The European central bank is the central bank for the euro and administers the monetary policy of the 17 EU member states which constitute the Eurozone. The primary objective of the European Central Bank is to maintain price stability within the Eurozone, which is the same as keeping inflation low and prevent deflation. On 9 May 2010, the 27 27 countries of the European union agreed, in order to have a new instrument to tackle the crisis, to a new pact which create the European Financial Stability Facility. The EFSF’s mandate is to safeguard financial stability in Europe by providing financial assistance to Eurozone Member States; the main instruments that it can use are: the providing of loans to countries in financial difficulties and to finance recapitalizations of financial institutions through loans to governments. In these days the president of the ECB, Mario Draghi, is under increasing pressure to abandon the bank's defined mandate to maintain price stability, and to instead become the Eurozone's lender of last resort; it prints more money to buy European states bond In order to reduce their sovereign debt. this has been considered, by some countries, as a panacea for their huge sovereign debts and as the best solution to sort out from this crisis, Germany and other countries instead fear the central bank will trigger an inflationary spiral. And unconstrained monetizing of Spanish and Italian debt will ultimately prove to be inflationary if governments fail to stick to their austerity measures. In a recent interview, asked about the financing of Italian and Spanish sovereign debt ,Luc Coene, the Belgian bank governor said that “It makes no sense for the ECB to start financing those countries, it would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet, the conclusion is clear: When you take away the market pressure, you take away the pressure on politicians to act.” President Mario Draghi reiterates a lot of times that "the ECB cannot replace governments," and that countries would have to request assistance from the European Financial Stability Facility (EFSF) before the ECB could step in. Unfortunately, history shows that once market pressure is relaxed on governments, they tend to restart spending and increasing their debt again. At the moment austerity seems to be the only believable instrument to tackle the sovereign debt crisis.
After the financial
earthquake that hit the United States, due to the subprime mortgage crisis and
that, due to the globalization markets, it has spread around the world,
including in Italy where there are today strong signs of economic crisis.
Everything stems from three
major problems: the state debt, the slowdown in economic growth and the
government's credibility.
This is not a new fact. Are
few decades that our country is going through hard economic times, mainly due
the considerable public debt accumulated since the seventies and eighties of
the last century. And yet, the current situation seems to have worsened.
Our main problem, as it is
known and has been repeated for many years and even more since the beginning of
the crisis, is the public debt. One of the famous Maastricht criteria, which
regulated the entry of European countries in the single currency, fixed the
ceiling of 60 per cent of the ratio of debt to gross domestic product (GDP), a
report that Italy joined in 1982. Since then, our national debt has grown
dramatically within a few years: between 1982 and 1994, in a range of twelve
years, has grown from 60 per cent to 121 per cent of gross domestic product.
Very few countries in the world have higher rates.
Insecurity, layoffs,
layoffs, unemployment, families in need are now daily experience for millions
of Italians. Of course, the economy and, consequently, lifestyles are changing
and the Italians are serving the greater competitiveness of countries where
labour is cheaper.
Were released by Istat a
provisional data on employment reported in March 2012. There are an increase of
unemployment especially referred to
young people where the unemployment rate is
28.6 per cent of people aged between 15 and 30 years. In the third
quarter of 2012 gross domestic product fell by 0.2% from the previous quarter
and 2.4% over the third quarter of 2011[1].
Italy is a
country in recession. In Italy, business are closing continually and the fault
is due to the international economic crisis. Since 2008, banks and financial
institutions have collapsed and they created a domino effect across the globe.
In Italy, businesses close for other reasons: lack sudden liquidity, tax
questions, suffocating bureaucracy. The sudden lack of liquidity is linked to the banks’
problems. Banks feel the crisis and do not finance the businesses, which find
themselves without cash to pay suppliers and salaries and after they are forced
to close. If the banks do not pay, business close down.
Another
problem is the oppressive tax burden. The suffocating tax burden and Italian bureaucracy are a
large ballast that prevents growth. Then we have to consider the lack of infrastructure: it is
difficult to open a company in areas where trains do not even. The subprime mortgage crisis and the credit crunch are not
the only concerns to disturb the slumbers of the Europeans. The price of oil
reached a new record for the continued demand from emerging economies of China and
India. This has affected consumers in North America and Europe in two ways.
