Euro crisis exposes political shortcomings

In the past couple of weeks, Greece and Italy have chosen two technocrat economists, Lucas Papademos and Mario Monti respectively, rather than politicians to lead new governments to confront the growing crisis in the eurozone and show the resilience needed to push through tough austerity measures.

The question now in both countries is whether the technocrats can succeed where politicians failed.

In Greece, the government is pushing through unpopular public sector cuts and tax hikes in exchange for more loans from the European Union and the International Monetary Fund, while Italy is highly indebted and suffering from anemic growth.

On the surface, both countries seem remarkably alike, but in Italy the economic fundamentals are far stronger than those of Greece.

Italian journalist and professor Lucio Caracciolo spoke to Kathimerini English Edition about the latest developments in Italy and similarities with the situation in Greece.

Caracciolo is rated one of Italy?s leading geopolitical analysts. He founded the geopolitical review Limes, which he still directs, and he teaches international relations at San Raffaele University in Milan and at Luiss Guido Carli in Rome.

Both Italy and Greece have appointed technocrats as prime ministers. Is this an indication of the ?financial elite? taking over policy instead of politicians? Are fears about whether these technocrats are working in the interests of the people justified?

I think that any person, whether he is a technocrat or not, who has been appointed to play an institutional political role immediately becomes a politician, but of course he does not lose his background and his technical experience financial and banking in this case. The problem is that politics requires technical knowledge and human knowledge. The limit of Lucas Papademos and Mario Monti is that they have never been in politics and never sought the popular consent without which you cannot do politics in a democracy. This economic crisis reveals the crisis of our policy. Our politicians have had to leave their seats, even for a short period, to make room for people who have never been in politics. Politics is no longer credible and for this reason the financial, banking and technical powers have taken their place.

In Greece and Italy, political leaders and MPs have been heavily criticized, sometimes attacked, as a result of the crisis. How much of the blame for the current economic problems should be attributed to politicians?

I think the economic crisis, especially for Italy, is a political crisis. For Greece things are different because of a different economic structure. Our debt problems are magnified because of our allegiance to a ?club? that did not purport to share the debt but only the currency. In this way we are sovereign over our debts but we have no control over the currency and the two things together cannot last for long. It is a miracle that they lasted until now. Europe was aware about the rigged debt of Greece and approved the trick. So I think there are strong political responsibilities and furthermore there is a problem which is related to the political architecture of the eurozone, which in reality prevents the proper functioning of the currency and in this way the economy. There are no sovereign state guarantees for the currency and as a result, no common economic and fiscal policy.

What kind of implications could the crisis have for the political systems in countries like Greece and Italy? For instance, some people fear the crisis could trigger social explosions that will make the return of extreme or nationalist parties more likely.

It?s true. Nationalist parties could get more votes because of the failure of our democracies and our economies and the resulting social unrest.

Many people believe that the austerity program that the troika has encouraged in Greece has damaged the economy rather than helped it. Do you think this is an accurate interpretation and is there a similar danger for Italy if it follows similar austerity policies?

I am not an economist but I think the kind of austerity measures imposed mainly by the Germans are measures which create a negative spiral and depress the economy without improving the debt, which eventually becomes worse. This leads to a reduction in consumption and of course a closure of export markets for German goods in this case. The result is that we are destroying ourselves.

What kind of policies can Greece and Italy employ to combat the crisis?

Greece, Italy and also Germany are not able to combat the crisis alone. Of course we need to do our homework in a reasonable way and we need time to do that. These measures cannot be imposed by any rating agency in a few hours because otherwise we would go straight into default. Financial markets also impose a time frame that politics and economics cannot possibly follow. We should also keep in mind that these exercises are done at the expense of people and not just on paper. People have blood, heads, hearts, passions, interests and wallets. So bear in mind that lab exercises tested on the people could be very dangerous.

Both Greece and Italy are terminal and transit points for important gas pipelines. Could these projects help growth or will they be affected by the crisis as well?

Certainly, yes, first of all because the energy demand is reduced in a way that there is less need for oil and gas. This should affect prices, but as we see it?s not so automatically done. I think we should get used to having the current pipelines for a long time. North Stream has been recently inaugurated but I think we will have to wait more for South Stream.

German Finance Minister Wolfgang Schaeuble says it could take Greece 10 years to exit the crisis. Is this a realistic time frame and do you think Italy faces a similar length of recovery time?

I do not understand how people who cannot predict what will happen tomorrow are able to predict what will happen in 10 years. So I will refrain from making further comments.

The crisis is affecting the Southern European countries much more than the north. Is this because of the common characteristics that are sometimes attributed to the south, such as indiscipline, corruption and laziness? Or is it because the northern countries have imposed the rules of the eurozone?

I think there are significant differences between Greece and Italy, compared to those that exist between Italy and France or between Italy and Germany in terms of economic volume.

Italy is richer than Germany in terms of assets. Italy has achieved development and technical and economic skills but also tax evasion and devaluation of the Italian currency. For this reason it?s rather difficult to make comparisons between countries within Europe.

In any case, it?s clear that these countries are very inhomogeneous with respect to the economic culture and economic structure not only in regard to Greece and Italy but also to Ireland, Cyprus etc. Putting them all together in the same basket on the basis of one currency which they cannot control because of lack of a unitary state was a big mistake and they knew it from the beginning, but they have pretended to ignore it.

According to some analysts the eurozone crisis has produced a Europe that is dominated by Germany. If so, what are the implications for the EU if Germany achieves a dominant position?

I think that the German dominant position is more in our minds than in reality because Germany is connected with us and with the European currency while certainly taking advantage of the European Common Market, which is very important for German exports. In this way a possible failure of the euro would also affect Germany. [For Kathimerini English Edition]