Cancelling a right wing comedian

 

Iranian and Italian politics explained

 

Seeing Mussolini’s Italy in Modi’s India

There are uncanny parallels between the Italy of the 1920s and the India of the 2020s writes Ram Guha in Scroll India

 

I read a lot of biographies, these often set in other countries than my own. A book I have just finished is Benedetto Croce and Italian Fascism, by the Canadian scholar, Fabio Fernando Rizi. It uses the life of a great philosopher to tell a larger story of the times he passed through.

Reading Rizi’s book, I found uncanny parallels between the Italy of the 1920s and the India of the 2020s. The myth of Benito Mussolini, like the myth of Narenda Modi, was crafted by writers and propagandists “eager to sing paeans to the genius of the Duce”. These propagandists had begun to call the leader of fascism “the providential man”, “the man of massive faith”, or simply, “the Man of Providence”. Thus was created “the myth of the Duce, the chief who is always right, the leader who dares where others vacillate”.

In December 1925, the Italian State passed a new law, which came down hard on the press and its freedoms. The consequences of this law were that “within a few months, the most important papers came under Fascist control, one by one. Some owners were compelled to sell under economic or political pressure. All the liberal editors had to resign and were replaced by more accommodating men.”

Professed reverence for the laws

In the same year, Benedetto Croce characterised the ideology of the ruling party and of Mussolini as a “bizarre mixture of appeals to authority and to demagoguery, of professed reverence for the laws and of violation of the laws, of ultra-modern concepts and of musty old trash, abhorrence of culture and sterile attempts at producing a new one…” In this regard, the Italian State of the 1920s bears a striking resemblance to Modi’s regime today which speaks respectfully of the Constitution while blatantly violating its spirit and essence, which appeals to ancient wisdom while displaying a contempt for modern science, which claims to exalt ancient culture while manifesting an utter philistinism in practice.

While most independent-minded Italian intellectuals were forced into exile, Benedetto Croce stayed on in his homeland, offering an intellectual and moral opposition to fascism. As his biographer puts it, “[w]hereas the regime employed the mass media and the education system to promote the cult of Mussolini and to inculcate submission to authority, demanding from the new generations, in mystical union with the Duce, without asking questions, ‘to believe, to obey, to fight’, Croce, instead, offered a set of liberal values, preached freedom, defended the dignity of man, as a free agent, and urged individual decision and personal responsibility.” 

Reading further into Rizi’s book, I found this passage: “By the end of 1926, liberal Italy had died. Mussolini had consolidated his power and created the legal instruments for the continuation of his dictatorship. Political parties had been outlawed, and freedom of the press destroyed. The opposition had been disarmed and Parliament reduced to impotence. By 1927 it had become almost impossible to undertake any political action; it was also dangerous to express critical opinions in personal letters or in public places. Civil employees could lose their jobs if they expressed views contrary to government policy.

“Besides a powerful and revitalized police division in the Ministry of the Interior, under the direct responsibility of the chief of police, a new and efficient secret police organization, ominously and mysteriously called OVRA, was created with the aim of repressing any sign of anti-fascism and controlling any expression of dissent. In a short while, it collected files on more than one hundred thousand people, including Fascist leaders, and built an impressive web of special agents, spies, and informers whose reach extended throughout the country and even abroad.”

As I was transcribing these words from Rizi’s book, news came in of the home ministry demanding, from the Finance Commission, a sum of Rs 50,000 crore to fund what it called “real-time surveillance” of citizens. This at a time when the states are being denied the money owed to them by the Centre; and while the home ministry has already dangerously abused its powers through the foisting of fake cases on independent thinkers, activists, and journalists.

And here is Rizi’s description of the Italian Parliament, c. 1929: “Parliament had become a rubber stamp of the government’s decisions. Speeches of the few remaining members of the opposition were ignored, or more often shouted down to jeers from the floor and from the public galleries.”
Patria and gloria

Fabio Fernando Rizi’s book focuses on one person in one country, and eschews comparative analysis. However, in passing, the author remarks that “Italian Fascism created an authoritarian regime, ever increasing its reach, but it did not have the time, perhaps did not even possess the strength, to build a totalitarian society.” This must be read as meaning only one thing; however awful Mussolini’s Italy was, it was not nearly as awful as Hitler’s Germany.

After reading Rizi’s intellectual biography of Benedetto Croce, I turned to David Gilmour’s magnificent book, The Pursuit of Italy, a wide-ranging and compellingly readable history of that country from the beginnings of time. Thirty of the four hundred pages of this book deal with Mussolini’s years in power. As with Rizi, much of what Gilmour said about Italy in the past chillingly resonated with what I am witnessing in my own country at present.

Consider thus these remarks: “In the 1930s the regime’s style became more ostentatious. There were more parades, more uniforms, more censorship, more hectoring, more speeches from the leader, more shouting, gesturing and grimacing from a balcony to vast crowds, which greeted Mussolini’s every reference to patria and gloria with chants of ‘Du-ce! Du-ce! Du-ce!’”.

Much the same could be said about Modi’s rule, especially after he won a second term in 2019, his every utterance greeted with “Mo-di! Mo-di! Mo-di!”.

Credit: Prakash SINGH / AFP

Why did the Italian demagogue enjoy such great popularity among the masses? Here is Gilmour’s answer: “Mussolini survived so long partly because he incarnated certain strands of italianata; he embodied the hopes, fears and generations that believed Italy had been cheated of its due, both by its liberal politicians and by its wartime allies, who had forced it to accept the ‘mutilated peace.’”

By the same token, Modi has successfully appealed to an alleged Golden Age in the distant past where Hindus were supreme in India and abroad, argued that Hindus had slipped from that pedestal owing to Muslim and British conquerors in the past, and pitted himself against conniving and corrupt Congress politicians who would drag Hindus and India down again.

Reading these books about Italy in the 1920s in the India of the 2020s, I was depressed by the many parallels; but also consoled by the few departures. Unlike Mussolini’s Italy, in Modi’s India, the Bharatiya Janata Party has had to contend with political opposition from other parties; admittedly an Opposition much attenuated at the Centre, but still fairly robust in half-a-dozen major states of the Union. The press has been tamed, but not entirely crushed. And while Mussolini’s Italy had only Benedetto Croce to call it to account, Modi’s India still has many writers and intellectuals speaking out courageously in defence of the founding principles of the Republic, and in all the languages of the Republic too.

In The Pursuit of Italy, after describing how Mussolini consolidated his rule, Gilmour remarks: “Fascism’s appeal was blunted, however, by its failure to provide prosperity. Italians might be deceived into thinking they were well governed but they could not be deceived into thinking they were well off.” Mussolini failed in providing jobs and prosperity; whereas Modi has, in fact, done far worse on the economic front, his ill-thought and quixotic policies annulling much of the progress that the Indian economy had made in the three decades since liberalisation.

