No one is really fine in the European gas chamber but – just to paraphrase Orwell – someone is finer than the others.
It is Germany, as you can easily imagine.
Earlier this year, the German industrial production recorded no annual growth and consumer confidence was at very low levels.
However, as is now well-known, since the beginning of the Euro phase Germany has destroyed our manufacturing industry and is replacing us in the major global markets: China, Russia (except for the crazy sanctions due to the situation with Ukraine – an operation much more linked to the US and NATO actions than to the Russian ones).
Hence the crisis of German production was short and regarded the relative compression of the Chinese market, as well as the much more severe negative cycle of the US production.
However, when markets are stolen from the others, everything gets easier and quicker.
The story began with the Social Democrat Chancellor, Gerhard Schroeder, shortly before the phase of the EU single currency started, when – also thanks to the “reabsorption” of the German Democratic Republic (GDR) still underway – he managed the forced lowering of the German mark value and the companies’ production costs, already below the expected Euro waterline, so as to make the “great German factory” already competitive even before the introduction of the single currency.
Moreover the Euro certainly enabled Italy, which was not at all prepared for the single currency, to reconstruct its own debt record, which was approaching the end with an imminent “Argentina-style” perspective.
But the single currency, inevitably too “high,” destroyed the purchasing power of wages and salaries, by halving them, and doubled both production costs and consumer prices.
Italy experienced an 80% deflation, which lasted six month, of which you can easily imagine the social effects.
Social effects experienced not even after the Second World War lost – and that says it all!
Hence Italy was forced to increase exports, which made us gain some positions on the world market, but destroyed – due to an usurious and virtually absent ruling class – the great State-owned industry, sold at a loss, however with one-off “transfers and payments” to the old and new political forces.
Furthermore, the shift to a stupidly “high” currency value further destroyed Italy’s banking system, which is now playing a secondary role compared to the large liquidity areas being created both within the EU and in the rest of the world.
In fact, Italy experienced recession for at least five of the past eight years.
Still today, Italy’s GDP is lower than in 1999 and its sovereign debt has grown by 133% since 1999. Furthermore, since the introduction of the Euro the national average productivity has steadily declined.
But what does it has to do with Germany? Certainly it has to do with Germany.
In fact, the European Union is unable to manage the huge German current account surplus – and indeed it remains silent before it. Said surplus is over 8% – a percentage that no EU Treaty allows and which also funds the current remarkable growth of wages and salaries in Germany (4.5% on average), besides refinancing the local domestic demand, which is the real engine of growth in the current phase in which exports are flagging.
Since the beginning of the 2006 crisis, caused by the US “financial bubble” on the European monetary and banking markets, Germany has slowly but relentlessly forced the other EU countries to be more fiscally “correct”.
This means to increase their domestic taxes in order to support the expected lower purchase of government bonds and to “cash” money to add to their coffers in case of few renewals of bonds at maturity.
Nevertheless, even freshmen in Business and conomic universities know that if taxation increases, domestic consumption will decrease and that if the internal market shrinks, there must be an equivalent share of exports offsetting that loss.
However, if the Euro external value changes for each individual country of the Area, Italy’s EU competitors recording a stronger and more stable external value of the Euro will take markets away from Italy also at equivalent prices.
This has meant basically destroying the Italian, Spanish and sometimes even French companies to favour both Germany and the German industrial expansion area beyond the old Iron Curtain.
Since the very beginning, the German labour outside German borders has supported the country’s expansion onto global markets at highly competitive prices, while Italy and the other regions which had not been cynically prepared for the Euro geoeconomics have collapsed under the weight of the unsustainable costs of their exports and international competition.
While former Italian President Ciampi was visiting China’s Great Wall, Chancellor Schroeder quickly landed in Beijing and in one single day signed all the contracts concerning the remarkable expansion of the Volkswagen Group into China.
It is worth recalling that this was exactly the same paradigm used by the Federal Republic of Germany (FRG) against the German Democratic Republic (GDR), reduced to an Anschlűss country, both to avoid the competition of Communist Germany’s companies, which were not performing so poorly, and to use – at a much lower cost – the labour force “released” from those areas.
