Italian crisis: Impossible to overcome while inside eurozone?
Italy's President, Giorgio Napolitano, is holding meetings with senior politicians to form a caretaker government. But according to writer and private consultant Charles Crawford, the problem is there are many factors affecting Italy that are not really under its control because it is in the Eurozone, and therefore it cannot avert financial disaster.
“One of the things they have to do is satisfy certain objective targets, namely finding a plan to pay back the money they owe to investors round the planet. The other thing they have to do is come up with subjective factors, namely to have people in charge of Italy who are convincing and credible. I think it is fair to say that Berlusconi had stopped being convincing and credible and Monti looks like a good choice,” he explained.
Greece has also installed a new government and a new Prime Minister, but simply changing the faces in power will not necessarily make much difference, believes Crawford, who says there are obvious similarities between Italy and Greece.
“All the countries in the eurozone which are getting these debt difficulties are having the same problem. This is because they are in the eurozone and cannot devalue their currencies. In effect they are left with borrowing money from the international market and the other eurozone members. They are left with reducing government spending, which is sacking people, which is not popular with the people who are sacked. They are reduced to putting up taxes, which is not popular with everyone else," he explained.
“Once you’ve got into these very strong difficult debt situations, the ways out are all very painful. So in both Greece and Italy and in some other eurozone countries the choices available to the leaders of the countries concerned are very limited. That is why the eurozone is coming under stress – because the political and psychological pressures are coming up against the way the whole thing was set up in the first place,” he added.
Crawford emphasized that the crisis in Europe is like an impressive house where the foundations, it turns out, were not very well built. And it is very difficult to repair the foundations while inside the house and without moving somewhere else.
“And the euro members cannot go anywhere else,” he said. “The eurozone is coming under stress – you can see this would not have been happening two or three years ago. It is going to be very difficult, I do not think there will be any easy options. The option that most people seem to favor is that the European Central Bank should print a lot of money, but there are clear policy problems with doing that on the scale required. Europe has to find a way to become a lot more credible.”
Patrick Young, Executive Director of the investment firm DV Advisors, said that changing the prime minister will not immediate solve Italy’s problems – as its real problem is a huge amount of debt, which it needs to sell in the near future.
“The markets have lost faith not just in Italy, but in Europe’s so called political leadership, who are doing anything but leading,” he told RT.
As for Greece, it must default on its debt to get a “wholesale restructuring.” But at the root of the problem are banks in France and Germany, which do not want to lose their money, he said.
“Greek people need to secure their own destiny and decide what they want to do, because piling austerity on austerity is just going to lead to more militancy and, tragically, people starving in the streets.”