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Return of the Lira? Italian general election, 2018

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    Ah, so like Iceland?

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      I owe Five Star an apology. I doubted that they were what they said they were. They really are a bunch of know-nothings off the internet pulling policies out of their arses.

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        94% of 5Star members vote to approve the agreement.

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          It is a bit misleading to characterise the vote that way.

          M5S has around 150,000 official members, but important decisions are usually taken by a directorate of five or six, and then ratified by an on-line vote. The 94 percent is the percentage of Yes votes among the 44,000 or so members who voted today (the on-line system was open for eight hours).

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            Why is Newsnight characterizing Five Star as some kind of Corbynite populist left? They are just fuckin populists.

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              Originally posted by Ginger Yellow View Post
              Not really. That's what happened in Ireland when it turned out you couldn't legally enforce on pre-2009 mortgages. Of course that was also in the midst of the economic collapse, so the causation wasn't all one way.

              The document also calls for some kind of debt forgiveness/writeoff for borrowers in financial distress, but it's pretty vague.
              So they're going to write down non-performing loans then? That could get exciting.

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                Isn’t the myth that non-performing loans are actually performing what keeps the Italian banking system from collapse?

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                  A more pressing consideration for the italian Govt is that it prevents the Italian pensioners who own a lot of those loans from having to confront their losses.

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                    So, Giuseppe Conte, then. Anyone know why he appears to be the nominee? He has some previous with DiMaio, it seems.

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                      So they're going to write down non-performing loans then? That could get exciting.
                      Well, like I say, it's too vaguely worded to say anything definitive. But I imagine it's more about writing down (ostensibly) performing loans. The actually non-performing loans have already been written down, though not written off. I imagine they envisage something like the forbearance criteria from the Piano Famiglie scheme back in the height of the Eurozone crisis, but with permanent principal reductions (or something like split mortgages in Ireland, depending on how much they actually think about it).

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                        Related tangent: any good books for a layman on the Italian First Republic and the fall out from mani pulite?

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                          I generally recommend Paul Ginsborg for those looking for an English-language survey.

                          I’m not aware of a serious history of Mani Pulite (at least in part because things haven’t changed as much as was expected), but Tobias Jones’ Dark Heart of Italy is entertaining and instructive. John Foot, who wrote the linked review, has just come out with a history of the country since 1945 that I haven’t yet read, but should be good.
                          Last edited by ursus arctos; 21-05-2018, 13:37.

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                            I don’t agree with all of it, but this piece from Social Europe is good on how the coalition isn’t really “populist” when it comes to policies.

                            The most important specific policy that will be introduced by the new government is the Italian version of the ‘flat tax’; firms and individuals will pay either 15 or 20% of income taxes, as opposed to the current 43% for the top income bracket. It is clearly stated that no wealth tax will be introduced (Italy has often been criticized by the EU for having cancelled real estate taxes on home-owners). Tax controls on Italy’s large number of small firms and self-employed will be scaled down, basically legalising tax evasion for a large number of right-wing, medium and high-income voters. For financial firms and banks no control or limit on their activities will be introduced. This will make Italy a neoliberal business paradise, competing with Ireland in the race to the bottom of business taxes in Europe, offering some room for the survival of Italy’s small businesses dramatically hit by a decade of crisis. In this way, the transfer of income to the richest 20% of Italians will be huge, with the very rich benefitting the most. Berlusconi would have never been able with his past majorities to introduce such a pro-rich agenda.
                            Spreads widening to 175 basis points, btw

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                              GY, as far as I can tell Conte’s essential qualifications are a) surface respectability (thought to be important in terms of Presidential assent), b) a lack of intense attachment to either of the “partners”, and c) a strong willingness not to interfere with the guys who are really calling the shots.

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                                Somewhat improbably described as a two-sigma event in a research piece quote by Alphaville this morning. So many of these pesky black swans these days.

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                                  It appears that a lot of those who have been short for a while are doubling down

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                                    That article makes Five Star look like total mugs.

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                                      There is not an insignificant volume of evidence to support that view

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                                        I would never have guessed that the unhinged populist rage of Five star was going to be a gateway drug to out and out fascism.

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                                          Their signature policy, the one thing they seem to have gotten from the coalition agreement, is:

                                          More difficult is the implementation of the only ‘pro-poor’ measure long championed by the Five Stars: the so-called ‘citizen income’. In the programme this is reduced to an income support of €780 a month for a maximum of two years for unemployed Italians (no residents with foreign citizenship will obtain it) ready to accept any job offer; no figure for potential recipients and funding for implementing it is mentioned.
                                          A pimped-up Jobseeker's Allowance. FFS.