Millions of young men today fanatically follow Narendra Modi. The fate that awaits them, and us, is anticipated in what Benedetto Croce said with regard to the millions of young men who fanatically followed Mussolini. After the Italian dictator had died and his regime had finally fallen, Croce wrote sadly of “the treasury of moral energies that the oppressive regime misguided, exploited and at the end had betrayed”.

Benito Mussolini and his fascists thought they would rule Italy forever. Narendra Modi and the BJP think likewise. These fantasies of eternal rule will not come to fruition; but so long as the present regime remains in power, it will continue to extract a horrendous cost – in economic, political, social, and moral terms. Italy took decades to recover from the ravages of Mussolini and his party; India may take even longer to recover from the ravages of Modi and his party.

Coronavirus: Is Europe losing Italy?

Furious at their plight being ignored and over resistance to coronabonds, Italians’ sense of betrayal deepens writes   Miles Johnson, Sam Fleming and Guy Chazan in The FT  

A year ago Carlo Calenda ran in European parliamentary elections in Italy under the slogan “We are Europeans”, a rallying cry to defend his country’s place in the EU at a time of rising nationalism. 

Now even Mr Calenda, a 46-year-old former minister and Italian permanent representative to the EU, is experiencing a crisis of faith in an idea he has spent a lifetime fighting for.  

“This is an existential threat, I am not sure if we are going to make it,” he says. “You have to consider my party is one of the most pro-European parties in Italy and I now have members writing to me saying: ‘Why do we want to stay in the EU? It is useless.’”  

As Italy faces its most severe crisis since the second world war, with more than 15,000 deaths from coronavirus and its economy on course to suffer the deepest recession in its modern history, there is a rising feeling among even its pro-European elite that the country is being abandoned by its neighbours.  

A massive, massive shift is happening in Italy. You have thousands of pro-Europeans moving to this position,” says Mr Calenda, who leads the recently formed liberal Action party. 

Last month Sergio Mattarella, Italy’s softly-spoken 78-year-old president, and the man its establishment has relied on to safeguard its constitution and international alliances, warned the future of Europe was at stake if its institutions did not show solidarity with their country.  

“I hope that everyone fully understands, before it is too late, the seriousness of the threat to Europe,” he said in an evening television address beamed into the homes of millions of Italians. 

Many in Rome now feel that unless bold action is taken by northern European countries, they risk Italy turning its back on the European project forever.  

There are already signs that Italian faith in the EU has been damaged. In a survey conducted last month by Tecnè, 67 per cent of respondents said they believed being part of the union was a disadvantage for their country, up from 47 per cent in November 2018. 

Donald Tusk, the former European Council president, told the FT the situation today was much more worrying than during the euro crisis — both politically and economically.   

Southern European expectations of a rapid demonstration of solidarity from the rest of the EU early in the pandemic were not met, even if the bloc has subsequently ramped up its assistance including financial aid and equipment.  

“I hope everything can be fixed, but the loss of reputation is huge,” says Mr Tusk, who is now president of the European People’s party, the centre-right political alliance. “We must save Italy, Spain and the whole of Europe and not be afraid of extraordinary measures. This is a state of emergency.”  

Mr Tusk says the EU’s assistance for Italy and other hard-hit countries is vastly more substantial than that from China and Russia, but he warns that “in politics perception can be more important than fact”.  

In 2018 Italy became the first founding member to elect a government hostile to the EU, with Matteo Salvini, the anti-immigration League leader and then deputy prime minister of the coalition government, raging against “the Brussels bunker”.  

The following year that government fell, and Mr Salvini was banished to opposition, giving pro-Europeans hope that the nationalist threat had faded. But many believe bitterness felt from events over the past month could permanently alter the country’s politics in Mr Salvini’s favour. 

“There was a feeling before that the political system had marginalised the anti-EU forces,” says Lorenzo Pregliasco, a pollster at YouTrend. “Now if pro-European party activists and politicians are no longer so sure how they feel, imagine what the voters think.” 

At the core of the argument is a bitter divide over the extent to which euro area countries should be pursuing a far more unified economic response to the crisis. Finance ministers will meet on Tuesday to attempt to agree a package of measures aimed at marshalling greater Europe-wide fiscal firepower. 

Italy is among the member states that are pushing for the euro area to be far more ambitious by collectively selling bonds to help fund the massive economic rebuilding efforts that lie ahead.  

The discussions mark just the latest iteration of a longstanding dispute over collective fiscal action that economists call debt mutualisation — and which many see as the biggest missing element of the single currency.  

The EU does have a rescue fund called the European Stability Mechanism which countries can use. But despite assurances to the contrary from the ESM’s managing director, Klaus Regling, many Italians still fear lending from the institution would come with tough conditions attached and would stigmatise the country. It would feel to many that their country was being punished for a disaster that was outside of its control. 

Roberto Gualtieri, Italy’s finance minister, has said that Italian gross domestic product is likely to fall by 6 per cent this year. Other economists believe this may be a conservative estimate. With the country entering the crisis with a debt-to-GDP ratio already at 136 per cent, there is a real threat that Italy’s debt reaches a level that brings into question its sustainability.  

In March, with the virus already ripping through southern Europe, nine euro members led by France, Italy and Spain signed a joint letter pushing for so-called coronabonds — jointly issued debt backed by all euro countries including deep-pocketed Germany — to help pay for the recovery effort.  

The depth of divisions over the topic was exposed at a tough EU leaders’ video conference call in late March in which the Italian prime minister Giuseppe Conte and his allies pushed hard for the door to be opened to coronabonds.  

Mr Conte said the euro area’s bailout instruments had been developed for the last crisis and were ill-suited to the current symmetric shock hitting the entire continent. “What will we tell our citizens if Europe does not prove capable of a united, strong and cohesive reaction in the face of a symmetrical, unpredictable shock of this historical magnitude?” he asked.  

Leaders eventually struck a compromise and issued a statement using vague language that effectively kicked deliberations in to Tuesday’s eurogroup meeting of finance ministers.  

But the truce did not last long. Ursula von der Leyen, the European Commission president and a former German defence minister, appeared to use dismissive language in an interview, describing coronabonds as a slogan and appearing to express sympathy with Germany’s concerns about the idea.  

The language provoked immediate rebukes from Mr Conte and Mr Gualtieri, forcing the commission to issue a late-night statement that vowed to leave open all options that are compatible with the EU treaty.  

Ms Von der Leyen’s shifting positions reflected in part sharp divisions among her commissioners as well as the EU as a whole over the idea of coronabonds.  

While the discussion over which financial instruments can be used to help Italy is technical, the tone of the debate has become emotionally charged in both southern Europe and in the north, where the Netherlands has sided with Germany in opposing coronabonds. 

