Italian economist Eugenio Benetazzo: 'act now or wait for social unrest'

Article published on Nov. 25, 2011
Article published on Nov. 25, 2011
In 2006 the Italian economist and independent trader forecasted the collapse of the global economy with his prophetic book Duri e Puri (‘Hard Core’). The financial guru gives us his bleak forecast for Europe

Since publishing his book, Eugenio Benetazzo has travelled Italy and put on a series of theatrical shows explaining the mechanisms of international finance and the global markets. Very present in the blog of one of Italy’s most popular comedians Beppe Grillo, the young trader has become a cult figure on the internet and independent television channels. He recently released his latest book entitled It Was My Country ('Era il mio Paese') as well as his economic manifesto for Italy, which summarises his solution (rather bitterly) of how we can get out of the crisis and boost the economy. ‘Unfortunately it will be impossible to improve the European economy, nor that of Italy, without undertaking social reforms.,' he explains. 'We can only slow the European decline through a challenging and drastic redefinition of the welfare system. It's a bitter medicine which we are no longer used to, but one that we must swallow.’ This is not the book to pick up if you are looking for toned down, comforting answers: Benetazzo has become famous thanks to the frankness of his economic analysis.

'We can only slow European decline through drastic redefinition of the welfare system'

‘We must expect a gloomy scenario that the Italian and European ruling classes have hidden from us for years, due to their electoral needs,’ predicts Benetazzo. ‘The welfare model must be considerably reorganised, especially when it comes to the pension system. These are clearly not propositions that a political party would dream of making, at the risk of immediately losing millions of votes. Either we act now or we do not intervene and leave the country to get into a much more serious state of social uneasiness.’ Interview. Are the PIIGS countries (Greece, Spain, Italy, Portugal and Ireland) to blame for the economic situation they find themselves in or are they victims of the more powerful countries in Europe?

Eugenio Benetazzo: Both sides share responsibility for the current situation in Europe. The more powerful countries as well as the poorer have exploited the only advantages that the euro has brought in the past few years. On one hand the outlying countries of Europe have profited from the possibility of getting into debt with the particularly favourable economic conditions. The consequence of this was a certain casualness in the management of the public accounts. On the other hand the powerful countries in the European union, especially France and Germany, have staked a big part of their financial resources on the PIIGS. This excessive confidence led to financial overexposure. Both sides are therefore responsible. This means that the current sovereign debt crisis sees creditors and debtors united in the same destiny. Do you think the European institutions have reacted adequately to the crisis, the first major one since the birth of the euro?

Eugenio Benetazzo: The European central bank and the EU as a whole have been the victims of a lot of pressure, which has prevented the birth of the government bonds or eurobonds. If they had been created two or three years ago at the start of the financial crisis, they would have been able to avert the disastrous consequences, which today weigh on the biggest debtor countries in Europe. This makes the failure of the euro even more apparent. Is this merely an economic problem or does it also have a political nature?

Eugenio Benetazzo: There has certainly been a problem of sovereignty. There was a lack of supranational governance capable of opposing the will of certain international banking lobbies who were against the creation of eurobonds. Might youth demonstrations such as the ‘indignant’ movement and Occupy Wall Street be enough to bring about change?

Eugenio Benetazzo: I do not believe that these movements will be sufficient. It would need an empty wallet which is not the case at the moment. These protest movements get a lot of media attention but realistically they are not bringing about much political change. Of course, several episodes demonstrate that a certain uneasiness is emerging. This will be difficult to alleviate even with a change in political leadership, not only in Italy but in Europe. Can we take hope from Iceland’s apparent recovery? Is this an isolated case or a possible solution?

Eugenio Benetazzo: At the moment Iceland remains an isolated case, even though in the last few years we have seen other countries behaving in a similar way. Iceland has been able to count on an autonomous monetary policy, its own currency and more than anything else a population which doesn’t react the way you might expect. Iceland's population refused the remission of debts when confronted with foreign investors. They pointed the finger at the managerial class of the banking sector, which led the country to ‘crash’ financially. If other countries acted in the same way, the consequences would be without doubt catastrophic for the financial plan. Iceland is a small country where the total debt rose to about ten billion euros, whereas in Greece it reached thirty billion euros. This is a classic situation where it costs less to cure a sick person than to leave them to die.

Image: (cc) odysseasgr/ flickr