Thread: EU Regime Change: Greece & Italy a Bankers' Coup

Regime Change in Europe: Do Greece and Italy Amount to a Bankers' Coup?

By Stephan Faris Friday, Nov. 11, 2011


Italian Prime Minister Silvio Berlusconi looks on as he arrives for a debate on a package of economic reforms intended to reverse a collapse of market confidence at the lower house of the Parliament in Rome November 12, 2011. Alessandro Bianchi / Reuters

The voice of the people isn't something the markets seem to want to hear these days. First there was Greece, the cradle of democracy itself, where early this month, the merest mention of a referendum offering its citizens a say in a series of severe austerity measures was enough to send the markets into a tailspin. The ultimate result: the collapse of Prime Minister George Papandreou's ruling coalition, the rejection of any notion of bringing the proposal before the people, and the installation of a caretaker government under the leadership of Lucas Papademos, a former vice president of the European Central Bank and, until earlier this week, a visiting professor at Harvard.

Then came Italy. As Athens threatened to go under, Rome found itself under pressure not so much for its level of debt — which though high is generally considered within the limits of sustainability — as much as for the erratic behavior of its flamboyant prime minister, Silvio Berlusconi. On Monday, investors seemed to make the collective decision that he could no longer be trusted at the helm of the euro zone's third largest economy and sent Italy's cost of borrowing up towards crisis levels. By the end of the week, not only was Berlusconi finished, so was the very idea of holding a vote to replace him. The markets had spoken, and they didn't like the idea of going to the electorate. "The country needs reforms, not elections," said Herman Van Rompuy, president of the European Council on a visit to Rome Friday.

Indeed both Papandreou and Berlusconi had been respectively berated and belittled by Angela Merkel of Germany and Nicolas Sarkozy of France. It is almost as if Franco-German displeasure combined with the disapproval of the markets was enough to bring about regime-change. As in Athens, the plan in Rome is to replace the outgoing prime minister with somebody from outside the political class. Mario Monti, a neo-liberal economist and former EU commissioner who seems designed with the idea of calming the markets in mind, is expected to take over from Berlusconi after he resigns Saturday. For many in the two battle-scarred capitals, the fact that Papademos and Monti aren't directly accountable to the public isn't a problem. It's the reason they're being called in. Both countries have been tasked by the EU to attempt to restore confidence through deep cuts, sharp tax hikes and painful restructurings of the economy. The two technocrats have been tapped to lead because no politicians wants to face the electorate after doing what the markets have decreed needs to be done. "Democracy has very serious limitations." says Roberto D'Alimonte, a professor of political science at Rome's LUISS University. "It has the ability to kill itself, to self-destruct. [Bringing in a technocratic government] is not good or bad. It's necessary."

In Greece, the political class lost its credibility with the blowout over the referendum, says George Pagoulatos, a professor of European politics and economy at the Athens University of Economics and Business. Though the vast majority of the public is not eager to undergo the unpopular austerity measures, the probable consequence of not passing them — abandonment by the EU and a chaotic exit from the euro — is seen with even more distaste. Papademos, a respected economist untainted by the political slugfest, is thought to have the credibility and legitimacy to see the program through, allowing the two main political parties that have agreed to support him to renounce responsibility when the reforms start to pinch. "Theoretically, he has the capacity to apply policies that are politically costly," says Pagoulatos.

In essence, what a technocratic head of government allows a country's elected officials to do is disperse the cost of passing unpopular legislation. By carefully hewing to the middle of their country's political spectrums, and pulling together packages of cuts that spreads the pain as evenly as possible among all sectors of society, Papademos and Monti, neither of whom would likely ever stand for election, have a chance to pass reforms that would otherwise be impossible. "The key in Greece and Italy and everywhere else is fairness," says D'Alimonte. "And that can only be done by a government that is not responsive to a single electoral base."

Of course, neither economist will be able to push anything through if there isn't a consensus that something must be done. And the lack of direct voter buy-in heightens the risk of populist dissent down the road. But, until now, the motivation has been provided by the threat of a market meltdown and a subsequent economic collapse. In Italy, Mario Monti was greeted with applause in the Senate Friday, a day in which the country's stock exchange gained 3.68% as stability seemed to be at hand.

