Until today the Italian prime minister, Matteo Renzi, did not perform well if it comes to lifting his country and the European Monetary Union (EMU) as a whole out of crisis (see e.g. our analysis here and the guest article by the political scientist Patrizia Storelli-Felten here). However, the major Italian newspaper La Repubblica published today an open letter by Renzi which could mark a historical turning point to a rational economic policy in the EMU.
The letter is a straight forward answer to an article by Eugenio Scalfari, journalist and politician, founder of La Repubblica and its former editor-in-chief, still writing columns for the newspaper. Whereas Scalfari had raised the topic of an European treasury “Superminister”, Renzi argues: “…the question of a European Treasury ´superminister´ is not the main point. The problem of the economy in the Union today lies not in the superminister, but in its direction.”
The problem of the economy in the Union today lies not in the superminister, but in its direction.
And then Renzi does something which can be seen as a fundamental precondition for a turnaround and which is hardly found among politicians: he admits mistakes. He would, of course, not be a politician if he would have accused himself. However, with regard to his frank statements on the core problems of economic policy we can easily overlook this. Renzi comes to the point by comparing the EMU with the USA. A comparison we did for years in our analysis to explain the failure of economic policy in the EMU, e.g. by comparing speeches of Mario Draghi and his U.S.-counterpart Janet L. Yellen. Whereas Draghi was only marginally bothered by the historical high incidence of unemployment, Yellen nearly only focused on it. “To get to the point:”, Renzi argues, “during the past eight years of democratic presidency, the United States has bet on growth, investments and innovation, while Europe was betting on austerity, currency and strictness. From an economic standpoint the United States is faring better than they were eight years ago. Europe, on the other hand, is faring worse. If we had to sum it up in a headline, or for a tweet if you prefer, we would write: Obama did well. Barroso didn’t.”
Of course, Renzi cannot declare austerity as a complete failure, since he himself has practised it until today. So he laments only: “Austerity alone is not enough.” So what! He outruns this by far when he says: “Insisting for eight years straight on a cure that does not work is a form of ´therapeutic obstinacy´.”
Insisting for eight years straight on a cure that does not work is a form of “therapeutic obstinacy”.
This direct naming of an important scandalous part of economic policy in the EMU is extraordinary and so far unique among top-ranking politicians in the EMU. This scandalous economic policy is, of course, obvious since years. We analysed and explained it again and again. However, at least Renzi spoke it out now. And not only this. There is another perhaps even more critical point he raised straight forward which should ring a bell to all German politicians, since other countries, e.g. France, could follow, though, unfortunately, France has not yet woken up but is moving in the opposite direction, following more or less the German receipe for austerity called Agenda 2010: “Italy follows the rules, and this year our deficit will be the lowest it has been in the past decade (2.5%). Germany, on the other hand, does not follow the rules, and its trade surplus still exceeds the Commission guidelines.”
Germany, on the other hand, does not follow the rules, and its trade surplus still exceeds the Commission guidelines.
Son of a gun! Ok, Renzi then dares to praise his “reforms” without any empirical substance. However, what matters in this case is, Renzi names the direction of economic policy and the German trade surplus as core problems of the Eurozone crisis and not the rules governing the EMU: “The problem lies not in the rules. The problem is the economic politics of this Europe of ours.”
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