Mr Calenda last week took out a full-page advert in the German daily Frankfurter Allgemeine Zeitung, signed by himself and a number of leftwing mayors and governors from the regions worst-hit by the outbreak.  

In it they attacked the Dutch position as “an example of a lack of ethics and solidarity”, called the country a tax haven and compared German reluctance to support joint European debt with the partial cancellation of Nazi war debts by European countries including Italy after the second world war. 

“Germany could never have paid it,” the letter said. “Your place is with the Europe of institutions, of values of freedom and solidarity. Not following small national egoisms.” 

“They shouldn’t be using such emotional arguments,” says Eckhardt Rehberg, a German MP in Chancellor Angela Merkel’s Christian Democratic Union. “Every country should ask itself whether it bears some responsibility for the situation it is in. Look at Italy’s health system. You cannot blame all your difficulties on Europe and Germany. As a German politician, I find that unfair.”  

The current German-Italian tensions are part of a much longer dispute, stretching back to the eurozone sovereign debt crisis of 2010-12.  

Even back then, many in southern Europe saw eurobonds as a potential solution. But Ms Merkel was always opposed, saying in 2012 that there would be no such instruments “as long as I live”. For the chancellor and her CDU party, the EU treaties were sacrosanct: and they expressly forbade the mutualisation of debt. The rule was clear: states cannot finance each other. 

Yet in the eurozone more broadly, her reputation suffered. Southerners increasingly saw her as Europe’s great disciplinarian. Posters appeared in Greece showing her with a Hitler moustache. She was depicted as a witch, a dominatrix or a wicked stepmother, and accused of trying to subjugate the whole continent. 

In Italy the hostility to her was fanned by the media empire of then prime minister Silvio Berlusconi. Records of bugged phone calls emerged in which he referred to the chancellor in extremely disparaging terms. In August 2012 the newspaper Il Giornale, owned by Mr Berlusconi’s brother, had a front-page picture of Ms Merkel raising her hand in a vaguely fascist salute, accompanied by an article claiming Italy was “no longer in Europe, it is in the Fourth Reich”.  

The crisis has emboldened politicians on Italy’s right who sense the mood in the country is shifting against Brussels, as well as becoming more anti-German.  

“The EU has gone from doing absolutely nothing to some trying to profit from the difficulties we are facing,” says Giorgia Meloni, leader of the far-right Brothers of Italy, which has made significant gains in opinion polls to become the second most popular rightwing party after Mr Salvini’s League. 

“There are people who are trying to use the virus to speculate. There is a game to weaken Italy and buy its strategic assets,” she told the FT. “While we are counting our dead, they are counting the risk of losing interest on their bonds.” 

Claudio Borghi, a League MP who has led a ferocious campaign against Italy accepting money from the ESM — arguing it would be tantamount to a surrender of sovereignty — this week posted an Italian Fascist era poster with a smiling German soldier extending his hand. The text reads “Germany is truly your friend”. Mr Borghi wrote: “Time goes on, but the tactics are always the same.”

Franziska Brantner, a German Green MP, says the Italians she has spoken to see themselves as “a laboratory for corona”, adding: “[They feel] Germany is just watching them and trying to learn from their experience. There is real bitterness among my pro-European friends in Italy. They’re saying what have we done to the Germans to make them treat us like this?” 

Italy’s pro-Europeans are hoping that the mounting shock from the Covid-19 crisis will jolt recalcitrant northern European countries into making a large enough gesture of solidarity to repair the damage that has been done.  

In recent days opponents of collective fiscal action have been on the defensive as the sheer scale of the economic slump has become clearer. In the Netherlands, the government of prime minister Mark Rutte last Wednesday proposed a solidarity fund worth €20bn, with cash transfers set to go straight to the coffers of Rome and Madrid to fund emergency medical spending.  

His finance minister Wopke Hoekstra had been criticised in the south after he called on Brussels to investigate why some economies did not have fiscal buffers to see them through a crisis. Portugal’s prime minister António Costa called the remarks “repulsive”.  

Mr Rutte’s proposal would only fill a small part of the gap given the vertiginous public finance challenges facing Italy and Spain, but the very fact that a country that has traditionally been a vociferous opponent of any fiscal transfers between euro area members should make such a suggestion is indicative of the changing public mood.  

Bruno Le Maire, France’s finance minister, on Thursday laid out plans for an “exceptional and temporary” joint fund that would help countries kick-start their recoveries. This would issue bonds with the joint guarantee of all EU member states and be operated by the European Commission.  

“Solidarity means to be able to pull together our resources to cope with the aftermath of the crisis,” he said. “Let’s avoid any ideological debates on eurobonds or coronabonds. There is one single political question: shall we stand together or not?” 

For Mr Tusk there is now little time left for the EU’s richest nations to come forward with bold and positive initiatives and avoid instilling any sense of humiliation in countries that needed help. “People are suffering now — it is not a political game,” he says. “People have to feel that we are a real community and a real family in such a time.”

A letter to the UK from Italy: this is what we know about your future

Francesca Melandri in The Guardian tell us what to expect during a lockdown

I am writing to you from Italy, which means I am writing from your future. We are now where you will be in a few days. The epidemic’s charts show us all entwined in a parallel dance.

We are but a few steps ahead of you in the path of time, just like Wuhan was a few weeks ahead of us. We watch you as you behave just as we did. You hold the same arguments we did until a short time ago, between those who still say “it’s only a flu, why all the fuss?” and those who have already understood. 

As we watch you from here, from your future, we know that many of you, as you were told to lock yourselves up into your homes, quoted Orwell, some even Hobbes. But soon you’ll be too busy for that.

First of all, you’ll eat. Not just because it will be one of the few last things that you can still do.

You’ll find dozens of social networking groups with tutorials on how to spend your free time in fruitful ways. You will join them all, then ignore them completely after a few days.

You’ll pull apocalyptic literature out of your bookshelves, but will soon find you don’t really feel like reading any of it.

You’ll eat again. You will not sleep well. You will ask yourselves what is happening to democracy.

You’ll have an unstoppable online social life – on Messenger, WhatsApp, Skype, Zoom…

You will miss your adult children like you never have before; the realisation that you have no idea when you will ever see them again will hit you like a punch in the chest.

Old resentments and falling-outs will seem irrelevant. You will call people you had sworn never to talk to ever again, so as to ask them: “How are you doing?” Many women will be beaten in their homes.

You will wonder what is happening to all those who can’t stay home because they don’t have one. You will feel vulnerable when going out shopping in the deserted streets, especially if you are a woman. You will ask yourselves if this is how societies collapse. Does it really happen so fast? You’ll block out these thoughts and when you get back home you’ll eat again.