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                                            This is what I call "populism". Bollocks about cutting taxes making everybody better off.

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                                              This Munchau piece from the weekend is quite different, but also interesting, and no doubt helped accelerate the sell-off

                                              Comparing today’s populists and nationalists to the Nazis and fascists of 80 or 90 years ago is pointless. But I see much clearer parallels between the fall of Germany’s Weimar Republic and the vulnerability of Europe’s liberal elites. Some of the current defenders of the liberal order are making the same mistake as, for example, the German Centre party of the early 1930s, by underestimating the scale of the threat that they face.

                                              Harold James, a professor of history at Princeton University, has recently given us 10 reasons why our political systems today share some of the self-destructive characteristics of the Weimar Republic. One is the strength of the economic shock. Another is an excessive optimism about the power of constitutions to protect the system.

                                              I would like to offer some additional thoughts on the role of complacent narratives — the stories we tell each other that make us feel better. As a commentator on eurozone affairs, for example, I keep hearing that an Italian exit from the euro cannot happen because it is not allowed. Italy’s constitution, for example, makes it impossible for a government to rescind international treaties by referendum.

                                              This argument not only overestimates the power of constitutional law to protect us from illegal acts by governments, as Prof James pointed out. It also ignores the circumstances under which a country would leave the eurozone. All its government would need to do is engineer a financial crisis, declare force majeure, and introduce a parallel currency over a long bank holiday weekend. There is nothing in the Italian constitution to prevent a financial crisis or to stop a government from giving people the means to buy food.

                                              To someone like Matteo Salvini, a financial crisis is not a threat but a promise, one that allows him to pull the plug on euro membership

                                              This is also why it does not matter why the Italian coalition agreement no longer contains a formal euro exit clause, as it did in an earlier draft. We know that Matteo Salvini, leader of the League, wants to create conditions for a euro exit. We also know that some, though not all, members of the Five Star Movement, their potential partners in government, want that too. That is all we need to know.

                                              Another argument is that the financial markets would frustrate such a rebellion. Those who make it again commit the error of attaching the mindset of a centrist politician to that of Italy’s new leaders. Centrists, in Europe at least, have an emotional need to be considered fiscally conservative. Centrists look at bond spreads the way deer stare at headlights. To someone such as Mr Salvini, a financial crisis is not a threat but a promise, one that allows him to pull the plug on euro membership.

                                              A third argument is the supposedly super-human ability of the Italian president to prevent disaster. Italy’s constitution has (wisely) given the president strong powers. The president has the right to appoint ministers and can refuse to sign legislation deemed incompatible with the constitution. But presidential mandates are finite, and even a strong president such as Sergio Mattarella cannot tell MPs and senators to pass a eurozone-compliant budget.

                                              A fourth argument is that the centre will always be able to stitch things up. Really? I recall the attempt by the Democratic party and Silvio Berlusconi’s Forza Italia last year to change the electoral system in their favour. They miscalculated the sheer scale of support of the populists. You cannot save liberal democracy through gerrymandering.

                                              The centrists are now resorting to the hope that the politically rehabilitated Mr Berlusconi could once again strengthen their hand. I see no evidence for this view. And what does it say about Italian politics if its future could only depend on the man who is primarily responsible for the country’s economic disaster?

                                              Fifth, I hear it said that, if all else fails, there is always the European Central Bank. Mario Draghi, its president, saved the eurozone in 2012, but can he save liberal democracy? His main anti-crisis tool, a programme known as Outright Monetary Transactions, is irrelevant in this case. OMT was designed for rule-compliant governments that find themselves under a speculative attack by investors. That is not the case here.

                                              Finally, there is the hope that the economic recovery will benefit the centrist parties. I think the opposite is the case. Five Star and the League will generate a recovery through a large fiscal stimulus — and will gain the credit for it. They are in power precisely because the centrists have failed to deliver on the economy. The truth is that there is no such thing as a technical backstop for liberal democracy.

                                              Herein lies the main lesson of the Weimar Republic. If liberal democracy fails to deliver economic prosperity for a sufficiently large portion of the population over long periods, it ends — along with the financial and economic institutions it has created.
                                              ional thoughts on the role of complacent narratives — the stories we tell each other that make us feel better. As a commentator on eurozone affairs, for example, I keep hearing that an Italian exit from the euro cannot happen because it is not allowed. Italy’s constitution, for example, makes it impossible for a government to rescind international treaties by referendum.

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                                                Conte nomination confirmed.

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                                                  I really need to sort out that FT subscription.

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                                                    I know there’s some serious shit going down but can’t believe NOBODY has made a Conte gag...

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