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First they came for Berlusconi and I said nothing

by rz Tue Jul 7th, 2015 at 03:49:32 PM EST

From   Wikipedia  (my emphasis):

On 12 November 2011, after a final meeting with his cabinet, Berlusconi met Italian President Giorgio Napolitano at the Palazzo del Quirinale to tend his resignation. As he arrived at the presidential residence, a hostile crowd gathered with banners shouting insults at Berlusconi and throwing coins at the car. After his resignation, the booing and jeering continued as he left in his convoy, with the public shouting words such as "buffoon", "dictator" and "mafioso". Following Berlusconi's resignation, Mario Monti formed a new government that would remain in office until the next scheduled elections in 2013. On 16 November, Monti announced that he had formed a Cabinet and was sworn in as Prime Minister of Italy, also appointing himself as Minister of Economy and Finances.
This was after he failed to pass an austerity budget. All this happened after increasing interest rates on Italian debt had created an unsustainable situation.

However, the increasing interest rates were neither a coincidence nor a direct result of a particular alarming debt situation. The debt crisis happened directly after the ECB started to raise interest rates from 1% to 1.4% betwenn April and July 2011. The market reaction was drastic. The move of the ECB was obviously insane. At that point the Federal REserve had already started its second quantitative easing program.

When the ECB interest rates had reached 1.4% in July 2011, the interest rates for Italian bonds started a slow upwards trajectory. Also in July Draghi and Trichet send their now infamous letter.

 The letter is truly something to behold and I recommend that you should read it in full.

Berlusconi did not perform well. In October 2011 it had become clear that the ECB would not back Italian debt if necessary and interest rates started to explode. A self fulfilling prophecy was underway.

Om the 16th of November 2011 Mario Monti was sworn in.
from his Wikipedia page:

On 4 December 2011, Monti's government introduced emergency austerity measures intended to stem the worsening economic conditions in Italy and restore market confidence, especially after rising Italian government bond yields began to threaten Italy's financial stability. The austerity package called for increased taxes, pension reform and measures to fight tax evasion. Monti also announced that he would be giving up his own salary as part of the reforms.
After Mario Monty had implemented austerity, the ECB started a program of direct bond purchases. Interest rates fell rapidly to the level of early 2011. Of course it is not clear exactly who did what and exactly why. But in principle it is more or less clear that an explicit deal was in place that Mario Monti needed to become Prime Minister, and only then the ECB would start buying bonds. I can cite e.g.  Matthews Yglesis  who is certainly neither a raging lefty nor a rightwing conspiracy nut.

Nobody likes Silvio Berlusconi except for the Italian electorate, so the world largely shrugged when the European Central Bank and the government of Germany perpetrated a coup d'état last year and removed Italy's prime minister from office as a condition for not destroying the Italian economy.
The rest of this blog post is also quite good.

Under Mario Monti unemplyment rose from 8% percent when he entered office to 11% when he left. Today it is still around 13%. Throughout his whole tenure GDP kept falling. On top of all this the Debt to GDP ratio rose faster than under Berlusconi.

We all disliked and still dislike Berlusconi and for good reason. But looking at the situation in Greece and the actions of the ECB I feel that what happened around 2011 should be clearly remembered.

Update [2015-7-8 4:13:58 by rz]: I changed the title a little.


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I feel (no proof, just assertion) that they think they will fare better under a fascist regime than a socialist one and our sad (and probably hopeless) task is to make sure the hair gets cut with the sinister side of the razor.

Notre révolution m'a fait sentir tout le sens de l'axiome qui dit que l'histoire est un roman ; et je suis convaincu que la fortune et l'intrigue ont fait plus de héros, que le génie et la vertu.

by ek hornbeck on Tue Jul 7th, 2015 at 04:30:22 PM EST
On the contrary, they do not even understand what effects the current policies might have on electorates.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Jul 7th, 2015 at 10:56:09 PM EST
[ Parent ]
I don't think the two are mutually exclusive, but I do feel they're evil.
by ek hornbeck on Wed Jul 8th, 2015 at 12:10:20 AM EST
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I do too ek. The amount of stupid needed to enact policies like this would preclude even being able to tie your own shoelaces.

As for Berlusconi, I don't care what it would have taken, B had to go, for reasons too innumerable to count.

Renzi may be worse, but he's still the main driver of Italian politics right now. Hopefully not for too much longer!


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Jul 8th, 2015 at 03:59:36 AM EST
[ Parent ]
Lots of perfectly intelligent people, well able to tie their own shoelaces, believe in a long list of immensely stupid propositions. cf religion, mysticism, racism, sexism, string theory et al.
by Colman (colman at eurotrib.com) on Wed Jul 8th, 2015 at 04:04:17 AM EST
[ Parent ]
Point taken, but perhaps 'apparently' would be more accurate than 'perfectly', Colman.