You will put on weight. You’ll look for online fitness training.

You’ll laugh. You’ll laugh a lot. You’ll flaunt a gallows humour you never had before. Even people who’ve always taken everything dead seriously will contemplate the absurdity of life, of the universe and of it all.

You will make appointments in the supermarket queues with your friends and lovers, so as to briefly see them in person, all the while abiding by the social distancing rules.

You will count all the things you do not need.

The true nature of the people around you will be revealed with total clarity. You will have confirmations and surprises.

Literati who had been omnipresent in the news will disappear, their opinions suddenly irrelevant; some will take refuge in rationalisations which will be so totally lacking in empathy that people will stop listening to them. People whom you had overlooked, instead, will turn out to be reassuring, generous, reliable, pragmatic and clairvoyant.

Those who invite you to see all this mess as an opportunity for planetary renewal will help you to put things in a larger perspective. You will also find them terribly annoying: nice, the planet is breathing better because of the halved CO2 emissions, but how will you pay your bills next month?

You will not understand if witnessing the birth of a new world is more a grandiose or a miserable affair.

You will play music from your windows and lawns. When you saw us singing opera from our balconies, you thought “ah, those Italians”. But we know you will sing uplifting songs to each other too. And when you blast I Will Survive from your windows, we’ll watch you and nod just like the people of Wuhan, who sung from their windows in February, nodded while watching us.

Many of you will fall asleep vowing that the very first thing you’ll do as soon as lockdown is over is file for divorce.

Many children will be conceived.

Your children will be schooled online. They’ll be horrible nuisances; they’ll give you joy.

Elderly people will disobey you like rowdy teenagers: you’ll have to fight with them in order to forbid them from going out, to get infected and die.

You will try not to think about the lonely deaths inside the ICU.

You’ll want to cover with rose petals all medical workers’ steps.

You will be told that society is united in a communal effort, that you are all in the same boat. It will be true. This experience will change for good how you perceive yourself as an individual part of a larger whole.

Class, however, will make all the difference. Being locked up in a house with a pretty garden or in an overcrowded housing project will not be the same. Nor is being able to keep on working from home or seeing your job disappear. That boat in which you’ll be sailing in order to defeat the epidemic will not look the same to everyone nor is it actually the same for everyone: it never was.

At some point, you will realise it’s tough. You will be afraid. You will share your fear with your dear ones, or you will keep it to yourselves so as not to burden them with it too.

You will eat again.

We’re in Italy, and this is what we know about your future. But it’s just small-scale fortune-telling. We are very low-key seers.

If we turn our gaze to the more distant future, the future which is unknown both to you and to us too, we can only tell you this: when all of this is over, the world won’t be the same.

In silencing Euroscepticism, Italy’s president has gifted its far right

Yanis Varoufakis in The Guardian

Italy should be doing well. Unlike Britain, it exports considerably more to the rest of the world than it imports, while its government spends less (excluding interest payments) than the taxes it receives. And yet Italy is stagnating, its population in a state of revolt following two lost decades.

Italian president names interim prime minister until fresh elections


While it is true that Italy is in serious need of reforms, those who blame the stagnation on domestic inefficiencies and corruption must explain why Italy grew so fast throughout the postwar period until it entered the eurozone. Was its government and polity more efficient and virtuous in the 1970s and 1980s? Hardly.

The singular reason for Italy’s woes is its membership of a terribly designed monetary union, the eurozone, in which the Italian economy cannot breathe and which consecutive German governments refuse to reform.

In 2015 the Greek people elected a progressive, Europeanist government with a mandate to demand a new deal within the eurozone. In the space of six months, under the guidance of the German government, the European Union and its central bank crushed us. A few months later, I was asked by the Italian daily newspaper Corriere della Sera if I thought European democracy was at risk. I answered: “Greece surrendered but it was Europe’s democracy that was mortally wounded. Unless Europeans realise that their economy is run by unelected and unaccountable pseudo-technocrats, committing one gross error after another, our democracy will remain a figment of our collective imagination.”

Since then, the pro-establishment government of Italy’s Democratic party implemented, one after the other, the policies that the unelected bureaucrats of the EU demanded. The result was more stagnation. And so, in March, a national election delivered an absolute parliamentary majority to two anti-establishment parties which, despite their differences, shared doubts about Italy’s eurozone membership and a hostility to migrants. It was the bitter harvest of absent prospects and withering hope.

After a few weeks of the kind of post-election horse-trading common in countries like Italy and Germany, the Five Star Movement and League leaders Luigi Di Maio and Matteo Salvini struck a deal to form a government. Alas, President Sergio Mattarella used the powers bestowed upon him by the Italian constitution to prevent the formation of that government and, instead, handed the mandate to a technocrat, a former IMF employee who stands no chance of a vote of confidence in parliament.

Had Mattarella refused Salvini the post of interior minister, outraged by his promise to expel 500,000 migrants from Italy, I would be compelled to support him. But, no, the president had no such qualms. Not even for a moment did he consider vetoing the idea of a European country deploying its security forces to round up hundreds of thousands of people, cage them, and force them into trains, buses and ferries before sending them goodness knows where.

No, Mattarella chose to clash with an absolute majority of lawmakers for another reason: his disapproval of the finance minister designate. Why? Because the said gentleman, while fully qualified for the job, and despite his declaration that he would abide by the EU’s rules, had in the past expressed doubts about the eurozone’s architecture and has favoured a plan of EU exit just in case it was needed. It was as if Mattarella declared that reasonableness from a prospective finance minister constitutes grounds for his or her exclusion from the post.

What is so striking is that there is no thinking economist anywhere in the world who does not share concern about the eurozone’s faulty architecture. No prudent finance minister would neglect to develop a plan for euro exit. Indeed, I have it on good authority that the German finance ministry, the European Central Bank and every major bank and corporation have plans in place for the possible exit from the eurozone of Italy, even of Germany. Is Mattarella telling us that the Italian finance minister is banned from thinking of such a plan?


Beyond his moral failure, the president has made a major tactical blunder

Beyond his moral failure to oppose the League’s industrial-scale misanthropy, the president has made a major tactical blunder: he fell right into Salvini’s trap. The formation of another “technical” government, under a former IMF apparatchik, is a fantastic gift to Salvini’s party.

Salvini is secretly salivating at the thought of another election – one that he will fight not as the misanthropic, divisive populist that he is, but as the defender of democracy against the Deep Establishment. He has already scaled the moral high ground with the stirring words: “Italy is not a colony, we are not slaves of the Germans, the French, the spread or finance.”