They are forced to pay exorbitant prices for their cars and for home heating;
rising prices have also squirt the commodity prices of feed, and this has
created an endless spiral. The food has become so expensive that in some cases
there have been riots in countries in the developing world. The economic crisis is the result of wrong human choices
in the United States and the natural development of the Eastern economies. Oil
prices will never return to the levels of the past and the world must learn to
accept this new reality and act accordingly. Similarly, the credit crisis,
which began in the United States, can only be resolved by the United States.
There is not much to do for Europe, which must try toweather the stormas best he can.
According to many, the
recovery cannot be separated from escaping from euro for the weaker countries,
for others need to strengthen the common European politic but what are the best
solutions to cope with and overcome the crisis? Some economists argue that we
should introduce a soft austerity: state finances must be redesigned in order
to have a lighter tax, which corresponds to a lower public spending but
efficient. That's what they're doing Poland and some Baltic states, but it
takes a strong leadership, is necessary, at the same time, encourage
cooperation between strong states and weak states.
A key priority for Italy is
to restore credibility of the political class. Strong measures must be taken
against corruption, bad governance, and everything that affects our country.
The policy cannot be a business, but a commitment that must be carried out
without fraud and theft. We think that this is the first step to give justice
to a country that thrives on scandals and deceit.
References:
De Masi D., "Development without employment", Rome, Labour, 1994.
Schumpeter J.A., "Capitalism, Socialism and Democracy", London, Etas, 2001.
The Executive
Committee of the European Trade Union Confederation (ETUC) called for a Day of
Action and Solidarity, across Europe on 14 November in order to mobilize the
European trade union movement behind the ETUC policies set out in the ‘Social
compact for Europe’.[1]
About fortytrade unionsfrom 23 countriesrespondedto the
first “anti-austerity day”, a day ofprotestsacross
all Europeagainstausterity measuresin the Old Continent.[2]
Here there are some
initiatives taken by trade unions in different European countries.
Some have suggested the strike, others different types of events.
Spain: CCOO – UGT – USO: general strike Portugal: CGTP + public services of UGT: general strike Greece: GSEE – ADEDY: 3 hours general strike (general strike
of 3 hours) Bulgaria: PODKREPA: Podkrepa has organized open forums in
several large Bulgarian cities against austerity and for job quality. Malta: GWU, CMTU, FORUM: The three Maltese Confederations,
the Forum of Maltese Unions (for.U.M.), the General Workers Union (GWU) and the
Confederation of Malta Trade Unions (CMTU) will be jointly organizing a
Half-Day Seminar on the 14th. November where the Press was invited. The
emphasis was be on Jobs and Solidarity and not to Austerity Measures. Mr. John Bencini (FOR.U.M.), Mr. Tony Zarb (GWU) and
Mr. William Portelli (CMTU) were the main speakers. This was the first time that all three confederations
were unite for a common cause. Latvia : LBAS: LBAS has organized political and media action on
the issue of youth unemployment. A delegation of young trade unionists and
trade union leaders met the speaker of the Parliament to discuss about youth
employment and education. Italy: CGIL: General
strike of 4 hours UIL: Action
centered on the education CISL: This
trade union organized actions, at the local level, to promote the proposals
contained in the Social contract for Europe of CES. The federation of public
services has organized a gathering in front of the Chamber of deputies in Rome
to protest against budget cuts. Finland : SAK, STTK, AKAVA :Take political and media
action to call for the respect of workers’ rights in Europe. Activities included meeting with the Prime
Minister and Ministers of Finance and Labour. Common demands were delivered to the
European Commissioner for Economic and Monetary Affairs Olli Rehn and Members
of the European Parliament. France: CGT – CFDT – UNSA –
FSU – SOLIDAIRES : Demonstrations on all the territory for
the employmentand the solidarity in
Europe. 25 demonstrations in France.[3]
ETUC General
Secretary Bernadette Ségol commented: "Europe’s leaders should recognize
the full magnitude of yesterday’s European mobilisation. Some 50 trade union
organisations from 28 countries participated actively in this day of action. It
is impossible to pursue the path of austerity, which is a total failure.
