And even if/when Berlusconi goes… it still doesn’t satiate the markets… November 9, 2011
Posted by WorldbyStorm in Economy.trackback
From a point yesterday where the Irish Times could write, entirely seriously, that the ‘Confirmation that Mr Berlusconi himself represented a major problem for the markets was underlined by a strange sequence of events yesterday morning….’ to the later news that following his pledge to resign that…
Italian borrowing costs soared to new record levels as the promised resignation of Silvio Berlusconi failed to reassure the financial markets that Italy could avoid insolvency.
It has the inevitability of a Greek tragedy – though the actual Greek tragedy has that inevitability and more too [and I should add entertaining, in a bleak sort of a way, to see that government formation there isn’t proving to be a walk in the park. Funny thing representational politics]. For whatever the markets want, and whatever they get, and they seem in this era to get pretty much exactly what they want, it doesn’t matter. They’re still not satisfied.
The Cedar Lounge Revolution 
[…] And even if/when Berlusconi goes? it still doesn?t satiate the markets? 20:35 Wed Nov 09, 2011 | WorldbyStorm […]
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Seems like my suspicion that Germany was planning to create a super-Euro was justified. This is coming out of Reuters:
The question for the RoI protectorate is, will all the assidous arselicking of the current government be sufficient to be deemed ‘simply a part.’
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Original source Handelsblatt (German FT), in an article appearing tomorrow, apparently.
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From the Guardian tonight:
Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy will be too big to rescue.
The lights are going out all over the Eurozone….
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‘Germany and France rattled financial markets Wednesday with calls for a restructured Europe and treaty changes as Italian borrowing costs spiked yet again and pressure mounted on Greece to form a new government.’
http://news.investors.com/Article/591083/201111091620/Germany-France-Talk-Of-2-Speed-Euro-Zone.htm?src=HPLNews
Ireland has nothing to worry about; Noonan is already making the case that Ireland is a northern European country.
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I know democracy is so last week, but any ‘new Euro’ would presumably need a new treaty, which, given our constitution would mean a referendum: would we vote to stay in?
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Constitutionally, the people are sovereign; therefore when Eu treaties diluted sovereignty referendums were needed.
But the IMF/EU deal negates Irish sovereignty, as even the govt. admits, so since the sovereignty is already gone no further referendums are required,-presumably.
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It’s democracy as school dinner – “you’ll get what you’re given and like it”.
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I think the criteria will be more how craven and technocratic the political class is. AAA rating FG/Labour.
But the corporate tax haven status will be the price.
Constitutionality? The only constitutional mechanism that seems to make a difference is that German Federal Consitutional Court.
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I think for what its worth that we are going to see a who’s in and who’s out debate starting. If they want in then its as ejh, democracy as school dinner. But the pressure in Ireland’s case to stay within the Euro will be massive from the triumvirate of the France/Germany/Netherlands matrix, the US and our own craven political class. It’s going to be Lisbon I and II on steroids, while mainlining austerity and fiscal federation. As we all know here Ireland’s low CT rate is irrelevant, and our ‘advantage’ on that score is quickly diminishing as CT rates (nevermind effective tax rates) in other EU countries come down). Part of the deal will be Ireland having to sign up to a CCCTB, no doubt about that. but the issue will be when. The EU will be in no rush and will be satisfied with it being agreed in principle which it is already I imagine. But Ireland staying in the (or a) Euro is important for the EU, US and the Irish tax consultant class because the IFSC is so tied up in the flow of money from the US and through Europe via the huge number of foreign banks with subsidiaries there. It is the way that these subsidiaries are treated here that is so important to maintain – which means they pay almost no tax. That and keeping everything in a single currency to keep to reduce the cost of exchange rate changes. This is important for the many large MNCs that are not banks, hedge funds and insurance companies too. It’s a reason why France/Germany and the Netherlands worked so hard for so long to get a single currency in the first place. Sorry if I’m stating the obvious for anyone. I’m never sure how many people know all this stuff.