Hence the model with which the Federal Republic of Germany (FRG) bought the German Democratic Republic (GDR) – with our money, and sometimes even with the GDR money – was replicated for the rest of Europe.
Incidentally, at that time the “moralistic” rules on rigour, which found many inexperienced advocates (but we would also say agents of influence) applied not even to Germany which, in the phase of “rigour”, made three-year investment plans accounting for 5.2% of GDP.
Also at geopolitical level, the strategic relationship between Germany and the United States makes economic sense: the pressure of sanctions against Russia, guilty of taking back what is its own in Crimea and part of Ukraine, undermines the economies more interrelated with Russia, including Italy’s – hence a crisis adds to the other.
The US interest is very clear: the more the European economic fabric and common interest crumble, the more the Dollar area – and, in any case, the US commercial and financial expansion area – is guaranteed and expanded.
The more the United States come back to Europe, the more the German bilateral power on the USA increases and the bilateral power of the other EU countries proportionally decreases. After the notorious “Arab springs”, the latter are now reduced to an internal struggle (such as Italy vs. France for Libya) or to a “joint action” – often fully ineffective – with the United States which, however, think they must walk out of the Middle East, after having madly set fire to it.
In a recently-published book, a CIA executive has candidly admitted that the United States “hoped that the democratic uprising would destroy Al Qaeda” – and we have seen with what tragic and uncontrollable outcomes.
Not to mention the case of the war in Syria and its impact on the EU welfare, which will shortly become totally unsustainable and will place the less cautious and far-sighted EU countries in a tragic situation while, on the contrary, it will create opportunities for profitable investment for the North European and US banks and private insurance companies.
After the EU restrictive rules on the EU Member States’ public budgets, with the 2011 regulations known as “Two Pack Regulations”, France has set itself – at least partially – against the financial (and later political) Germanization of the European Union, while Italy has continued to use the debt lever and the lucky chance provided by the ECB Governor, Mario Draghi, with the programme designed to repurchase – on the secondary market – the surplus of government bonds of countries like Italy.
But it will not last.
There are only two possibilities: either the sequence of “sacrifices” and budgetary constraints is applied – and forget about the story that States spend too much and badly, because all States do so – and hence Italy will no longer have a domestic market to support its industrial output, because it also has a low labour productivity, or it shall incur debt on financial markets and ultimately collapse under the burden of the interest generated by that debt.
Obviously, they will help us die.
Later, they will buy our companies at low cost so as to incorporate them in their European and global networks, with the national workforce that will be a variable – and not a constant – factor of business calculations and profits which will go abroad.
In 2013, Italy already ranked second in the list of Mergers and Acquisition (M&A) of German companies – and it just so happened during the crisis – and currently over 30% of the Italian companies which are now no longer nationally-owned have already been sold to the Germans.
Only in 2013, for example, we recorded as many as 23 deals of German small and medium-sized companies (SMEs) which acquired Italian companies, out of a total of 171 sales of national SMEs between 2013 and 2014.
Given the complexity of these operations, it is obviously not possible to speculate on the activities which are still in progress.
Hence the issue lies in undermining a country and then buy it at very low prices.
A strategy which has long been developed and that Italy, for the fatal inability of its ruling class, did not prepare on time, i.e. before the Euro’s entry into force.
What can be done? Getting out of the single currency is useless.
However, Italy must operate freely on the major global markets where the country can still compete with its European “allies” – and it shall do so quickly and with harsh and resolute methods.
And it must accept foreign to foreign transactions not denominated in Euro, as with China and the Russian Federation.
This is what good intelligence and a ruling class not consisting only of mere parvenus and upstarts, like the current ones, would be for.
Giancarlo Elia Valori * (@GEliaValori)
* Presidente della merchant bank “La centrale Finanziaria Generale S.p.A.”
– Presidente della “Cattedra sugli studi della pace, la sicurezza e lo sviluppo internazionale presso la Facoltà di relazioni internazionali della Peking University, nonché “professore straordinario” di economia e politica internazionale nello stesso Ateneo
– Honorable dell’Académie des Sciences dell’Institut de France