Even though we were keen about how voter repudiation of austerity in the Italian elections last week was throwing a wrench in the Troika’s austerity plans, we also warned, based on the example of Greece, that they’d try to neutralize the results. That effort is already underway. Ambrose Evans-Pritchard’s latest article, “Anger builds in Italy as old guard plots fresh technocrat take-over,” tells us:
Italian officials say the Bank of Italy’s governor Ignazio Visco is front-runner to take over as premier despite warnings that this will be seen as an elitist ploy. It is far from clear whether the Democrats (Pd) in charge of the lower house will back the idea.
The plans amount to a near replica of the outgoing team of Mario Monti, though one greatly weakened by the earthquake upset in the elections a week ago. Almost 57pc of the vote went to groups that vowed to tear up the EU-imposed austerity agenda.
At the moment, this looks like brave talk. Beppe Grillo’s Five Star Movement does not have enough votes to block a coalition. But the Democrats would have to back an the technocrats, and so far, they don’t appear to be willing to buck voters:
Stefano Fassina, the Pd economics chief, said his party is vehemently opposed to “any form of technocrat government, new or old”, insisting that the election result must be respected. Mr Fassina said 90pc of the country had rejected the Monti agenda and warned that it would be a grave error to try to force through the same reviled plans a second time.
Grillo has no doubt further rattled the northern countries by reiterating his campaign proposal of having a referendum on the euro. But at least today, Mr. Market isn’t betting on a technocratic counter-revolution in Italy. Europe is down after a day in Shanghai, where property shares tanked. But as of this hour, the MIB is down 1.65% while the DAX has fallen a mere .57%. The lead story on Bloomberg now, natch, is “Euro Leaders Demand Austerity as Italy Nears New Vote.” This is a clean-up up version of the the hissy fits we described last week. From Bloomberg:
uropean leaders demanded that euro members press on with budget cuts to end the debt crisis as Italy edged closer to a new election after an anti-austerity vote last week resulted in political deadlock…. In Rome, a top aide to Democratic Party leader Pier Luigi Bersani said the country may need to hold another election this year after passing new electoral laws.
“Now in Europe, after the Italian election, it seems to be a case of either austerity and savings programs or growth, but that’s a completely false premise,” German Chancellor Angela Merkel said at March 1 event. EU Economic and Monetary Affairs Commissioner Olli Rehn echoed those comments this weekend, telling Germany’s Der Spiegel magazine that there’s no scope for the bloc to let up on budget discipline.
The Italian elections are simply laying bare a dynamic that Michael Hudson described in 2011:
Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.
Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by cancelling the debts and redistributing property or taking its usufruct for the state.
Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans…But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.
This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.
It does not take familiarity with Aristotle to recognize financiers as the new oligarchs. Simon Johnson made the same observation in 2009, based on his experience with the IMF, in his article The Quiet Coup. Italy may wind up being the last stand of the democrats. Let’s hope they prevail.
This piece is cross-posted from Naked Capitalism with permission.