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Don’t be sorry Donagh. I know none or very little of it. What I’m taking from what you’ve said is that we are in cos we are not lazy, good-for-nothing Mediterraneans but in fact hard-working, diligent northern Europeans (in that we have cornered such a big slice of the money-laundering sector that the rest of the hard-working northern Europeans need us in).
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Thanks for pointing that out Donagh – I obsess to much about corporate tax rates. It’s the nexus between US MNCs and the EU through the IFSC that matters, as you say. Pure intra-EU tax avoidance/evasion seems to be done by Luxembourg. Consequently we can assume that the likes of Microsoft and Google will be lobbying hard for Ireland remaining inside the Eurozone.
I guess also the needs of finance capital and information technology invested capital are opposed in this instance – the financiers clearly want as many individualt currencies as possible to speculate against. If the EU can’t stand up to them then small European countries will be easy pickings. That’s why so much effort has been devoted by finance capital to the destruction of the the Euro.
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Donagh,
Your argument regarding the importance of the IFSC is convincing.
Do you have any numbers on how much capital is accumulated via the IFSC on a yearly basis, how much flows through it, how much tax is avoided? Just wondering if it’s say something like USD20bn for example, how would that stack up numercially against the economic benefits to the EU of Ireland being dropped out of the Eurozone?
And what are those latter benefits anyway, in the case of Greece or Ireland, can numbers be put on them, can they be quantified? The people making these decisions are going to have spreadsheets in front of them with those sort of calculations after all, so I’d be curious to see someone’s attempt at second guessing the parameters they might be using.
Another aspect to the IFSC as kingpin in the decision on Ireland’s position in the Eurozone, from the US perspective, is that it might well suit the US administration to close the IFSC and bring some of the avoided tax back home. In any power struggle between administration and US MNC interests it’s clear the latter will normally win the day, but maybe events will drop this one neatly into the lap of the administration.
And of course there’s nothing to stop a new IFSC being set up somewhere else within the core Eurozone, other than some disruption costs. One could imagine a bit of competitive scrambling for the business by politicians eager to bring the jobs and tax stream into their own fiefdom.
I’m not sure I’d be as pessimistic as you are about the inevitability of Ireland being condemned to core-Eurozone status in perpetuity.
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This article from Jürgen Habermas analyses the contemporary German political mentality well. A longish quotation:
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He’s probably right, but Habermas himself needs to take some responsibility for cheerleading the integration project without thinking through the resulting ‘democratic deficit’. He’s changed his tune a fair bit over the past few years, once he realised that a USE would not be his version of civic democracy writ large, and his recent writings – the Post-National Constellation onwards – are interesting, in that he’s quite clear eyed about what’s gone wrong but remains on the ‘nevertheless, there is no alternative’ side.
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In summation, it seems the ideal has met the material, and the material is thwarting the ideal; especially as the ideal has been warped by staggering proportions of undemocratic intent.
When the formal, front door desire to create the USE through a constitution failed, the idealists, supposedly, gave their endorsement to back door referenda. Then they had to knock on the back door a couple of times (Ireland) to get the back door open.
Ally this an ill conceived Euro in conjunction with cental Euro governors who follow a certain brand of capitalist ideology and you’ve cooked up the stew we find ourselves in today.
Does anyone even have an idea of what kind of consensus would put humpty dumpty back together again on a Euro wide basis?
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To possibly torture ‘Make Do And Mend’s’ analogy anyone who posits an ideal should have some grasp of the material context. In Habermas’ case he often appears to take for granted, or attribute little significance to, the fact that the Europe in which he grew up and was intellectually formed by was, above all else, a capitalist Europe. It was just that, through a comparatively short-lived historical detour, that Europe was the product of, in very crude terms, an uneasy truce between capital and labour resulting from relative shifts in power of both following the second world war. European history is now returning to its natural path where labour is sub-ordinated, economically, politically and definitively to capital. It’s striking, having watched dozens of interviews with economists and commentators over the past few weeks, how the first or at least second response to the question ‘What is to be done about Italy/Spain/Greece?’ is some attack on ‘labour market regulation’ or wages, or welfare provision. The bankers, bondholders, traders know instinctively who the enemy is: the European worker and the latter’s belief that they are entitled to a decent standard of living and a decent level of tax funded social provision.
