ITALY’S economic crisis is reaching the point of explosion, an explosion that even bourgeois economists fear will bring down the eurozone and the entire European Union with it.
Figures this week show that the output of manufacturing industry in the country, crucial to the Italian economy, has at the very least ‘stalled’ over the summer, adding intolerable strains to the already debt-ridden Italian capitalism.
Capitalism today is surviving exclusively on debt, with countries depending on ‘loans’ by issuing bonds in their own currency which are bought up by international investors. These bonds come with interest rates (yields) that the country pays to the investor over a defined period of time, be it a month, a year or ten years before it ‘matures’.
How much you pay in interest depends on the risk to the investors, the main risk being that the country they lend to will default and effectively declare itself bankrupt and unable to repay not just the interest but the entire debt. The threat of default has been hanging over Italy for some time. The debt-to-GDP ratio for the country stands at 132% – in other words Italian debt is a third more than its annual economic output. Now, with the news that manufacturing output is on a downward slope, this can only increase.
To pour petrol on an already raging economic fire, the Italian working class has risen up demanding an end to the savage austerity measures imposed by the EU bankers to pay off the debts the Italian bourgeoisie owes to the banks and international speculators. In the general election in March this year, they threw out the pro-EU coalition government led by Matteo Renzi that had faithfully carried out EU austerity attacks and voted in a coalition government of the right-wing nationalist Lega (League) party and the anti-establishment 5-Star movement.
Both these parties won support from workers on the basis of their outright hostility to the EU and the euro along with a commitment to end austerity and reverse attacks on wages and pensions. Last month, this coalition shocked the bankers by announcing that it intended to immediately implement changes including introducing a flat tax rate for all, plus a national basic income for all, and abolishing the Fermo reform.
This reform, brought in in 2011, pushed up the retirement age for men and women. The cost of these measures for the Italian government is estimated to be 73 billion pounds a year – a massive amount that will tip Italy into an economic crash capable of taking the rest of the eurozone and the EU with it.
Italy is not a relatively small economy like Greece. It is the third largest economy in Europe. An Italian default cannot be controlled and the increased austerity the EU bankers will seek to impose to pay back this debt will revolutionise the working class not just of Italy but of Europe as a whole.
Already this week, it has become clear that the investors who supply the ‘loans’ keeping the country going are fleeing, seeking safer havens for all the free money gifted to them by the central banks through quantitative easing. At the same time, the European Central Bank, fearful of the debt bubble it helped create through QE, is cutting back and ending buying government bonds.
With no ‘lender of last resort’ available, state bankruptcy and a crash are staring Italy in the face. However, it is not just Italy that is on the cliff edge – the whole of Europe and Britain will be dragged down with it as the capitalist ‘contagion’ undermines the entire banking and economic system.
What is absolutely clear is that, in this crisis situation, the drive by the leaders of the big trade unions and TUC in Britain to overthrow the referendum result and keep the British working class tied to a bosses’ and bankers’ EU that is on the brink of crashing down in flames is an act of monumental treachery.
The only way forward for workers in Britain, Italy and across Europe is to overthrow bankrupt EU capitalism with socialist revolutions, and go forward to a Socialist United States of Europe. This requires the building of revolutionary parties of the Fourth International in every country in Europe to lead the European socialist revolution to victory!