Europe is getting desperate now. Faced with apocalyptic warnings by analysts and officials that it has “10 days to avert collapse” (only five left by now), EU leaders will convene in Brussels on Friday in yet another bid to end the ongoing eurozone debt drama once and for all. To set the stage for this grand finale, Italy’s unelected government just announced a radical new austerity budget, involving a frontal assault on its own working population.
And then there was the big announcement by Angela Merkel last week: “We are not only talking about a fiscal union, we are beginning to create it.” Stock markets rallied in anticipation of the ‘grand bargain’. But as the Bonfire of Illusions rages on, these hopes will prove just as short-lived as the ones that came before. In reality, the current proposals won’t do a thing to stop the break-up of the eurozone. Indeed, they will only make meltdown more inevitable.
To understand why, we have to look below the surface of the political discourse. The beautiful words about “Europe pulling together” are a mere chimera; what we are really witnessing is just a thinly-veiled theater play in which governments are launching an assault on their own people in the hope that the audience, mostly made up of wealthy bankers, will revel at the spectacle and reward the cast with a warm applause in the form of reduced borrowing costs.
As Wolfgang Münchau just wrote for the Financial Times, “contrary to what is being reported, Ms Merkel is not proposing a fiscal union. She is proposing an austerity club, a stability pact on steroids. The goal is to enforce life-long austerity, with balanced budget rules enshrined in every national constitution.” Ultimately, these measures will provide the legal framework for a permanently depressed periphery, making a cascading series of defaults inevitable.
In the opening act to this epic play, Italy’s new technocratic government just decreed “a $32 billion package aimed at showing the markets that Italy is serious about managing its debt.” The hope, as the New York Times reported, is that the austerity measures “will take some of the market pressure off Italy.” After all, “once Italy has shown it is committed to austerity, the European Union can move ahead with broader plans to shore up the euro.”
In other words, the pensions of millions of hard-working people are being sacrificed just to distract markets and buy some extra time. The measures are so harsh that Italy’s new Labor Minister promptly broke down in tears while presenting them to the public. Financial markets, swayed by the realistic portrayal of genuine emotion, instantly applauded the government with another major rally. So far, everything seems to be going according to script.
But observing this theatrical performance through the eyes of a critic, the story-line is simply too predictable and the characters far too shallow. The problem is that the owners of the EU theater — the Frankfurt Group — have appointed the unimaginative Angela Merkel as playwright. Realizing that political actors could not deliver the complex script, she simply replaced them with puppets, hoping they would dance to her tune and entertain a global audience of bondholders.
The script, in other words, was audience-driven. “They want something that looks like progress,” the chief equity strategist for Wells Fargo Advantage Funds told the New York Times. “Wall Street wants to see a mechanism that promotes proper budgets, something that gives us a sense that they are not building up unsustainable debt … We want something [to convince us] that they are willing to make the sacrifices politically so that money can move.”
And so the puppetry inside Europe’s ramshackle financial theater continues. The problem is not just the bad acting and the highly demanding audience, but also the poorly structured story-line and the anti-climactic finale. “Their narrative,” Münchau points out, “which reduces the crisis to a failure of fiscal discipline, is probably the underlying reason why all their crisis resolution efforts have failed so far.” And, we might add, why it will fail this week, too.
As Europe enters a critical week in its history, perhaps the analogy of a theater play is not that apt after all. Indeed, the behavior of our elites is increasingly starting to resemble that of a cult of witch doctors, superstitiously carrying out complex rituals in honor of the Masters of the Universe, busily sacrificing the weaker members of the tribe at the altar of global capital, mysteriously deluded by the deities of high finance — the almighty Gods That Failed us yesteryear.
Sadly enough, as Alex Callinicos pointed out in the Bonfire of Illusions, this ideological wizardry will prove just as vain and destructive as the material interests it is so religiously trying to serve.
Source URL — https://roarmag.org/essays/italy-austerity-eurozone-eu-fiscal-union-crisis/