A recent commenter here ‘shea’ made the point, in another context, that ‘this will end in guns’. The way the crisis is unfolding in Europe, and the degree of historical illiteracy evident amongst the proponents of extreme austerity, suggests that they mistakenly believe that there won’t be some reaction to their policies. And that when that reaction comes it will not be pleasant. The extreme austerity discourse appears to have factored in broad public acquiescence with austerity as a constant over the next ten-fifteen-twenty years; an extraordinarily foolish thing to do.
One further point: anyone who thinks ‘the markets’ are going to stop with Spain and Italy is gravely mistaken. Once Italy goes, it will be Spain’s turn, then France and all the way to Germany. ‘The markets’, intoxicated with their political power, and under no countervailing influence, will just keep going until the policies being forced upon Greece, here, and soon in Italy are applied universally across Europe. Does anyone want to bet that despite all of this Fintan O’Toole, ICTU and SIPTU will still call for a ‘Yes’ vote in the next European Referendum?
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In Habermas’ case he often appears to take for granted, or attribute little significance to, the fact that the Europe in which he grew up and was intellectually formed by was, above all else, a capitalist Europe.
@CMK,
I pretty much agree with what you’re saying otherwise, but re: Habermas, I think, nearly the opposite – he was born in 1929, so the Germany he was formed by was, not a capitalist one, nor the post war SDP model but…….. well you can do the sums.
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Sorry, a bit got chopped off – I don’t -obviously -mean he’s a closet Nazi, but that maybe he clings to liberal democracy for fear of something very much worse……
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CMK’s point that there will be no end to the onslaught is one worth hammering home at every opportunity.
In addition to the defeat of democratic apretense at inddivual state level, beginning with Greece and ending with Germany and beyond, within each state there is also a privatisation agenda which begins with the low-hanging fruit of “New Era” targets in the commercial semi-state sector and which ends with absolute for-profit commercialisation of education / health / social welfare and more.
That the latter are not yet, to varying degrees, on the immediate agenda is no guarantee that the eyes of Capital are not already making plans for the vast profits to be gained from these areas of social provision.
The important word is “yet”.
Cast oneself back to the late ’70s and it seemed unlikely that Capital would make private profit from what was then the public provision of healthcare, transport, water, energy, telecommunications etc etc. But it happened across Europe regardless.
That the soft Left ignores or denies this future vision and carries on regardless is an unsustainable political position.
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SoS, yes, that’s a good point about Habermas’ formation but he was a kid for most of the Nazi era and would be no-one’s idea of a Nietzchean Teutonic superman, so he probably had a rough childhood. By his intellectual formation, I meant, specifically, the US dominated West Germany of Adenauer where Habermas began his career and published his earliest works. I take your point about clinging the liberal democracy having experienced Nazism, the downfall the the post war chaos. But from my, not enormous, exposure to Habermas he seems to just accept that capitalism is a given – like the existence of the sun – and that capitalism, its imperatives, demands, and its political agendas and human agents couldn’t possibly impede upon his normative tasks. I know that’s a caricature of him, but I suppose Habermas has a blind side re: the dynamics of capitalism and he will struggle to reckon with the degree to which capitalism seems determined to dynamite the sort of society that a Habermasian, which I presume Habermas is(!), might believe to be a just and democratic one.
