4.3 The transfer-driven southern Europeans

4.3 The transfer-driven southern Europeans

Many politicians in southern Europe no longer view the euro positively. The southern European countries have lost substance with the Euro, the youth unemployment figures are high and, despite some austerity efforts, no turnaround has been achieved.  Today, the south does not know how it will survive the next recession.

Photo: The Italian Interior Minister, Matteo Salvini, Italy's new strongman.

Reform-driven governments are being voted out of office, not least because most people have not experienced any improvement in their situation as a result of the reforms that have taken place. The reason for the rejection of reform is certainly also due to the role of the ECB. With his "whatever it takes" doctrine, Draghi initially created the conditions for keeping the countries of the south in the euro. But, with this policy, he has also opened the way for them to stop the reform process. When the citizens realised that the ECB was going to save them, the reformers in Italy and Spain saw any chance they had disappear. While the population was willing to support some reforms at the beginning of the crisis, the situation has now changed. The reformers have given up or been voted out of office. In Greece, the Syriza government has suspended its reform programme. In Spain, the conservatives have been voted out and replaced by a social democratic government. In Portugal, the left has also taken over the government. In Italy, the social democratic reformer Renzi was voted out of office and two EU-sceptic movements came to power to end the hated austerity policy. In France, despite initial successes, the reformer Macron faces enormous difficulties - with his price increases for petrol and diesel, Macron has angered the working population and unleashed the Yellow Vest Movement. Italy and Spain have even withdrawn reforms.

If a country were to leave the euro system, its assets and liabilities would have to be settled in full.
Mario Draghi on 18 January 2017 in response to the question of what would happen to the Target 2 balances in the event of a withdrawal from the euro.

In 2015, the Greek government held a referendum on the acceptance of the agreements with the creditors. Around 61% of the votes cast were against accepting the outcome of the negotiations and therefore, de facto, in favour of Greece's withdrawal from the euro. The result of the referendum was ignored under pressure from the EU. Italy, too, made some noises about parallel currencies and the exit from the euro. Now that the EU has vehemently opposed such considerations, it is clear to politicians in the south that a single-handed exit from the euro would inevitably lead to national bankruptcy.

Italy could not survive even a small recession.
The former IMF Director Carlo Cottarelli on 8 September 2018.

Without the opportunity to even talk to the EU about debt and other liabilities such as Target 2 balances, they have only one option: Demands for more and more transfers and debts. As a rule, southern Europeans are forced to make various voluntary commitments in exchange for fresh money. For example, southern Europeans had to accept tougher fiscal rules in order for Germany and others to agree to the introduction of the ESM. These voluntary commitments serve to reassure northern European taxpayers and are usually quickly forgotten in the south after they have been signed.very euro printed by the ECB increases the blackmail potential of the southern countries. Its extent was evident in the Italian government's policy in autumn 2018: The Italians presented a budget that quite clearly would breach the deficit criteria and further agreements in the euro system. At first, they met with strong resistance from the Commission, which is currently fighting for the implementation of the third pillar of the banking union and is eager to present itself as guardian of the treaties.

Photo: Juncker's openness is sometimes sobering. What you allow the French to do, you can't deny the Italians.

When France then also introduced government spending that was incompatible with the budget targets and Italy made some corrections, the Commission gave up its resistance. France enjoys a certain carte blanche in Brussels. In 2016, replying to a question about why the EU Commission would not introduce infringement proceedings against France, Commission President Juncker simply said: "Because it's France".


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