According to a recent report by the International Labour Organisation (ILO),
the austerity measures implemented in Greece are leading to violations of
fundamental rights. We need to change course immediately. The social situation
is urgent."[4]
In this day and in the
most of European Union Stateswere present not only trade unions but also
students, workers and common people that it is contrary to this type of
measures.
We must remember that
in the recent months there have been many demonstrations against the crisis, as
we can see in the two videos below,
but none has reached
the size of that of Wednesday!
Demonstrations were numerous
and not without clashes; for example riot police arrested at least two
protesters in Madrid and hit others with batons, in Rome[5]
students pelted police with rocks in a protest over money-saving plans for the
school system[6], demonstrators in
Athens clash with riot police during the general strike in protest.
At the other side, the
Chancellor of Germany Angela Merkel said that it’s important to listen the protesters' demands but it’s necessary go forward[7] in
this direction.
The explosion of worldwide economic crisis in 2008 has revealed a greater fragility of Spain compared to other countries. That's because Spain hasn’t created over the decades solid economic foundations of production, and because of the strong unbalance on the the tertiary sector (more than 60% of companies: tourism, transport, trade, telecommunications, financial and insurance services), which hassuffered especially from the crisis. After 15 years, at the end of 2008,GDP shrinks and in February 2009 Spain (as well as Greece, Irleand and Portugal) officially goes into recession. The building, which during the boom years had a major role in tow the spanish economy, during the crisis had a real paralysis. Prices for square meter collapsed and the sale of real estate became very difficult (almost half million of houses built have not been sold ).The crisis has also impacted on tourism, which however didn’t fall because of competitive prices compared to the European average. There is also an exponential growth of social spending. Former Prime MInister Zapatero was alleged to have bettoo much on the construction industry trying to counter the crisis, financing many public works, not actually necessary (roads, parks, flowerbeds), which allowed the construction companies to go ahead, but without producing neither real wealth nor work for the future. In addition, the premier sought to deny until the last the severity of the economic situation, always speaking of a transitional slowdown. He was forced to resign six months before the end of his mandate because of the collapse of popular support with resulting unprecedented triumph of Partido Popular at early elections in November 2011. In the 2012 the financial crisis and the housing bubble put in serious trouble the economic situation. Banks and Government of Rajoy is forced to turn to EFSF (European Financial Stabilty Facility) to recapitalize Spanish banks. Unemployment raches stellar levels, around 25%, and youth unmployment (relating to young people under 25 years of age) exceeds 50% , these are signs o fan economy in recession as well as the flight of capital abroad and the steady increase in interest rates of government bonds up to 7% and then the spread increase over the German Bund.
The remedial measures taken to limit the damages: cuts and taxes
To combat this trend, in july 2012 the Government operates numerous and important cut: immediate suppression of thirteenth month's salary for state workers as well as reduction of holidays, cuts in unemployment benefits and pensions, increases of VAT from 18 to 21%. Popular protests against these measures are significant, because peoplerebel against the idea of having to pay to repair the crash of financial institutions generated by real estate companies.The state does not have the means to remedy this deficit and thus tries to reduce costs and increase the tax burden on citizens. In the eyes of the world one of the most powerful images of Spanish crisis is the endless protest of miners in the region of Asturias, in the north of the country, who are asking the Minister Soria to respect the pact between the government and unions which provides aid throughout the 2012 for the mining sector, to achieve the progressive closure of mines not earlier than 2018. The cuts due to the crisis instead would lead to an immediate closing of structures, creating more unemployment in an area not among the richest in the
peninsula.
Possible strenghts to be leveraged for shooting: exporting and innovation
In front of
this almost catastrophic situation, there is anyway a downside positive the Iberian
financial sector has proved relatively solid in the subprime crisis (which
instead was catastrophic for the United States) and, in addition, many
companies have been able to expand significantly in Latin America, China and
India. In addition, innovation in several areas (renewable Energy, hi-tec,
biotechnology, pharmaceuticals) has reached in Spain excellent levels of
development and can be one of the key points for a re birth based on something
more concrete than inflated construction investments that has played a
major role to push the country into recession.
There is one word that is on everybody's lips in the European Parliament in last years..