If Mattarella takes solace from the fact that previous Italian presidents managed to put in place technical governments that did the establishment’s job (so “successfully” that the country’s political centre imploded), he is very badly mistaken. This time around he, unlike his predecessors, has no parliamentary majority to pass a budget or indeed to lend his chosen government a vote of confidence. Thus, the president is forced to call fresh elections that, courtesy of his moral drift and tactical blunder, will return an even stronger majority for Italy’s xenophobic political forces, possibly in alliance with the enfeebled Forza Italia of Silvio Berlusconi.

Only governments can stem the tide of tourism sweeping the globe

Elizabeth Becker in The Guardian


In Barcelona this summer, I was shown a protest sign written in English that said: “Why call it tourism season if we can’t kill them?” Anger over unhampered tourism is getting ugly, even in Barcelona, where the mayor, Ada Colau, is one of the few politicians dedicated to reining in the industry. Residents told me they have had it with skyrocketing rents, thousands of tourists from cruise ships swamping the city’s historic centre and partygoers keeping families up into the night. And they are increasingly sceptical about the economic benefits for the average citizen.

Every time I find myself smirking at another photograph of drunken tourists crowding a gracious town square, I think of Venice. The annual tourist traffic of more than 20 million visitors to La Serenissima has impoverished, rather than enriched, most Venetians. They have been pushed out, the population cut in half to fewer than 60,000 people. The survivors continue to protest and vote against giant cruise ships and mindless tourism. But the powers that be have done little. Even the United Nations has warned that the genius of Venice, its culture, art and way of life are being drowned by tourism.

 

The anger isn’t limited to Europe. In Cambodia, citizens were evicted from their fishing villages so that foreign-built resorts could rise on the pristine beaches. With record crowds and mounds of litter, the once romantic Ipanema beach in Rio de Janiero now features drunk tourists infuriating the locals. Cities across North America, from New Orleans to Vancouver, have issued regulations on Airbnb rentals after citizen complaints that their neighbourhoods were being overwhelmed by unruly tourists and rising rents.

It is no longer possible to dismiss criticism of exploding tourism as elite snobbery, of high-end cultural tourism versus T-shirt-clad visitors squeezed on a tour bus. Or a question of who has the right to travel and who doesn’t.

The dimensions of the industry have grown so vast so quickly that it has become a serious issue of globalisation, as pertinent to the communities at risk as shuttered factories have been to the American and British rust belts.

Few industries were better positioned to take advantage of the 21st century than tourism. Open borders for the first time in modern history, leaps in technology from aeroplanes to the internet and the rise of the global middle class (think China) meant travel moved from a pastime to an economic engine. In less than two decades, travel doubled from 536m trips abroad in 1995 to 1bn in 2012. When the Cold War closed off much of the world to tourism, that figure was only 25m.

Travel and tourism has become a behemoth, capable of doing great good and great damage. It is an $8tn industry. It is the largest employer on Earth: one in 11 people works in tourism and travel.

The appeal of travel is a given. Leisure, excitement, education, adventure. Nothing seems to put a damper on travel. Not the 2008 great recession. Not terrorism, including attacks on tourist resorts. Not even war. Tourists still show up in Afghanistan and North Korea. A tourist was released last week after six years held hostage in Mali by al-Qaida.

 The Thai government has banned tourists from Koh Tachai island. Photograph: Alamy

Travel is already up 6% this year, according the UN ’s World Tourism Organisation, with a 10% increase in the Middle East, the centre of the world’s most deadly conflicts, and up 6% in Europe, despite a string of terrorist attacks, particularly in France and England.

This boom has translated into crowds of tourists in every corner of the globe and, in a new rite of summer, stories of tourists behaving badly. Hong Kong protests against loud, impolite tourists urinating in the street sound a lot like the complaints I heard in Thailand about Chinese tourists desecrating Buddhist temples. An internet search of “tourists behaving badly” can keep you entertained for hours.

Many of us hear these stories and congratulate ourselves for being thoughtful travellers. We avoid the nasty crowds. We seek the out-of-the-way destinations where we enjoy the best in local food and culture. Some plant trees to offset their carbon footprints. But this problem can’t be remedied by good consumer behaviour. Appealing to the industry to refrain from packing their planes and adding new cruise destinations isn’t going to work either.

Only governments can handle runaway tourism. Few major industries fall so squarely into their hands – local, regional and national. Governments decide who is eligible for visas: how many cruise ships, airlines and trains can bring in visitors, how many hotels receive building permits, how many beaches are open to development, how many museums and concert halls are open, even how many farmers receive subsidies to raise food for the restaurants and cafes that tourists frequent.

After years spent tracking the explosion of tourism, I came to the obvious conclusion that without serious and difficult government co-ordination, mayhem can follow. The current biggest disrupters are short-term rental companies, such as Airbnb, and cruise ships.

Most governments still measure tourism success simply by the number of visitors. The more, the better. For the moment, officials have been reluctant to regulate tourism to the benefit, first of all, of their own citizens. Instead, tourism is seen as an easy moneymaker and a short cut to economic development. The exceptions are standouts. France, Bhutan, Costa Rica and Canada are among the few countries with governments willing to co-ordinate policies of sustainable tourism and they haven’t suffered: they are among the most popular destinations in the world.

Promoting tourism by the numbers works both ways. The Chinese were only allowed to travel abroad 20 years ago, after generations of forced isolation. The travel bug hit big. Now the Chinese as a nationality are ranked as the greatest number of travellers in the world and the biggest spenders. President Xi Jinping negotiates favours with other countries in return for more tourist visas for his people.

There is hope. Tourists and governments accept that too much tourism can have a deadly effect on the environment and nature. “Eco-tourism” has been popular for years, whether practised in good faith or not. Slowly, governments are adapting, sometimes in the extreme. Last year, Thailand banned all tourists from Koh Tachai as the only way to save that exquisite island.

Cities and societies can be just as vulnerable to runaway tourism as ocean beaches and forest habitats and governments need to do the hard work of taming tourism for them as well.

Americans can spot election meddling because they’ve been doing it for years

Owen Jones in The Guardian

As I write, president-elect Donald Trump – soon to become the most powerful individual on Earth – is having a tantrum on his Twitter feed. Losing the popular vote can have devastating consequences for a bigoted plutocrat’s ego, and accusations that Vladimir Putin’s regime intervened to his advantage are getting him down. “The ‘intelligence’ briefing on so-called ‘Russian hacking’ was delayed until Friday,” he claims (falsely, apparently), “perhaps more time needed to build a case. Very strange!”

Did Putin intervene in the US election? It is entirely plausible, although evidence from the CIA (with its dubious record) and the FBI needs to be carefully scrutinised, whatever our feelings on Trump. And if the Democratic establishment pin the supposedly unthinkable calamity of Trump’s triumph on a foreign power, they will fail to learn the real lessons behind their defeat.

