The Italian government has come out with an aggressive response to perceived insinuations from the leaders of France and Germany that Italy does not have a handle on its fiscal affairs. The Italians point out that they have a primary budget surplus which excludes interest costs), demonstrating better fiscal ‘virtue’ than either France or Germany.
Most importantly, Italy argues that the ECB has made the crisis worse as it refuses to stand at the ready as a lender of last resort like other central banks, an argument I have also made. Italian leader Berlusconi goes further and suggests that the EU is only facing a liquidity crisis in Italy’s case, the reason Berlusconi argues that the ECB should stand at the ready.
But Berlusconi also launches a blistering personal attack, presumably against Angela Merkel (and Nicolas Sarkozy), writing that “no one is the self-appointed commissioner” of the euro zone. Wow.
Below is my translation of this press release statement which the Italian government has issued. (As my Italian is weak, feel free to suggest corrections.)
24 October 2011
“Italy has decided on and is about to complete what is in the nation’s and Europe’s interest and which corresponds to its sense of justice and social equity. We honour our debt on time, we have a primary surplus that is more virtuous than that of our partners. We will balance the budget in 2013. There is nothing to fear regarding Europe’s third largest economy, an extraordinary country and founding member of the eurozone which values supranational cooperation as highly as its proud independence.
As for the turbulence of sovereign debt and banking crisis in France and Germany in particular, we have firm positions, which we will take to the next EU summit. The euro is the only currency that does not have – like the dollar or the pound or the yen – a lender of last resort behind it, structurally prepared to defend its credibility due to the aggressions of financial markets. This situation must be corrected once and for all as this crisis affects all European economies.
We are making some tentative step towards a government of the euro zone, but much remains to be done. Angela Merkel’s Germany is aware of this, and its work will have the benefit of our loyal cooperation. No one is the self-appointed commissioner who can speak on behalf of the elected governments and the citizens of Europe. Nobody is able to lecture their partners. On the other hand, all of the Italian ruling class – if it wants to be treated as such rather than as a chorus of demagogues – should join in the effort to develop the necessary structural reforms of great importance which the Government has taken and for which further decisions must be made.
Italy’s labor and business communities know how things are. They want us to promote freedom and competition strongly and do not want to participate in power struggles, domestic or European.
It would be lovely if for once Italy’s parties and factions could shake off old habits, abandon their doom and gloom, and come together for the benefit of the country.
From here, you can start the healing and the recovery."
Source: Dichiarazione del Presidente del Consiglio, Governo Italiano