EU reject Italian budget draft

Clanrickard

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Just give it time.
It may happen it may not. However given the two governing parties at the last poll had over 50% support I wouldn't bank on a total climb down. The Commission bent over to accommodate Spain and I can see much wiggle room here.
 


flavirostris

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[Tweet]1068565382955483136[/tweet]
 

Dame_Enda

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I am a supporter of critical engagement with the EU. But fairs fair. Italy knew the rules when they joined the Euro and since the Stability Pact and then the Fiscal Compact. It is reasonable to say that like nearly every western EU member they have almost never had a referendum on an EU treaty (except one I think). But when you are sharing a common currency, your economic policies will affect the strength of that currency. That makes it the business of the Eurozone but only insofar as it threatens the stability of the currency. Beyond that the EU should not meddle.

As I said before, Italy like Greece was prematurely admitted to the Eurozone before it had shorn itself of its Meditteranean, Siesta type spendthrift budgetary issues.
 

Mr. Jones

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I am a supporter of critical engagement with the EU. But fairs fair. Italy knew the rules when they joined the Euro and since the Stability Pact and then the Fiscal Compact. It is reasonable to say that like nearly every western EU member they have almost never had a referendum on an EU treaty (except one I think). But when you are sharing a common currency, your economic policies will affect the strength of that currency. That makes it the business of the Eurozone but only insofar as it threatens the stability of the currency. Beyond that the EU should not meddle.

As I said before, Italy like Greece was prematurely admitted to the Eurozone before it had shorn itself of its Meditteranean, Siesta type spendthrift budgetary issues.
Your argument is logical of course Dame but considering their debt to GDP ratio is currently at 132% surely they need to try something different. I'm not suggesting their budget is going to turn things around but they may as well go down fighting / trying something different. They need to pull 5%+GDP growth for a decade out of somewhere or else it's curtains.

Italy is destined to go back to the lira sooner rather than later. Like the Greeks they need the ability to devalue their currency every 15 years or so.
 

McDave

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Have you noticed how much they've taken the mask off since Brexit. They're not even hiding their ambitions now with regard to migration, ending national sovereignty for good and the EU army.
... or you’re being paranoid.
 

McDave

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It's at the very least jumping the gun. Negotiations will result in compromise e.g. 0.1, 0.2%, enough for both sides to save face.

But why would a news org from a non-Eurozone, EU-exiting country deliberately claim an EU victory?
For the sheer hell of putting a cat among Europhobe unicorns.

Go down laughing?
 

McDave

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I am a supporter of critical engagement with the EU. But fairs fair. Italy knew the rules when they joined the Euro and since the Stability Pact and then the Fiscal Compact. It is reasonable to say that like nearly every western EU member they have almost never had a referendum on an EU treaty (except one I think). But when you are sharing a common currency, your economic policies will affect the strength of that currency. That makes it the business of the Eurozone but only insofar as it threatens the stability of the currency. Beyond that the EU should not meddle.

As I said before, Italy like Greece was prematurely admitted to the Eurozone before it had shorn itself of its Meditteranean, Siesta type spendthrift budgetary issues.
A lot of sense here. When you join a club, you play by the rules.

Currently 3/4 of the way through Mody’s book on the Euro. I’ll hold fire on what I ultimately think of Greece and Italy until I finish, but on technical grounds they should not be in the Euro.
 

statsman

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Italy government will send revised version of budget to EU by next week: source By Reuters - Get the latest financial news. Free real time quotes, 25 Trading Tools, Technical analysis, and much more.

ROME (Reuters) – The Italian government will send a revised version of its budget to the European Union by next week, a Treasury source told Reuters on Wednesday.

Earlier in the day cabinet undersecretary Giancarlo Giorgetti said that the government could cut nearly 4 billion euros from a promised relaxation of pension rules and a new income support program.
 

flavirostris

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McDave

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Someone made a comment recently on twitter that the EU's increasingly controlling behaviour is hiding deep insecurity that the project may be collapsing.
‘Someone’. ‘On twitter’.