That doesn’t mean alleged interference by the Russian regime shouldn’t be taken seriously. Putin heads a hard-right, kleptocratic, authoritarian government that persecutes LGBT people, waged a murderous war in Chechnya, and has committed terrible crimes in Syria in alliance with Bashar al-Assad’s dictatorship. It is a pin-up for populist rightwingers across the west, from Trump to Ukip, from France’s Front National to Austria’s Freedom party. Its undemocratic manoeuvres should be scrutinised and condemned.

But while Americans feel justifiably angry at alleged interference with their political process, they have also been handed a mirror, and the reflection should disturb them.

For the US is a world leader in the field of intervening in the internal affairs of other countries. The alleged interference is far more extensive than hacking into emails belonging to unfavoured political parties. According to research by political scientist Dov Levin, the US and the USSR/Russia together intervened no less than 117 times in foreign elections between 1946 and 2000, or “one out of every nine competitive, national-level executive elections”.

Indeed, one cannot understand US-Russian relations today without acknowledging America’s role in the internal affairs of its defeated cold war foe. As Stephen Cohen puts it, after the collapse of the Soviet Union, the approach of US advisers “was nothing less than missionary – a virtual crusade to transform post-communist Russia into some facsimile of the American democratic and capitalist system”.

As soon as Bill Clinton assumed the White House in 1993, his experts discussed “formulating a policy of American tutelage”, including unabashed partisan support for President Boris Yeltsin. “Political missionaries and evangelists, usually called ‘advisers’, spread across Russia in the early and mid-1990s,” notes Cohen: many were funded by the US government. Zbigniew Brzezinski, the former national security adviser, talked of Russia “increasingly passing into de facto western receivership”.

The results were, to put it mildly, disastrous. Between 1990 and 1994, life expectancy for Russian men and women fell from 64 and 74 years respectively to 58 and 71 years. The surge in mortality was “beyond the peacetime experience of industrialised countries”. While it was boom time for the new oligarchs, poverty and unemployment surged; prices were hiked dramatically; communities were devastated by deindustrialisation; and social protections were stripped away.

To the horror of the west, Yeltsin’s popularity nosedived to the point where a communist triumph in the 1996 presidential elections could not be ruled out. Yeltsin turned to the oligarchs, using their vast resources to run an unscrupulous campaign. As Leonid Bershidsky puts it, it was “a momentous event that undermined a fragile democracy and led to the emergence of Vladimir Putin’s dictatorial regime”. It is even alleged that, in 2011, Putin’s key ally – then-president Dmitry Medvedev – privately suggested the election was rigged. In the run-up to the election, Russia was granted a huge US-backed IMF loan that – as the New York Times noted at the time – was “expected to be helpful to President Boris N Yeltsin in the presidential election”.

Yeltsin relied on US political strategists – including former aides to Bill Clinton – who had a direct line back to the White House. When Yeltsin eventually won, the cover of Time magazine was “Yanks to the rescue: The secret story of how American advisers helped Yeltsin win”.

Without the chaos and deprivations of the US-backed Yeltsin era, Putinism would surely not have established itself. But it’s not just Russia by any means, for the record of US intervention in the internal affairs of foreign democracies is extensive.

Take Italy in 1948: as the cold war unfolded, the US feared that a socialist-communist coalition would triumph in Italian elections. It barred Italians who “did not believe in the ideology of the United States” from even entering the country; funded opposing parties via the CIA; orchestrated a massive propaganda campaign, including millions of letters from Americans of Italian origin; and made it quite clear, via the State Department, that there was “no further question of assistance from the United States” if the wrong people won. Its efforts were a success. This was the first of many Italian elections featuring US interference.

CIA concludes Russia interfered to help Trump win election, say reports



Take the CIA’s self-professed involvement in the military coup that overthrew democratically elected secular Iranian president Mohammad Mosaddeq in 1953: it was “carried out under CIA direction as an act of US foreign policy, conceived and approved at the highest levels of government”, as the agency later confessed. The nature of the 1979 Iranian revolution cannot be understood without it. Or what of CIA backing for Augusto Pinochet’s murderous overthrow of Salvador Allende in Chile in 1973?

There are more recent examples too. Take the military overthrow of Honduras’ Manuel Zelaya in 2009. The then secretary of state – a certain Hillary Clinton – refused to describe the toppling of Zelaya as a “military coup”, which would have required the suspension of US aid, including to the armed forces. Rather than call for Zelaya’s reinstatement, Clinton called for new elections. US assistance – including military aid – continued as dissidents were treated brutally; as death squads re-emerged; as violence against LGBT people surged; and as widely boycotted unfair elections took place.

Allegations of Russian interference in the US elections are undoubtedly alarming, but there’s a double standard at play. Meddling in foreign democracies only becomes a problem when the US is on the receiving end. The US has interfered with impunity in the internal affairs of so many other countries. The day that all such interference is seen for what it is – a democratic outrage, unworthy of any great nation – will be a great day indeed.

The US frequently refuses extradition requests - On Obama's cancellation of summit with Putin and extradition

The US frequently refuses extradition requests where, unlike with Snowden, it involves serious crimes and there is an extradition treaty

BETA

• 
• • Glenn Greenwald
  • theguardian.com, Wednesday 7 August 2013 16.38 BST

President Barack Obama today canceled a meeting with Russian President Vladimir Putin. Photograph: Evan Vucci/AP

President Obama today canceled a long-scheduled summit with Russian PresidentVladimir Putin in part because the US president is upset that Russia defied his personal directive to hand over Edward Snowden despite the lack of an extradition treaty between the two nations. That means that US media outlets will spend the next 24 hours or so channeling the government's views (excuse the redundancy) by denouncing the Russian evil of refusing extradition. When doing so, very few, if any, establishment media accounts will mention any of these cases:

New York Times, February 28, 2007:

Washington Post, July 19, 2013:

The Guardian, September 9, 2012:

[US refuses Bolivia's request to extradite its former CIA-supported president, Gonzalo Sánchez de Lozada, to stand trial on charges of genocide and other war crimes after de Lozada hires Democratic lobbyists to represent him]

El Paso Times, December 30, 2010:

The US constantly refuses requests to extradite - even where (unlike Russia) they have an extradition treaty with the requesting country and even where (unlike Snowden) the request involves actual, serious crimes, such as genocide, kidnapping, and terrorism. Maybe those facts should be part of whatever media commentary there is on Putin's refusal to extradite Snowden and Obama's rather extreme reaction to it.

Other matters

Former Bush-era CIA and NSA director Michael Hayden appeared on CNN this week and confirmed that our reporting on the NSA's X-Keyscore program was accurate, telling the nation that we should all be grateful for those capabilities.

NYU journalism professor Jay Rosen has a superb essay on the behavior of the US media in NSA stories.