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LATC, I think what’s sustaining a lot of people through the current crisis is the hope that things will return to ‘normal’ in a few years time and we can put all of this stuff behind us and get on with our lives. And when Inda, Gilmore and Noonan say ‘the plan is working’ and ‘we are not Greece’, people cling to that: ‘we may just make it, if we keep the course’. The tragedy is that what’s happening in Greece is a foretaste of where are, inexorably, headed. The jackboot of austerity is not a temporary measure; it’s a permanent structural feature being embedded in our lives before our eyes. The commodification of everything, that you allude to, is the next logical step in the process. But with a collapse in living standards it will be impossible to make sufficient profits from wholly commercial healthcare and education, with the result that provision will be withdrawn. Our grandchildren’s children will be taking out student loans to go to primary school and those who are not credit worthy enough will be put to work. That’s where we’re going and the soft Left are putting their shoulder to the wheel to ensure we get there that little bit quicker….
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CMK, agreed.
“But with a collapse in living standards it will be impossible to make sufficient profits from wholly commercial healthcare and education, with the result that provision will be withdrawn.”
Capitalism will make profits where and while it can, regardless of the future consequences. A large/total share of a market today is what matters most, not that the consequences of exploiting that market results in a shrinking market tomorrow. Witness Capitalism’s exploitation of natural resources, whather that’s rain forests, fish stocks, water, fossil fuels etc.
As you point out, that leaves the bulk of the population without future provision of what we currently experience as natural entitlements, human rights.
My wife accuses me of being a pessimist, but I keep telling her I’m an optimist, because that dystopian future can’t be allowed to just happen through passive neglect.
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popeepopt and LATC, yeese are writing what I’ve been thinking but couldn’t put into words.
The trajectory is set. Capital needs to invest itself every second of every day. In a way capital is like a locust swarm, but first it creates before it destroys and hollows out an economy. It then seeks new victims.
The only wrinkle I would add, and yeese alluded to it, is basic resource competition and depletion. Capital formation is now vast and allied with technology is able to consume resources more quickly than at any point in history. I can’t help but think that capitalists know the easy fruit has been plucked and they have to rely on commodification of all human activity. There’s still a certain amount of productive capital formation possible (which is why we might see a return to some undulating growth), but within the West it seems productive capital must become rentier capital in order to multiply.
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‘self absorbed colossus’ is about right.
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@Joe. No, that’s not what I’m saying at all.
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@Donagh. If I left out the first bit of twaddle in my comment and left it at: “We will be in because we have cornered such a big slice of the money-laundering sector that it will suit Germany/Netherlands/France/Us to leave us in”, would I be closer to the mark?
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I suppose I am arguing that whether or not Ireland remains in the Euro will not be for the reasons that we are told, but simply because Ireland is a hub of this sort of movement of capital. As we can see now with the appointments of the technocrats, Papademos in Greece and Mario Monti or Giuliano Amato in Italy, all of whom are closely connected to banking, not only the ECB, but in the case of Monti to Goldman Sachs, you can see whatever way this is going to play out it’s going to be in the interests of the banks. Given that the “IFSC along with Luxembourg are the two main centres for administering hedge and other funds in Europe and hosts over half of the world’s top 50 banks and half of the top 20 insurance companies and in 2008 hosted about 8,000 funds handling €1.6 trillion of assets” (to quote Jim Stewart) I think its fair to say that they will not be in any great hurry to bump Ireland out of the Euro. Ireland not being in the Euro would undermine one of the main advantages the IFSC has at the moment.
Of course, in order to maintain Ireland in the Euro, while also requiring us to repay the entire banking debt which we have taken on in full and which came about in large part from the activities of these banks the domestic economy will have to be squeezed even harder. But we will be told that this is a necessary evil required to remain in the super-club of the German/France/Netherland’s economic nexus.
And that is why I don’t comment here that often. I sound like a crazy person.
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Not to worry, Donagh. Anyone who speaks the truth about an insane system may come across as insane to those who take insanity for normality.