????

You’re truly away with the fairies. :)
 

Clanrickard

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. Italy knew the rules when they joined the Euro and since the Stability Pact and then the Fiscal Compact. I
So did France and Germany under the Maastricht Treay but they ignored the rules and the rules were changed.

A lot of sense here. When you join a club, you play by the rules.

Currently 3/4 of the way through Mody’s book on the Euro. I’ll hold fire on what I ultimately think of Greece and Italy until I finish, but on technical grounds they should not be in the Euro.
As above.
 

McDave

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So did France and Germany under the Maastricht Treay but they ignored the rules and the rules were changed.



As above.
Germany were given leeway to help manage reunification - a once-off event. They’re now in compliance, with a budget surplus and decreasing debt. They’re in generally good economic shape.

France are a different case. They’ve constantly flouted the Maastricht criteria. They’ve lost leadership credibility as a result.

Italy are in worse position than France. It’s up to them to decide if they can stick with the Euro. If they crash out, their central bank is on the hook for a massive debt.
 

McDave

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I defer to Ashoka Modi, IMF's head during our bailout - quote from IT review of his book "Eurotragedy"

"And the Orwellian title “Stability and Growth Pact” given, in 1997, to a poorly thought out and overly mechanical set of fiscal rules – just as likely to destabilise economies and slow growth – is rightly called out."

Eurotragedy review: What Europe got wrong in the euro crisis, by a troika insider

I'm feeling very conflicted as I actively campaigned against the runaway public/private borrowing/spending in the leadup to the crash.
Having just finished Mody’s book, I certainly wouldn’t defer to him. Although the book is well written and readable, it’s little more than a recap of a decade or more of Anglo-Saxon bias against the Eurozone, and Germany in particular. Economics is such an imprecise science, yet everything about the Euro is black. A lot also of ‘that’s all very well in practice, but how does it work in theory’. The Euro, of course, is still standing.

Mody pays no attention to the politics of the Eurozone, yet feels constrained to tell its sovereign, democratic nations to bail out the profligate. He has particular disdain for the democratic will of creditor nations, and a strange proclivity for no-strings bail-outs.

Technically, neither Greece nor Italy should be in the Eurozone. But their inclusion was a political judgement, in the hope they can be shown a path to economic redemption. It may not work, but it has to be given a run. The payoff if it does is very positive for European politics.

What annoyed me the most was the manner in which Mody racked up every possible technical criticisms of the Eurozone, all the while giving a free pass to the Fed. Not least Greenspan’s post-9/11 QE free for all, which Greenspan himself admitted was an overreach. Mody doesn’t even mention it.

All in all, Mody’s book is a polemic. It lacks even a modicum of balance. A huge disappointment.
 

McDave

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EU mission accomplished?

It's been the stormiest year for Italian bond markets since the 2011 euro zone crisis, but as 2018 ends, investors who fled mid-year are returning and their worst fears -- euro exit, junk ratings and reckless spending -- have proved unfounded.

Often described as bond vigilantes for the way they impose fiscal discipline on profligate governments, debt investors punished Italy hard for proposing a draft budget deficit three times higher than it had pledged. Sovereign borrowing costs surged to five-year highs.

That creditor strike appears to have achieved its aim. Government bond yields, already down a fifth from the highs, lurched lower again this week after the conviction grew that a budget row with the European Commission would blow over without Rome incurring significant penalties.
https://in.mobile.reuters.com/article/amp/idINKBN1OC25V
 

TweetyBird

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Salvini and co have dodged a financial and political bullet, for now, with the ECB taking over one of Italy's troubled banks. Salvini has been hyper critical of tax payers money being ploughed into troubled banks has been very quiet over Wednesdays decision by the ECB. At some point the Italian government though will have to make a choice as to how to deal with the troubled bank. If they choose to fund they can be accused of utter hypocrisy given how they criticised the previous government. For now the can is kivked temporarily down the road but the thing about being the ones actually having to make decisions is the possibility of making a particularly unpalatable one.