Foreign Policy CEO and Editor David Rothkopf becomes the latest establishment figure to recognize, as he puts it in a quite good column: "I have myself been too slow to recognize that the benefits we have derived from Snowden's revelations substantially outweigh the costs associated with the breach."

Italian government sues S&P anf Fitch

S&P and Fitch accused of market manipulation in Italy

Italian prosecutors have filed charges against Deven Sharma, the former president of Standard & Poor’s, and six other credit rating officials for issuing downgrades that destablised the country and fuelled the debt crisis.

Italian prosecutors claim downgrades from S&P and Fitch destablised Italy and exacerbated the eurozone debt crisis Photo: AFP

By Louise Armitstead, Chief Business Correspondent

5:18PM GMT 12 Nov 2012

Comment

Prosecutor Michele Ruggiero has asked a court in Trani, Italy to indict five S&P employees and two from Fitch Ratings for market manipulation, in a move that could trigger a raft of similar claims against rating setters around the world.

Mr Ruggiero, who has pursued the agencies since they placed Italy on negative watch last summer, accused them of “aggravated and continuous…market abuse”. He claimed they leaked “biased and distorted information” about Italy’s financial stability to traders.

In a statement, he said the rating agencies had tried to “destabilise Italy’s image, prestige and credit confidence on the financial markets, alter the value of Italian bonds by depreciating them [and] weaken the euro”.

As well as Mr Sharma, president of S&P from 2007 and 2011, the operational director for Fitch, David Riley, was also named in the legal filings.

Claims against Moody’s Investor Services were dropped. Fitch failed to return calls for comment. 

In a statement, S&P said: “These claims are entirely baseless and without any merit as our role is to publish independent opinions about creditworthiness according to our public and transparent methodologies, which we apply consistently around the world.

The agency added: “We will continue to perform our role without fear or favour of any investor, debt issuer or other external party and to defend our actions, our reputation and that of our people”.

Italy’s sovereign debt, which stands at 120pc of GDP and is the second highest in the eurozone after Greece, has been a focus for traders and investors for months. After warning about its concerns in May 2011, S&P downgraded Italy’s sovereign debt in September 2011 by one notch to a single-A rating. Another downgrade followed in January of this year, by two notches to BBB-. Fitch followed in February by downgrading Italy from A+ to A-.

Mr Ruggiero’s case was triggered after two consumer rights groups claimed the downgrades had been leaked to traders before being announced and had triggered big losses on the stockmarket in Milan.

If the Trani judge gives the go-ahead, it could be a test-case for dozens of other efforts to sue the credit rating agencies. Despite widespread criticism for failing to realise the debt they were rating as AAA was highly toxic, the agencies have so far managed to protect themselves from prosecution by claiming that their ratings are only opinions. In America, they have claimed protection under free speech rules.

More than 60 cases against the agencies are thought to have been filed around the world following the financial crisis but none with much success.

A breakthrough came three weeks ago when an Australian court ruled that S&P misled 12 councils in Australia by awarded a AAA rating to derivatives products created by ABN Amro which imploded less than two years after they were sold.

In July, McGraw-Hill, the American owners of S&P, admitted in a filing that US regulators, including the Securities & Exchange Commission and the Department of Justice, are investigating S&P’s ratings of structured products.

Possible Options for the Euro

The single currency has arrived at a three-pronged fork in the road

There are three possible ways out of the eurozone crisis: austerity, investment or the route taken by Argentina in the 90s

• 
• • Larry Elliott
  • guardian.co.uk, Sunday 15 April 2012 18.28 BST 
  • 
    

Greeks protest outside the headquarters of the Bank of Greece in Athens. Photograph: Simela Pantzartzi/EPA

The next 12 months will decide the fate of the eurozone. The single currency's problems have not gone away and will again dominate this week's meeting of the International Monetary Fund in Washington. Every one of those attending knows that the crisis could erupt again at any moment; last week's selloff in Spanish and Italian bonds was like the puff of smoke billowing out of a volcano getting ready to blow.

Here's a summary of how things stand. The euro was constructed on the false premise that monetary union would lead to a harmonisation of economic performance across member states. Greece would become like Germany; Portugal would be similar to Finland. Instead, the euro has led to a widening gulf between rich and poor, and this has been brutally exposed by the financial crisis and its aftermath.

It became clear that the countries on the periphery of the eurozone had a cocktail of problems. Their economies were much less productive than those at the core, so they were gradually becoming less competitive. They had shaky banking systems. And they had weak public finances. Investors, unsurprisingly, came to believe that holding Greek, Italian or Spanish bonds was risky, and demanded higher interest rates for doing so. This added to the pressure on banks and governments, and by pushing up borrowing costs, affected growth prospects as well.

By late last year the eurozone was on the brink of meltdown. At that point, the European Central Bank stepped in and announced long-term refinancing operations (LTROs). These pumped unlimited ultra-cheap money into the eurozone banking system to satisfy the funding needs of banks for three years.

The idea was to kill two birds with one stone. Banks would have more cash and could use it to buy government bonds in their own countries, thus driving down interest rates and so boosting growth.
This was a high-risk strategy that depended on the crisis-affected countries quickly returning to steady and robust growth. If they didn't, their banks would be loaded up with government bonds and vulnerable to a selloff in the markets.

In the past couple of weeks this possibility has dawned on markets. They have started to mull over a scenario in which a deepening recession in Spain leads to the government missing its deficit-reduction targets, prompting rising bond yields and eventually necessitating an international bailout.
There is much talk in European circles about how Greece was a one-off. Few in the markets believe that.

In the very worst case the euro will break up entirely, leaving the ECB nursing big losses and ruing the day when it embarked on an expansion of the money supply.

As George Soros noted last week, the Bundesbank perceives the risk, which is why it is campaigning hard against any further LTROs. The message from Germany, and from other core countries, is that it is time for Spain, Italy, Greece and Portugal to start delivering on their promised structural reforms.
All that explains why Christine Lagarde, managing director of the IMF, keeps insisting that Europe has bought itself just a little time to sort out its problems. Lagarde is absolutely right about that: the single currency has arrived at a three-pronged fork in the road.

Route number one is Austerity Avenue. The eurozone continues on the same road, the poorer countries on the fringe making themselves more competitive by what is known as internal devaluation. This involves driving down production costs via wage and welfare cuts, and state assets selloffs. Living standards take a big hit for a prolonged period, but eventually countries such as Greece bridge the gap between themselves and Germany.

Economic and political problems beset this route. Austerity is killing growth, making it harder to reduce government borrowing, and it inflames populations unhappy at the prospect of falling living standards year after year. It's a bumpy road; it could also prove a short one.

Next up is the High-Investment Highway. The premise for this route is that the single currency can survive but only if measures are taken to stimulate growth. Soros proposed a plan last week in which all countries could refinance their debts at the same rate – but, as he admitted, this would never get past the Bundesbank.