But the markets want it both ways with respect to the Euro. There has been massive and pretty unanimous shorting (i.e. betting on a fall in value) by these very same hedge funds since the beginning of October. They need to inflict major damage and soon to drop the price of a Euro from about $1.40 to $1.30 or below.
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As mentioned previously, the historical illiteracy of media commentators is striking. events have forced some of them to look back further, so now the flaws embedded with teh creation of the euro are being examined, a little at least. A week or two ago there was a piece on UK’s Newsnight by their economics editor (not Peston) comparing the crisis now to 1929. An historical approach at last, and mention was made of the collapse of an international currency system (the gold standard), increasing economic isolationist pressures, austerity and social unrest, the rise of nationalism and eventually war. Interesting to hear it on the MSM.
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I assume that was Paul Mason. He’s well worth reading as well:
http://www.redpepper.org.uk/Reclaiming-our-past/
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Thanks for that link. It’ll make watching BBC2’s Newsnight all the more interesting in future, knowing there’s a bit more depth to him than the Dan O’Brien’s of the MSM on this side of the water.
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Paul Mason: http://en.wikipedia.org/wiki/Paul_Mason_%28journalist%29
I saw a comment somewhere the other day that he’s an ex-member of Workers Power / 5th International.
Anyone able to confirm that?
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No, but Harry’s place seems to hate him, which only endears him to me even more.
http://hurryupharry.org/2010/11/06/paul-mason-on-the-picket-line/
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Mason wrote a good book ‘Live Working or Die Fighting’ on the history of socialism and the working class; published a few years ago
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“It’s inevitable Greece will default and exit. I think Ireland will be saved because there’s too much riding on it as a big version of Monaco. Portugal doesn’t really matter, it’s not systemic, and so it all comes down to Italy.”
<a href="http://www.guardian.co.uk/commentisfree/2011/nov/11/the-conversation-eurozone-crisis?newsfeed=true"http://www.guardian.co.uk/commentisfree/2011/nov/11/the-conversation-eurozone-crisis?newsfeed=true
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The autistic teenagers on speed (and the software simulcra thereof) that constitute ‘the markets’, will like Papademos in Greece & Monti in Italy.
It will not be necessary to appoint Colm McCarthy as governer here, because Kenny & Gilmore are have an instinctive feel for what the Imperium requires.
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And they’re a bit cheaper than McCarthy, who’d bill by the hour…..
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+1 🙂
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we’ll vote yes in a referendum because politicians in this country use corporate marketing techniques and sell lifestyles. it doesn’t matter if the can of deodorant actually makes you sexy just that you feel it.
it would be dirty anti intellectual and supping with the devil but a way for the left to influence this direction would be to attack that feeling.
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The view from China:
“If you look at the troubles which have happened in European societies, this is purely because of the accumulated troubles of the worn-out welfare society. The labour laws induce sloth and indolence rather than hard work.”
quoted by Tony Barber, FT, Nov 11
http://www.ft.com/intl/cms/s/0/93c5cb36-0c92-11e1-a45b-00144feabdc0.html#axzz1dRr53gvI
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That’s communist China 🙂
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To be honest I’d be very sceptical about anything like that emanating from the PRC. Their labour laws are very poor, protective legislation for workers thin, citizens rights far too contingent and so on.
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Chairman Jin is quite a guy.
-Jin’s praise of hard working Chinese people stands next to NGO reports of “sweatshop” conditions in some of its biggest factories.
Workers at Foxconn plants in Shenzhen and Chengdu, which make iPads and which saw 14 suicides in the past year, say they sleep 24-to-a-room, get one day off in 14 and earn 75 euro cents an hour. Workers at the Ford factory in Chengdu work 30 days a month in peak time and earn 80 cents-
http://euobserver.com/884/114195
I could do with some of that ‘languishing on the beach’ right
now.
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The other side is that the Foxconn factories are generally regarded as better than worse in the context of PRC working environments… so God only knows what worse is like.