If there is such a thing as perfect intelligence it would surely include/be built on compassion.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Jul 8th, 2015 at 04:08:31 AM EST
[ Parent ]
there's nothing wrong with string theory.  I personally prefer Bosonic because you can never have enough dimensions.
by ek hornbeck on Wed Jul 8th, 2015 at 12:29:23 PM EST
[ Parent ]
There's also nothing right with it.
by Colman (colman at eurotrib.com) on Wed Jul 8th, 2015 at 12:33:19 PM EST
[ Parent ]
This is a cue for the almost obligatory reflex to link to Kalecki's Political Aspects of Full Employment (1943)
There are, however, even more direct indications that a first-class political issue is at stake here.  In the great depression in the 1930s, big business consistently opposed experiments for increasing employment by government spending in all countries, except Nazi Germany.  This was to be clearly seen in the USA (opposition to the New Deal), in France (the Blum experiment), and in Germany before Hitler.  The attitude is not easy to explain.  Clearly, higher output and employment benefit not only workers but entrepreneurs as well, because the latter's profits rise.  And the policy of full employment outlined above does not encroach upon profits because it does not involve any additional taxation.  The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them?  It is this difficult and fascinating question with which we intend to deal in this article.

...

One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism.  The necessity for the myth of 'sound finance', which served to prevent the government from offsetting a confidence crisis by spending, is removed.  In a democracy, one does not know what the next government will be like.  Under fascism there is no next government.

And much more quotable...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jul 8th, 2015 at 06:14:31 AM EST
[ Parent ]
leave the <a href= "http://www.huffingtonpost.co.uk/2013/09/12/berlusconi-euro_n_3913748.html">Euro</a>

This was enough for the Italian elites, who were still calculating that Italy in the Euro was good for their interests, to acquiesce in the putsch.

A broken clock is right at least once in awhile.

by John Redmond on Wed Jul 8th, 2015 at 04:49:40 AM EST
Trying to fix the link
by rz on Wed Jul 8th, 2015 at 04:52:16 AM EST
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But, can't seem to get the html to work.
by John Redmond on Wed Jul 8th, 2015 at 05:12:05 AM EST
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I think a new account gets html blocked to discourage spammers until an admin unblocks them.
by generic on Wed Jul 8th, 2015 at 05:24:07 AM EST
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Yeah. Now a user.
by Colman (colman at eurotrib.com) on Wed Jul 8th, 2015 at 06:03:49 AM EST
[ Parent ]
Welcome back...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jul 8th, 2015 at 06:10:26 AM EST
[ Parent ]
Thank you for this historical piece. I did not make this connection back then, partly out of a dislike for Berlusconi.
by chumchu on Wed Jul 8th, 2015 at 07:47:20 AM EST
The same for me. In general I do not think that alone the fact that Berlusconi stepped would necessarily be problematic.

It is the combination with the letter, the installation of Mario Monti and the resulting absolutely disastrous performance of the Italian economy.

by rz on Wed Jul 8th, 2015 at 07:54:55 AM EST
[ Parent ]
I am going to have to look up the articles and comments made at the time. I remember I was in Wyoming at the time and could not participate in the festa of Berlusconi's demise.

However, this meme of some sort of putsch was proposed immediately by a foreign reporter who had not been on the ground here in Italy long enough (some cute green kid who had already written trite articles before). And it was characterized as a European ouster that did concern the famous letter.

This completely misses the point since Berlusconi was already politically dead for all of the corruption scandals and his criminally relevant sexual escapades. By dead, I mean simple parliamentary numbers. His coalition had collapsed and was under no condition to pass legislation. There were purges, followed by intense smear campaigns against his ex-allies and there were defections on a daily basis. His government was paralyzed by infighting and all that was needed was a vote of confidence to take him out. His closest collaborators, emboldened by popular mandate, ran a system of capillary corruption only to find themselves all under investigation for numerous serious crimes. Given his personality, he chose to resign rather than affront parliament.

As for the letter in July, it must be put in context. Berlusconi's government and his parliamentary coalition were in disarray already for quite sometime, incapable of making important political decisions or even carry on daily business. Further his minister of economy, Giulio Tremonti, was totally inadequate for his role. Considering that the state was drifting about without a rudder for some time, the letter was perfectly normal, however blunt and irritual it was.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Wed Jul 8th, 2015 at 01:31:11 PM EST
Fair enough. I really do not want to defend Berlusconi.

But what about Monti? How did he get a majority in Parliament?

by rz on Wed Jul 8th, 2015 at 02:01:53 PM EST
[ Parent ]
By institutional routine and praxis. Consult parties, put together a program, choose a team that satisifies coalition member arithematic, present yourself in parliament and get a majority vote. The only provision to be nominated Council president is that the president of the republic nominates you. he can nominate anybody- so long as they are Italian and over 26 years of age. Council Presidents are never elected nor do they have to be elected. That went out with Mussolini. Berlusconi would exploit it in elections and made it part of one of his electoral reforms, but it was only political propaganda that was in no ways legally binding. Italians have never legally voted for a Council President.
by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Wed Jul 8th, 2015 at 03:20:34 PM EST
[ Parent ]
Even if you accept that a hung parliament is a valid excuse for ruling by decree (and I'm not personally a fan of that proposition), there are still two noteworthy things about the letter:

First, quite literally every single bit of subject matter in that letter lies well beyond the scope of any imaginable mandate its authors might conceivably be imputed by even the most generous observer.

And second, it's all hair-raising quackery. Like prescribing a heart transplant to a patient suffering from degraded kidney function. Using a heart from someone who died of AIDS.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 8th, 2015 at 03:25:02 PM EST
[ Parent ]
Yes, exactly!

I approve of the fact that Berlusconi had to go. this does not absolve the ECB of pushing policies on Itlay (and Spain for that matter) which created a total economic disaster.

by rz on Wed Jul 8th, 2015 at 03:35:06 PM EST
[ Parent ]


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