Technocrats of Europe

I’ve come across shrill articles about the financial crisis being an excuse, opportunity or, if you’re into conspiracies, a cunning plan to replace elected representatives with technocrats across Europe. This thinking seems to imply that there is someone planning, scheming and pulling strings … it’s a comforting thought, but I doubt there’s anyone in charge. Merkel is playing a dangerous game and, whilst she must be satisfied that Papandreu and Berlusconi have been replaced. It will take a lot more than new Prime Ministers not to let the Titanic sink. She might think we haven’t hit the iceberg yet, but we have as soon as the run on the Italian bonds started and now the banks are moving onto France.

But let’s go back to ‘politics’. It is of concern that we need ‘technocrats’ to run the country. What about democratic accountability? The problem is that the first casualty of the financial crisis has been politics. It showed that politicians until then didn’t have the eye on the ball or didn’t even seem to understand what game they were playing … all those numbers and figures … must be magic. Magic indeed it was and all those numbers and figures have turned out to be an illusion.

Politics has failed. Instead of showing strong leadership that would reassure markets and inspire people, politicians have cowered behind populist nonsense. They have tightened borders, which will kill growth. They have started, once again, to look inward and forget that, whilst they might be very local and provincial, the economy is global. It is disingenuous to simply dismiss Italy as a country that is not competitive while turning a blind eye on some of the European (and International) causes of that lack of competitiveness, such as some countries having far too much surplus … If you want Europe to work, you need to adjust imbalances.

But let’s get local and let’s get cultural too. I hear a lot of xenophobic comments made again Italy and Italians (and all southern Europeans), masked behind the ‘respectability’ of financial talk. It betrays the very old prejudice that sees southern Europeans as lazy or lacking in innovation and entrepreneurship, while northern Europeans are virtuous, disciplined and industrious. As with all clichés, there’s some truth in it, but it has nothing to do with ‘national character’, culture or actual way of working. After all, Italian cities in the middle ages laid the foundations for the Industrial Revolution.

There are structural problems, however, that stop Italy from moving. This has been particularly true in the past 10 years, the Berlusconi’s era. It would be comforting to dismiss Italy in the light of Berlusconi, the ‘buffoon’ (so is Sarkozy by the way), but the lack of growth in Italy is not entirely his fault. The problems are far more complex. Italy has many sections of society protecting their vested interest, from professional groups (lawyers, architects, notaries etc.) to unions, from business groups (business ‘entrepreneurs’, taxi drivers etc.) to politicians. This has serious adverse effects on young people who are trying to enter the marketplace, on innovation, on foreign investments in the country, and, ultimately, on growth.

The ‘caste’ of politicians, as it is now called, has been looking after their own interests. Mario Monti, dubbed Super Mario, the ‘technocrat’ who is forming a government now, has been trying desperately to get politicians on board. They don’t want to be on board because they know that tough measures need to be implemented and they want to win elections. Italy needs to liberalise its economy and break free from patronage and cliques doing their own interests.

The point of democracy is to guarantee the interests (not just economic) of all, not of a few. Italian politicians have betrayed Italy for far too long. In this interim period of technical government, political parties need to show integrity. If they don’t, they will make Monti fail and Italy default. If that happens, we may see the rise a populist protectionist government condemning the country to depression and unemployment. That cancer will spread and Europe will be once again divided.

Is Europe about to crash?

There’s a comforting story out there that the eurozone is in crisis because of countries such as Greece and Italy have huge deficits and that if they weren’t in the euro everything would be ok. Nonsense! The crisis started in the US … but let’s skip a few passages.

The euro is a strong currency and it’s an international currency, which means any problems with it will impact on the rest of the world, not just eurozone countries. So what are the problems? They are not to do with the euro per se, but with banks and lack of growth in the West. European banks have pushed Greece, for example, to incur into more and more debt and then ditched the country. Similarly, Italy’s debt was more than manageable until European banks started ditching Italian bonds making the rate of debt repayment go sky-high. Why?

They didn’t have confidence in the country and its administration, but also in the EU. Action from European ‘leaders’ has been conspicuous for its absence. One reason is the fear of being booted off by their electorate, who are not keen on austerity. The other is that it’s pretty deliberate, actually. The duo Sarkozy and Merkel seem now to be pursuing a financial warfare. The total immobility is pushing banks to ditch Italian bonds, for example, and increase the credit rate spread. There might be various ‘good reasons’ for this. I’m an optimist so I’m hoping that this attack has a strategy. Is it to ensure that Greece and Italy are really implementing reforms? Is it to show to the German electorate (France is in a mess as well) that the situation is dire and requires structural change? This ‘structural change’ really ought to mean more European integration, NOT less.

Our economic system is interconnected to an unprecedented level, only transparency and co-operation can make it work and can make it fairer. You cannot disentangle a country from another. That’s why it’s so important for the whole world (not just the eurozone or Europe) to save Italy and Greece. There is no such thing as an orderly default, especially if we’re talking about a country the size of Italy.

Yes, it’s the banks’ fault, ‘politics’ let the ‘chaps’ of the banks run amok and increase the gap between the extremely rich and the rest. The ‘trickle down effect’ never materialised and we, the people, had to bail out the banks. That was pretty harsh and unfair, but letting Lehman go bust was the worst mistake they could make. You don’t change the economic system (modern post-industrial capitalism) by allowing a financial meltdown.

Politics needs renewal, but it’s not gonna happen overnight. In the meantime, we need to sort out the problems without causing depression, financial meltdown and war. Gloomy? Think of the French Revolution, how it came about, and into what it descended. Politics tends to follow economic changes, rather than lead them. No, Roosevelt didn’t get America out of recession, the war did because it created an internal economy.

The economic system needs to change. It needs political leadership, but the leaders need to realise that too much is at stake. The recipes are out there (QE, Eurobonds, European financial and fiscal integration …), where is the will?