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Don’t worry, we’ll be getting Chinese style labour laws before long. An entire generation of ‘entrepreneurs’ and business people are contracting the authoritarian capitalist bug though doing business in China and we’ll have an outbreak here soon enough.
Consider the Irish ‘entrepreneur’ visiting the company’s operation in China – minimal health and safety, a party official who’ll fix anything for you for a couple of grand, no unions, cowed workers who nonetheless maintain a perma-smile and seem happy enough with the shit conditions and low wages; then this ‘entrepreneur’ returns ‘home’ and faces health and safety law, minimum wage laws, regulations for this, regulations for that and, if they’ve been stupid enough to recognise a union, they have to deal with shop stewards and officials and a wider union movement spouting nonsense about ‘justice’ and ‘fairness’ etc, etc.
Break the masses, their petty dreams of improvement for them and their children, push them as close to poverty as you can without provoking a revolution, and keep telling them that their degradation is for their own good and that of the economy: that’s the European dream and what lurks behind all of the rhetoric and nonsense about ‘competitiveness’.
The rise of the ‘technocrat’ government in Europe is an irreversible structural pillar for the embryonic European ‘authoritarian capitalism’, don’t be surprised is we have a similar development here should the ‘recovery’ plan fail to work out, which looks increasingly likely.
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‘authoritarian capitalist bug though doing business in China and we’ll have an outbreak here soon enough’
Is there not an Orientalist edge to this kind of talk? After all the capitalist class here in the ‘west’ have never been too fond of democracy other than amongst themselves as shown by the struggle for universal sufferage etc.
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There is a danger in that, and well worth noting that Russia has taken a not entirely similar but still authoritarian capitalist approach too, but perhaps what makes people so surprised is that the PRC went through a Marxist phase and now has reverted almost to a late 19th century mode.
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Yea I get what you mean but it should be remembered that what democratic rights we have here are as a result of massive social struggle by past generations and not gifts granted to us by ‘western civilisation’ which is where the likes of Zizek seems to be coming from in his latest pronouncement about the ‘asian strain’ of authoritarian capitalism.
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I agree that there could be an ‘orientalist edge’ to talk of ‘bugs’ etc. What I was getting at is that we only had a comparatively short period of non-authoritarian capitalism in the West, but that whatever progress that has been made is being beaten back by the pressure to compete with the PRC and, to a lesser extent, India. Also, there’s a symmetry between the Singapore model developed under Lee Kwan Yew and recent developments in Europe with the enthronement of Papademos in Greece and Monti in Italy. And, crucially, we are now in a de facto ‘one policy state’ [i.e. the dictates of the bond market] where what matters is not that there is a competitive multi-party political democracy, but that whatever parties are contending within that system are willing to implement pre-ordained policy i.e. please the bond markets at all costs. Whether there’s two, three, five, sixty political parties in a European state is irrelevant, what matters is that they all adhere to the same broad policy emphasis. It’s only taken 22 years from the fall of the Berlin Wall to the initiation of the gradual installation of the technocrats. From one party states to one policy states. The challenge will be to keep a lid on the tensions that are inevitable as austerity is imposed on an unwilling population.
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Fair enough
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Here’s Zizek contrasting liberal, Western capitalism with the authoritarian, Eastern variety.
He also raises an interesting question: who will appropriate the energy of the protests?
http://www.aljazeera.com/indepth/opinion/2011/11/2011111011283172950.html
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You might want to check which Irish left-wing political parties still retain an affection for the PRC, and indeed have ‘business’ links with them.
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“That´s why I believe Europe, to help drive forward a governed globalization, alongside the United States in particular, has to become more like the U.S. in its own domestic economic structures, and this means, of course, more flexible markets and, well, the Lisbon agenda basically.”-Mario Monti, advisor to Goldman Sachs and member of the board, Coca Cola.
http://www.imf.org/external/pubs/ft/fandd/2005/06/people.htm
(Note: this is the technocratic, non-political, non-ideological agenda)
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