and it is reasonable – is an end to the Greek problem.  That if this is going to happen, it happens once and for all.  The Greek bondholders lose 50%, Greece gets bailed out…and hopefully Greece manages to get its finances in order sufficiently to service the rest of their debt.

The trouble is whether or not bailing out Greece – even with a 50% “haircut” for bondholders – will really do the trick.  Greece is pretty small potatoes as far as the Eurzone economy goes.  Looming gigantically larger are Spain and Italy.  As far as I can determine, both of those nations are already fundamentally bankrupt and cannot rely upon the private economy to service their debt as their bonds come due.  The only entity out there with the willingness to heavily purchase Spanish and Italian bonds would be the European Central Bank, or whatever financial bail out structure the Europeans come up with.  And where does the money come for that? From the Germans who will have already bailed out Greece and have no spare money left?  From the European Central Bank printing up a bucket of money?  Where?

It is the lack of real money – someone out there with trillions not already committed to some other enterprise – which makes me figure all these efforts to avert collapse are meaningless in an economic sense.  In a political sense, they may help the Ruling Class (European and American) ride out the political storm now through 2013.  The cost will be enormous, but such things never disturb people who are rich, in charge and determined to stay that way.

 

Italy Seeks a Bail Out

Mark Noonan27 Comments

From Market Watch:

Italy’s economy minister has said that a solution to the euro zone’s current debt crisis would be the creation of euro bonds, according to a report published Saturday.

Reuters reported that Giulio Tremonti said that such bonds would have prevented the continent from reaching the point it has, with Greece, Ireland and Italy among countries pushing through austerity measures in the hope of avoiding sovereign defaults.

Tremonti said joint-issued bonds would make nations’ debt a shared burden, and was quoted by Reuters as saying that they would be “master solution” to the crisis…

It is actually a way of making Germany a co-signer on Italy’s debt…and Spain’s and Portugal’s and Greece’s, etc, etc etc.  I’m not enough of a finance guy to figure out exactly how such a thing would play out, but I do know enough to understand that Germany cannot underwrite the bad debt of the Eurozone.  This may well plug the leak, but only for a few months…and you’d have to get German taxpayers to agree to put their stellar bond rating on the line for Italy and the rest of the PIIGS.  That is a dicey proposition, at best.

In the end, the fact remains that the PIIGS (Portugal, Italy, Ireland, Greece and Spain) owe far more than their economies can pay back .  There is no way to make up for this deficit between debt and wealth…either by printing money (and thus devaluing the currency) or by straight default, those who hold the bonds of the PIIGS will have to take a loss.  There may be a way to soften the blow, but the blow must fall…default (straight up or disguised) absolutely will happen.