Another idea, suggested by the former Labour MP Stuart Holland, is bond-financed investment programmes modelled on Roosevelt's New Deal. This would have two components: Union bonds, under which a country could convert up to 60% of its national debt into non-traded Union bonds; and Eurobonds, which would be traded and actively marketed to fast-growing countries of the emerging world wanting an alternative to dollar reserves.

The idea, which caught the interest of France's socialist presidential candidate, François Hollande, would be to use Union bonds to stabilise debt and Eurobonds to finance investment.

As with the Soros plan, this would no doubt run into stiff opposition from Germany. It would also involve a much higher degree of fiscal integration. But if Austerity Avenue is a dead end and High-Investment Highway a road to nowhere, that really leaves only one other exit: Buenos Aires Boulevard.

A paper published last week by Capital Economics described the similarities between the struggling eurozone countries today and Argentina in the late 1990s. Argentina had fixed the peso against the dollar irrevocably at the start of the 90s but, after a few good years of strong growth and low inflation, by the end of the decade was under severe strain.

The solutions tried now in Greece – austerity, debt rescheduling, IMF programmes – were tried in Argentina to no avail. Indeed, output crashed, making the country's debt position even worse. Eventually the pressure was too much and Argentina devalued and defaulted.

But far from the sky falling in, which was what the IMF and the other proponents of orthodoxy predicted, Argentina's growth averaged 9% a year from 2003 to 2007.

As Andrew Kenningham, of Capital Economics, accepts, Greece would not be expected to do nearly as well as post-crisis Argentina, which benefited from rising commodity prices and did not have to cope with the inevitable contagion effects arising from a country leaving a single currency. But, he says, Argentina's example offers a "painful but viable" exit from the crisis that the current deflationary policies do not. And unless policymakers in Europe can offer their citizens somethingmore enticing than endless austerity, a stroll down Buenos Aires Boulevard will look increasingly enticing.

Don't blame the ratings agencies for the eurozone turmoil

Europe and the eurozone are strangling themselves with a toxic mixture of austerity and a structurally flawed financial system

• 
• • Ha-Joon Chang
  • guardian.co.uk, Sunday 15 January 2012 21.16 GMT

Standard & Poor's has decided to downgrade France's top-notch credit rating. Photograph: Philippe Huguen/AFP/Getty Images

 

Even the most rational Europeans must now feel that Friday the 13th is an unlucky day after all. On that day last week, the Greek debt restructuring negotiation broke down, with many bondholders refusing to join the voluntary 50% "haircut" – that is, debt write-off – scheme, agreed last summer. While the negotiation may resume, this has dramatically increased the chance of disorderly Greek default.

Later in the day, Standard & Poor's, one of the big three credit ratings agencies, downgraded nine of the 17 eurozone economies. As a result, Portugal pulled off the hat-trick of getting a "junk" rating by all of the big three, while France was deprived of its coveted AAA rating. With Germany left as the only AAA-rated large economy backing the eurozone rescue fund (the Dutch economy, the second biggest AAA economy left, is much smaller than the French economy) the eurozone crisis looks that much more difficult to handle.

The eurozone countries criticise S&P, and other ratings agencies, for unjustly downgrading their economies. France is particularly upset that it was downgraded while Britain has kept its AAA status, hinting at an Anglo-American conspiracy against France. But this does not wash, as one of the big three, Fitch, is 80% owned by a French company.

Nevertheless, France has some grounds to be aggrieved, as it is doing better on many economic indicators, including budget deficit, than Britain. And given the incompetence and cynicism of the big three exposed by the 1997 Asian financial crisis and more dramatically by the 2008 global financial crisis, there are good grounds for doubting their judgments.

However, the eurozone countries need to realise that its Friday-the-13th misfortune was in no small part their own doing.

First of all, the downgrading owes a lot to the austerity-driven downward adjustments that the core eurozone countries, especially Germany, have imposed upon the periphery economies. As the ratings agencies themselves have often – albeit inconsistently – pointed out, austerity reduces economic growth, which then diminishes the growth of tax revenue, making the budget deficit problem more intractable. The resulting financial turmoil drags even the healthier economies down, which is what we have just seen.

Even the breakdown in the Greek debt negotiation is partly due to past eurozone policy action. In the euro crisis talks last autumn, France took the lead in shooting down the German proposal that the holders of sovereign debts be forced to accept haircuts in a crisis. Having thus delegitimised the very idea of compulsory debt restructuring, the eurozone countries should not be surprised that many holders of Greek government papers are refusing to join a voluntary one.

On top of that, the eurozone countries need to understand why the ratings agencies keep returning to haunt them. Last autumn's EU proposal to strengthen regulation on the ratings industry shows that the eurozone policymakers think the main problem with the ratings industry is lack of competition and transparency. However, the undue influence of the agencies owes a lot more to the very nature of the financial system that the European (and other) policymakers have let evolve in the last couple of decades.

First, over this period they have installed a financial regulatory structure that is highly dependent on the credit ratings agencies. So we measure the capital bases of financial institutions, which determine their abilities to lend, by weighting the assets they own by their respective credit ratings. We also demand that certain financial institutions (eg pension funds, insurance companies) cannot own assets with below a certain minimum credit rating. All well intentioned, but it is no big surprise that such regulatory structure makes the ratings agencies highly influential.

The Americans have actually cottoned on this problem and made the regulatory system less dependent on credit ratings in the Dodd-Frank Act, but the European regulators have failed to do the same. It is no good complaining that ratings agencies are too powerful while keeping in place all those regulations that make them so.

Most fundamentally, and this is what the Americans as well as the Europeans fail to see, the increasingly long-distance and complex nature of our financial system has increased our dependence on ratings agencies.

In the old days, few bothered to engage a credit ratings agency because they dealt with what they knew. Banks lent to companies that they knew or to local households, whose behaviours they could easily understand, even if they did not know them individually. Most people bought financial products from companies and governments of their own countries in their own currencies. However, with greater deregulation of finance, people are increasingly buying and selling financial products issued by companies and countries that they do not really understand. To make it worse, those products are often complex, composite ones created through financial engineering. As a result, we have become increasingly dependent on someone else – that is, the ratings agencies – to tell us how risky our financial actions are.

This means that, unless we simplify the system and structurally reduce the need for the ratings agencies, our dependence on them will persist – if somewhat reduced – even if we make financial regulation less dependent on credit ratings.

The eurozone, and more broadly Europe, is slowly strangling itself with a toxic mixture of austerity and a structurally flawed financial system. Without a radical rethink on the issues of budget deficit, sovereign bankruptcy and financial reform, the continent is doomed to a prolonged period of turmoil and stagnation.

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