THE REAL RISK AND THE EURO SURVIVE FOR THE NEXT 5 YEARS . IT IS TERRIBLE FOR EUROPEAN COUNTRIES ( PRITCHARD ) Wednesday, June 4, 2014 LONDON - Extraordinary interview with Ambrose Evans -Pritchard , International Business Editor of the Daily Telegraph , created by Alessandro Bianchi The Antidiplomatico . Read. The Italian press is presenting UKIP as a party of the extreme right , xenophobic , homophobic and anti-Semitic. Its leader , Nigel Farage, more or less as the successor to Hitler. Possible that 30 % of Britons have rated this danger to the centuries-old British democracy ? I personally know Nigel Farage for over 15 years . When the Ukip had only three seats in the European Parliament, we ate dinner once a month in Strasbourg and I was able to deepen his ideas and values. It is definitely not a party fascist, racist or xenophobic . It crazy affirm . Farage has created a mechanism that prevents access to anyone who wants to join the party with a history of this type and that provides for the immediate expulsion from the inside for those who is guilty of racism . The strategy and the UKIP policy is to block all forms of discrimination . I do not know where they get the information from Italy in support of these arguments , but just think about the fact that Farage has clarified how an alliance with the National Front would be unthinkable for him , because within this French party there are some members with a history of anti-Semitism. With regard to domestic policy , will force the Ukip party consiervatore Cameron - who is personally pro-European than one wing increasingly influential Tory who thinks like the UKIP - to change position because the message in Brussels in the last election was clear: the British people no longer tolerate a loss of sovereignty continues. Despite the propaganda of the light out of the tunnel or Greece has also turned the corner , the economic situation in the euro zone remains particularly difficult . What is your opinion about the near future of the area and what are the factors of destabilization of the most dangerous ? The Italian economy contracted in the first quarter and the second half, as opposed to what they advertised , it just is not happening. The same is true in the Netherlands , Portugal and Spain. The only reason why there is an apparent growth in Spain is the way it is now calculated the GDP. A careful analysis shows that even Madrid is not growing and all the countries of the south, in the final analysis , are shrinking , with France, which is in stagnation. It is a paradoxical situation if you think in a framework of well-established global recovery : if 5 years after the Lehman Brothers crisis and with an improved international environment , the euro area economy is still not safe and have a situation of mass unemployment dramatic and lasting means that there is something deep that it does not work . In Italy, for example , youth unemployment is at 46% and this at a time of global expansion. Think about this : in five years from the start of the global recovery after the Lehman Brothers crisis , youth unemployment in Italy is 46% ! And the tragic result of the choices being pursued within the European Union and the euro area . In other words, it is the inevitable choice of suicide at the same time restrictive fiscal and monetary policies . This , mainly , at a time when banks have restricted access to credit to the real economy in order to meet the new regulations and the contraction of loans led to the failure of an incredible number of small businesses in Italy and throughout the southern Europe. Also in the UK we used measures of fiscal austerity, but accompanied by a great boost monetary and the same happened in the United States . In Europe you have chosen the economic suicide of entire nations . And in addition there is a context of very low inflation and deflation for southern Europe in the background, which in a few emphasize enough. What does this mean for Italy and which scenarios we must assume ? As far as Italy is precisely the mistake to consider only the real GDP in economic evaluations that are done : what counts for Italy , Spain, Portugal is the nominal GDP . The problem is that in a world of low inflation or deflation, the nominal GDP falls dramatically and the existing debt burden simply becomes unsustainable . It a serious problem for Italy who is now the national debt to 133% of GDP, while the private sector is more sustainable than in Portugal and Spain. The contraction of the Italian nominal GDP was 20 points last year , but he never had to overcome three to four points. It a policy failure of historic proportions and would never have happened. The reduction of public and private debt to the countries of the south becomes simply impossible in a situation of deflation. I recently interviewed the officer in the operations of the IMF Troika in Ireland and he told me that Italy and Spain to have a debt sustainable in the medium term they need a rate of inflation in the euro zone than 2% for more than five consecutive years . And this is confirmed in a series of papers that the IMF stressed that the trajectory of the debt is out of control in a context of low inflation. Moreover, the dynamics are well known in the science of economics and the ones that are Irwing Fisher described in 1933 when it was claimed as the deflation that caused the Great Depression. And exactly what is happening today: the debt becomes increasingly untenable and bankruptcies are inevitable. What the ECB is doing in the face of this dramatic situation ? Everything to make it increasingly difficult for Italy out of the crisis . An inflation rate of 3 % or 4 would allow encompass countries of the South to fill the gap in competitiveness between Germany and Italy , Germany and Portugal , etc ... But this is not possible and the countries of the South are forced to act through cutting wages , the so-called internal devaluation . Since Germany does not tolerate inflation , the southern countries sink into deflation. It s inevitable . We have an expression in English that describes very well the paradoxical current economic situation of the countries of the South: It damage if you do it and it is a loss if you do not . If the periphery of the euro zone succeeds in fulfilling the requirements from Brussels - Berlin -Frankfurt creates a situation of internal devaluation to regain competitiveness with Germany strikes nominal GDP , making the trajectory of the out of control debt. If you reach that Brussels is asking you , in a nutshell , go bankrupt. It s the result of success. If the Italian government of Berlusconi had implemented more restrictive measures three years ago or if Letta had cut even more spending, Italy would be in a situation worse, not better . It a suicidal policy . I do not know if the European monetary authorities have ever posed this question: Why have imposed these policies to countries where their success makes the situation worse than the previous one ? The ECB does not comply at all times with a huge difference and neither the inflation target of 2 % of the area, nor the amount of money that M3 should be in circulation. Why does not respect its obiettvi ? There is a reason why credible economic level , the ECB does not want to achieve the objectives of monetary policy and for so long a period ? No, not there. People do not yet understand well the tragedies that produces deflation for a country like Italy . Better then a numerical example , it is a mathematical calculation involves different studies , such as a very accurate Bruegel : 1% inflation less for the euro zone means that Italy has to have an extra budget surplus only an additional 1.3% to achieve the same goals. It a mathematical calculation . The target is 2% inflation close to zero and then coast to Italy for 2.6% of GDP to achieve the same objective could be achieved only if the ECB meets its objectives imposed by the Treaties. This situation of low inflation is disastrous for the economic future of Italy. In this scenario, the euro is still at risk? When Mario Draghi has launched the program OMT - Outgriht Monetary Transactions - August 2012 changed everything. The euro was about to go bankrupt in July, with Italy and Spain, which were in a great crisis of financing its debt and the single currency was close to collapse. Angela Merkel was planning to expel Greece from the euro zone and only when Berlin has agreed that there would be too many dangers for the contagion to Italy and Spain , Merkel has accepted the plan devised by the German Ministry of Finance , which is then transformed into OMT program . I spoke in London with a top executive of the ministry in July of that year and told me that nothing flies in the euro area at the time without our permission . Germany was clearly controlling the policy of the euro area in every single aspect . At that stage they were preparing the MTO and two weeks after Draghi made his famous speech of whatever it takes . It is not that the ECB has changed its strategy , it is Germany that made him, terrified of what could happen to Italy and Spain. Few people understand this process very well : it is Germany that has changed politics , turning the ECB into a lender of last resort . Since then, the euro zone crisis is completely different. From that historic moment there is no longer a risk that the euro can explode for a bank failure . But you have to be careful because the German Constitutional Court ruled that the MTO of Dragons is a violation of the treaties and would be ultra vires . So the question is : what program can be activated in case of need ? The systemic danger still exists and you can get a break for different reasons : the countries of the South will experience a state of permanent economic depression , which will produce damage to the industrial sectors are crucial for the life of different countries and the situation politically unsustainable in the long run . The election of radical parties could then force the change and modify the entire project. When you win in France is a party that , once in power , he wants - as he confirmed in an interview with Marine Le Pen - order the French Treasury to take action for the immediate return to the franc , the question remains central to the debate . How will they react now the Gaullists and moderate conservatives to this message of the French people in the European elections and the destruction of the historic French industry ? If the National Front were to win the elections , France does not respect the Fiscal Comapct and this ridiculous law firm in Brussels . The other parties can no longer ignore it. According to you what will happen in the euro zone in the next five years? There are two possible ways : the countries of the periphery will understand that you stay within the euro area requires a number of sacrifices are no longer tolerable and decide to get out, or, for example, along with the Netherlands which is in a similar situation, will take possession in a coordinated manner institutions that control the economic policy of the EU , imposing the change in line with their needs. I would be very surprised if it took place the latter alternative , since these countries have certainly not the knife by the handle and in the past Hollande has failed to create a consensus with the Mediterranean countries . But even if they succeed , the risk of the euro zone would then be the opposite , ie an output of Germany, who would never accept inflationary policies . The central problem of the origin of all the euro zone crisis is the fundamental conflict of interest and destiny among the southern countries and Germany on how to solve the huge gap in competitiveness. This issue remains unresolved and , to me, is simply no solution. The countries of the South are forced into a permanent internal devaluation and need to impose expansionist policies that re-launch the application , but that would force Germany to leave the euro to a rate of inflation that Berlin could not accept. It a puzzle without a solution. The situation can not be resolved before the euro zone and eventually , the better for everyone. The alternative ? They are 15-20 years of depression to the periphery of the rules imposed by the implementation of the Fiscal Compact , which , in a period of declining population and shrinking workforce , will produce dramatic scenarios to the economic and social fabric of these nations. This strategy will not help anyone and absurd the question is how can last without there being a political reaction ? In France and Italy are becoming increasingly popular idea that to save the rest of the European project, it is necessary to think of a coordinated dismantling of the euro. E at this point that the policy must begin to think in a constructive way to avoid future chain reactions out of control. At the moment it is not useful to make predictions about the future of the euro zone and would try to reverse the question : should no longer speak of the risk of rupture of the euro zone , but the real risk is that it can survive for another five years , producing unimaginable damage to the countries southern Europe. The lost decade of Europe would end then with a global economic environment is very different from how it was started and the whole continent would live totally in the margins. The real risk is that the euro survives . And it is a terrible risk for the future of European nations.
Posted on: Wed, 04 Jun 2014 22:15:59 +0000
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