Yet, until the moment he's sworn in, Monti's ascension is far from a done deal, and it didn't take long after the markets had closed for the weekend for it to start to come under fire. Though Monti, a former advisor to Goldman Sachs, is heavily championed by the country's respected president, many in parliament have spent the week whispering that Berlusconi's ouster amounts to a "banker's coup." "Yesterday, in the chamber of deputies we were bitterly joking that we were going to get a Goldman Sachs government," says a parliamentarian from Berlusconi's government, who asked to remain anonymous citing political sensitivity. With less than 24 hours until Berlusconi's expected resignation, other names, closer to the outgoing prime minister, were beginning to be floated. If the markets object, the world will find out as soon as the opening bells ring on Monday.

http://www.time.com/time/world/article/ ... z1db31Z6Jd

France 'could be next victim of eurozone crisis', Osborne warns after Berlusconi quits

Chancellor says Sarkozy must answer doubts about his nation's debt

Disgraced Italian PM threatens to stand at next election due within 18 months

By Tim Shipman and Nick Pisa
Last updated at 1:11 PM on 14th November 2011
209 Comments

George Osborne warned last night that France is being drawn into the same economic chaos as Italy.

As the curtain fell on Silvio Berlusconi’s premiership, the Chancellor said his EU counterparts were ‘terrified’ by the debt crisis which is dragging major eurozone economies down the same path as bankrupt Greece.
Former EU commissioner Mario Monti was parachuted in to run the Italian government yesterday, with a cabinet primarily made up of technocrats and academics rather than elected


Forced out: Silvio Berlusconi waves to supporters outside his residence in Rome yesterday



Mr Osborne made clear the crisis will not be over until France too has answered doubts about its debts and the rising costs of borrowing on the markets which effectively ended Mr Berlusconi’s premiership.

In a warning to French president Nicolas Sarkozy, Mr Osborne said ‘the immediate crisis in hand’ was ‘dealing with the lack of confidence in Italy’ and ‘dealing with the questions that have been raised over countries like France’.

‘That is where all our efforts have been focused on at the moment,’ he said. ‘We’re not any more just talking about countries like Greece, we’re talking about big countries like Italy and France . . . having to take very, very difficult decisions.’

Contrasting the success of Britain in reassuring the markets that the Government is serious about tackling the UK’s huge debts, the Chancellor pointed out: ‘France has had two emergency budgets in the last three months.’

Arguing that Britain is better prepared for the storm, he told the BBC Politics Show he was not ‘a eurozone finance minister who is terrified he can’t sell his country’s debt tomorrow’.

After a frantic day of 25 meetings behind closed doors, Italian president Giorgio Napolitano summoned Mr Monti to his palace to ask him to form a government before the markets open this morning.

Mr Monti said: ‘Our efforts will be focused on resolving the financial situation. We owe this to our children.’


George Osborne (left) has warned that France, under President Nicolas Sarkozy is being drawn into the Eurozone economic chaos

A day after he was jeered out of office, Mr Berlusconi agreed to support Mr Monti in implementing sweeping austerity measures to restore confidence in the Italian economy.

In a TV address last night, the 75-year-old said his resignation on Saturday was a ‘declaration of love for Italy’ and demanded the European Central Bank act as lender of last resort for the countries of the euro.
David Cameron will echo that call on a trip to Berlin this week, where he aims to persuade German chancellor Angela Merkel to ditch her opposition.


Calling for change: Tony Blair warned that the collapse of the euro would be 'catastrophic'

But in a move likely to spook the markets, Mr Berlusconi threatened to return to power at elections due within 18 months. He also said he had been forced to step down because of ‘threats and blackmail’.

EU power brokers, including Mr Sarkozy and Mrs Merkel, effectively engineered a coup against Mr Berlusconi in Italy and installed a technocratic government in Greece.

Last night Mr Osborne said that if they want a long-term solution to the crisis, they will have to effectively set up a central financial government for the whole eurozone.

In words likely to enrage Tory eurosceptics, he demanded full scale fiscal integration in euroland – and said nothing about the UK reclaiming powers from Brussels in return.

Former prime minister Tony Blair warned that the collapse of the euro would be ‘catastrophic’ and backed calls for major institutional change.
He said: ‘This is the biggest challenge for the European Union since it began.

'You have got to have some measure of strong fiscal coordination, alongside monetary union and you have got to have major reforms for the European social model and the European budget.’

But bizarrely he insisted Britain should still join the single currency one day. ‘If you’re looking at the very long term and assume the euro stabilises, we should certainly always keep the option open of doing it,’ he said.

http://www.dailymail.co.uk/news/article ... quits.html

Tony Blair - Eurozone Breakup Would Be 'Catastrophic' http://www.guardian.co.uk/business/2011 ... ne-breakup

To Save Europe They Had To Kill Democracy

http://www.businessinsider.com/the-rise ... at-2011-11