di Alessandro Bianchi
Ambrose Evans Pritchard. International Business Editor of The Daily Telegraph
On the Telegraph, you have often written that southern European countries should form a cartel and speak with one voice in the board of the ECB and the various summit in order to force that policy change necessary to revitalize their economies. Do you believe the euro system can still save itself or do you think it would be better for a country like Italy to return to its national currency?
What we need in Europe today is an economic shock on the model of Abenomics .
Italy , Spain, Greece and Portugal, along with France must stop pretending not to have a common interest to protect. These countries have the necessary votes to force a change. The ECB today is not complying with its obligations under the treaties and not just for the 2% target , given that treaties are not talking only about inflation, but also for growth and employment. The figure of 0.8 % in October is a real disaster for the performance of the trajectory of long-term debt . Without a stronger change in strategy, Italy risks collapse in 2014. The country has a primary surplus of 2.5 % of GDP and yet its debt continues to increase. The drama of Italy is not moral , but it depends on the deflationary crisis, which is forced by his participation in the euro zone.
Politics is about choices and courage. Till now no action has been taken to prevent the dissolving of the political consensus of the euro in Germany. But today there is a greater threat and if Berlin does not accept the new policies, it can also leave the system. The return of Spain, Italy and France to a weak currency is just what the latin countries need. Moreover, the German threat is a bluff , and the countries of southern Europe must expose him. The time of confrontation has arrived.
The problem is that the current governments of Southern Europe seem hypnotized by the spell of "more Europe" and do not consider other solutions. Why does this happen?
I recently had the opportunity to meet in London Italian Prime Minister Enrico Letta, and we just talked about this. To my question about the reason why he would not be promoter of a cartel with other European countries in trouble to force this change, the Italian Prime Minister told me that according to him it will be Angela Merkel to change its attitude in the next mandate and meet the needs of south. It is complete wishful thinking. Enrico Letta, as well as Hollande in France, is a fervent believer of the project of European integration and cannot accept that the current situation is a complete disaster. This attitude doesn’t enable him to understand the reasons why the euro has become so dysfunctional for the member countries.
Those who argue that southern European countries cannot return to their national currencies use two reasons in particular: the huge inflation resulting in the inevitable devaluation and then the inability to withstand the competition of commercial giants such as China. Do you think they are right?
It is, in both cases, the exact opposite of reality. The euro is a real curse for exports, which depend on the prices and the exchange rate . European countries, overvalued because of the single currency, have lost a significant portion of their global market at the expense of China. With that Beijing keeps the yuan undervalued and with a vastly overvalued currency, many areas where the Italian industry excel are inevitably in crisis. A crisis that depends on the exchange rate.
Regarding inflation, if Italy were to proceed to a chaotic and disorderly collapse of the euro, the country could lose in the first phase, the control of prices. But today the latter are already out of control. In southern European countries there is an ongoing crisis of deflation that threatens to revive the " lost decade " of Japan with startling shapes for that regards the performance of debt / GDP ratio. In Italy that increased from 120 % to 133 % in two years: it is a trap that is leading the country to collapse. The problem today is to fight deflation and not inflation .
Current experience of Italy and the other euro-zone countries is well known in Britain. In our country there have been two examples of similar crisis of deflation and internal devaluation : in the early '30s with the system of the Gold Standard and the EMS crisis of 1991-1992 . In both cases , the United Kingdom has led to the breakdown of the system and restored full control of its currency at a time when the country's interests were put at risk. Critics at the time used the same argument of inflation, but in 1931 at the exit from the Gold Standard, in a situation of domestic deflation , there was no uncontrolled increase in prices, with the monetary stimulus and devaluation that have been the prerequisite for the recovery from the Great Depression. The exact same experience we lived in 1992 with the EMS crisis .
We often tend to have a superficial approach to economic issues and this does not help the political debate. If you were to leave the euro, Italy should opt for a large monetary stimulus from the Bank of Italy, a devaluation and a tight fiscal policy. This combination would ensure a smooth transition in the country and no crisis out of control.
Very often those who consider the unsustainable return to national currencies are also afraid of the unsustainability of being able to withstand the inevitable economic retaliation of Germany. Is it a credible threat?
There is nothing more far from the truth. Is in Germany's interest to manage the exit of a member country in the most linear, smooth and quiet as possible way . In the case of a depreciation out of control of the Lira, for example , the biggest loser would Berlin: German banks and insurance companies that have huge investments in Italy would be at failure risk , and in addition German industries could no longer compete with the Italian ones on global markets. It would be primordial interest of the Bundesbank to acquire on international currency markets the lire, francs , pesos or drachmas to prevent a collapse . It is a very important point to understand : in case one of the southern countries were to decide to leave the system in isolation , it is in the interest of economic countries of northern Europe , primarily Germany, to prevent its currency to be out of control and ensure a smooth transition. All the stories of terror on any disasters that we read have no economic base.
In several of his recent articles, you declare as the push for change will come from France. What will be practically the element that will determine it?
With unemployment growing to uncontrollable levels, Hollande, who has set employment as his presidency primary goal, is losing all credibility
and is reaching the breaking point with Europe.
Read More. The second part of the Interview onthe British referendum and "the last battle" of May of 2014