Italian populists dodge first big banking test POLITICO
 

Tacitus

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Having just finished Mody’s book, I certainly wouldn’t defer to him. Although the book is well written and readable, it’s little more than a recap of a decade or more of Anglo-Saxon bias against the Eurozone, and Germany in particular. Economics is such an imprecise science, yet everything about the Euro is black. A lot also of ‘that’s all very well in practice, but how does it work in theory’. The Euro, of course, is still standing.

Mody pays no attention to the politics of the Eurozone, yet feels constrained to tell its sovereign, democratic nations to bail out the profligate. He has particular disdain for the democratic will of creditor nations, and a strange proclivity for no-strings bail-outs.

Technically, neither Greece nor Italy should be in the Eurozone. But their inclusion was a political judgement, in the hope they can be shown a path to economic redemption. It may not work, but it has to be given a run. The payoff if it does is very positive for European politics.

What annoyed me the most was the manner in which Mody racked up every possible technical criticisms of the Eurozone, all the while giving a free pass to the Fed. Not least Greenspan’s post-9/11 QE free for all, which Greenspan himself admitted was an overreach. Mody doesn’t even mention it.

All in all, Mody’s book is a polemic. It lacks even a modicum of balance. A huge disappointment.
I had similar thoughts while reading it. Mody's criticism was similar in nature of other American economists, e.g. Paul Krugman during the crisis, because he pointed out why according to his economic logic the attempts to solve the crisis were flawed or even harmful, but his own suggestions completely ignore the political realities in Europe.

It is understandable (though deeply annoying) that someone like Krugman has a very limited grasp on how the EU works, but Mody, as former head of the IMF, should know differently. Like many observers he seems to be completely focused on Germany as an actor, thereby ignoring that other countries had a say, and even a veto in how to help the ailing countries. And arguably his biggest blindsight is how he rareley acknowledges how German institutions prevent "key actors" like Merkel and Schäuble to act like they - according to his opinion - should have acted. It is worth remembering that Merkel had to fight tooth and nail to get the German parliament to approve the bailout-funds, and the German Constitutional Court set very clear legal limits on what he would approve. To think that Germany - or other countries who were even more sceptical towards bailing out Southern Europe - could have offered Greece better terms without losing the support of their own voters is at best very questionable.
 

McDave

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I had similar thoughts while reading it. Mody's criticism was similar in nature of other American economists, e.g. Paul Krugman during the crisis, because he pointed out why according to his economic logic the attempts to solve the crisis were flawed or even harmful, but his own suggestions completely ignore the political realities in Europe.

It is understandable (though deeply annoying) that someone like Krugman has a very limited grasp on how the EU works, but Mody, as former head of the IMF, should know differently. Like many observers he seems to be completely focused on Germany as an actor, thereby ignoring that other countries had a say, and even a veto in how to help the ailing countries. And arguably his biggest blindsight is how he rareley acknowledges how German institutions prevent "key actors" like Merkel and Schäuble to act like they - according to his opinion - should have acted. It is worth remembering that Merkel had to fight tooth and nail to get the German parliament to approve the bailout-funds, and the German Constitutional Court set very clear legal limits on what he would approve. To think that Germany - or other countries who were even more sceptical towards bailing out Southern Europe - could have offered Greece better terms without losing the support of their own voters is at best very questionable.
Indeed! Reading Mody was like reading the FT and London Times throughout those difficult years. Everyone of that ilk seemed to think it was Germany’s business to pay other countries’ debts, or underwrite Eurobonds. Krugman and Stiglitz were particularly one-dimensional. Reading the FT, one almost came away with the impression everyone in the paper had it in for the Germans.

To Germany’s credit, they stuck to their guns. This experience will have taught them a lot about who their friends really are. It’s no coincidence that Merkel subsequently marked the US’s card on the EU pulling more together. It’s also well worth reading Tooze’s Wages of Destruction, particularly about how Schacht kept the Germany macroeconomy going in the face of reparations and an international collapse. The Germans are nothing if not resilient and inventive.
 


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