This nice video gives a good idea of what is one of the main issues that Institutions must face: even if said in different languages, the problem is the same in all the European Union!
On
9th and10th November an
international workshop aboutthe changes
andperspectivityof contemporary
Russia was held atthe Universityof Padua.
TheEuropean debt crisisis not onlyforcing the populationof the continenttothe immensesacrificesthroughharshausterity
measuresbut is alsoerodingthe abilityof Europe (andthe U.S.)to exertpolitical
influenceon manycountries in
difficulty.Of thispower vacuumtheyare taking advantage ofsome states, such as Russia, China and Turkey, more dynamic economically and withamore aggressive foreign policy. Among them,to havehigher intereston Europeis justMoscow.
Russia
hasjoinedthe
World Trade Organization(WTO).This
isparticularly important foradhesionto the EU:the EUis the maintrading partner ofRussia, which,in turn,is thethird largest trading partnerof the EU.For the first time, Russia and the EUwill bebound byrules and obligationsinmultilateralreciprocal
trade. ""Today's WTO accession is a major step for
Russia's further integration into the world economy", said EU Trade
Commissioner Karel De Gucht. "It will facilitate investment and trade,
help to accelerate the modernisation of the Russian economy and offer plenty of
business opportunities for both Russian and European companies. I trust that
Russia will meet the international trading rules and standards to which it has
committed." [1]
In
the economic fieldthemain reason for thisapproximationis dueto the energy resourcesthat Russia has, andEurope
importsin massive quantities. But
in additionto the exchange ofgasand oil, the economic relations between
the two areasare characterized by theincreasing number ofinvestmentsthatRussian investorsare
buyingin Western countries.
The
global crisis has hit hard the Russia,
butfor a limited period. As of
today, we can say that it isout
of the crisis, but with a growth ratehalved compared tothe past decade.
Russia
is tryingto exert influenceonsome European countriessuch as GreeceorCyprus,
that are incrisis. Russia istaking
advantage of thelack of political willof the European Union, that it doesn’t seems so
united.
The
conference wasparticularly
interesting from thefirst to the lastintervention. Manyimprovements have beendiscussed and presentedand amplespace is givento the relationshipbetween Russiaand the European Union.
According to Sophie Elmhirst austerity is a policy of
deficit-cutting by lowering spending via a reduction in the amount of benefits
and public services provided. This measure is often used by governments to reduce their deficit spending and is often
coupled with increases in tax[i].
The opinions about austerity are controversial, indeed
more economists condemn this decision because in a period of recession and high
unemployment these restrictive measures
are counterproductive and, what is
worse, the austerity
policies are applied indiscriminately in different situations-states, each of
which represents a sui generis case, to be considered separately.
The
economist Paul Krugman, Nobel Prize in 2008 and reporter for the New York Times,
believes that public spending cuts inevitably lead to a reduction in the
economic growth of a state. According to him reducing public spending to reduce the deficit, in a crisis
time, is not the best way, not only because aggravates the crisis, but does
nothing to reduce the deficit. At the same time Krugman underlines that a weak
economy reduces tax revenues and If everyone is trying to reduce their spending
the economy can be trapped in what economists call the paradox of thrift,
worsening the recession and the GDP fall[ii].
On the other hand we have the supporters of austerity
policy who say that this is the way to realize a positive future expectations
based on increased private consumption and a global economic recovery. These
optimistic expectations have been denied by the International Monetary Fund, in
fact in October 2012 announced that the implementation of austerity programs
have been consistently overoptimistic, suggesting that tax raise and spending
cuts have been doing more damage than expected[iii].
The European situation shows an increase of protest
movements and other initiatives that ask a radical change of policies and the
current orientation of many European governments in the economic and social
issues. We are also seeing an European mobilization: workers and students against austerity policies as pensions cuts,
public services reduction and education spending decrease, mobilization that give a continental dimension to the all
forms of struggle that have taken place in Greece, Spain and Portugal.
In conclusion we can report what John Maynard Keynes said
in 1937: “ The boom, not the slumps, is the right time for austerity at the
Treasury”[iv].
[i]Elmhirst,
Sophie (24 September 2010). "Word Games: Austerity". New
Statesman. Archived from the
original on 29 September 2010. Retrieved 29 September 2010.
