Italy Crisis: Workers Are Paying for Decisions Made Nearly 30 Years Ago

Shore told the House of Commons on March 24, 1993: “The most astonishing omission from the treaty is the fact that it never faces the issue of the counter-recession policy, about which it contains not a word. One lesson that we should have learned from the disasters of the inter-war years was that tendency to go too high in a boom, and too low in recession and slump.

“Why is that aspect not written into the protocol? Why does it not say that we must recognise those counter-cyclical problems, and will certainly do so if unemployment grows by X per cent? Instead of having merely three percent and 60 percent for borrowing and debt, why not have three, four or five percent of the level of unemployment or the fall in gross domestic product?”

The problem is not that the idea of a single currency for European countries is a bad one. It‘s the way the whole thing was implemented. Perhaps the architects of the Maastricht Treaty thought that with the demise of the Soviet Union they could restructure Europe’s economies to be more banker-friendly.

The center-left meanwhile could be bought off with ‘add-on’ measures such as the ‘Social Chapter.’  But what’s the use of the ‘Social Chapter’ if you don’t have a job to go to in the first place?

By blocking the appointment of Savona, Italian President Mattarella, appeared – at least earlier in the week – to have made matters a whole lot worse from a Europhile perspective. On Tuesday, the euro dropped to its lowest level against the dollar for 10 months.

But the Milan stock market did rise 1 percent on Wednesday, with reports emerging that Five Star and the League could yet form a government, albeit without Savona.

The remarks of Gunther Oettinger, the EU’s budget chief haven’t been helpful either.

“My concern and my expectation is that the coming weeks will show that markets, that government bonds, that Italy’s economic development could be so drastic that this could be a possible signal to voters not to choose populists from left and right,” the German declared.

The words of Donald Tusk and Jean-Claude Juncker have been more emollient, and Oettinger himself has apologized for what he said, but you could say the damage has already been done. If Italy’s voters were Euroskeptic before last week, they’re even more so now.

For a solution to the crisis, we need to look to Berlin. The EU’s strongest economic power needs to cut struggling countries like Italy a lot more slack.

To reduce its deficit in the medium to long-term, Italy needs to increase it in the short term –  and should be allowed to do this – within the Eurozone. Democracy should trump the ‘markets’ and Herr Oettinger. The EU – and not Italian voters – must blink first.

It‘s not often you‘ll find me quoting George Soros but on the need for the EU to change direction, and drop its ‘addiction to austerity,’ he is surely right. The billionaire hedge funder is smart enough to know that unless there are big changes in the way the EU operates, the whole European project will be doomed.

Let’s leave the last word to Shore, the man who saw exactly what the rushed introduction of the euro and the associated ‘addiction to austerity’ would lead to.

“The issues of democracy, prosperity and self government in the nation states of Europe will not go away. They continue to be the subjects of continuing debate.”

The date of Shore’s letter?  December 14, 1993.