Will Grillo Break the Euro?

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Italy's elections could signal the end of the euro or they could mean nothing at all. It's impossible to know just yet. But one thing is certain, Italians have "had it up to here" with austerity. Nearly 60 percent of the electorate voted for candidates who oppose the policy and who want a change of direction. That's why Beppe Grillo's upstart Five Star Movement (M5S) did so well in the balloting, because they rejected Brussel's hairshirt diktats and called for a referendum on whether Italians want to ditch the euro or not.

The Movimento 5 Stelle (M5S) nabbed a full 25 percent of the vote, paving the way for parliamentary gridlock that could make it impossible for the European Central Bank (ECB) to continue its support of the Italian bond market via its Outright Monetary Transactions (OMT) program. If Grillo's agents (Grillinis) are able to block Brussel's unpopular "reforms," then the yields on Italian debt will skyrocket opening a new chapter in the euro crisis. This is why global stock indicies plunged when the election results were announced earlier in the week. Investors are still on tenterhooks.

So far, Grillo has taken the high-ground and resisted the temptation to join "presumed" prime minister Pier Luigi Bersani's center-left alliance leaving open the possibility that Italy's next PM will have to form a coalition with Silvio Berlusconi. This is a winning strategy for Grillo. By assuming the role of opposition party, the Five Star Movement can expand its ranks (by lambasting the existing policy) while building support for its central demands, an end to austerity and a referendum on the euro. If Grillo plays his cards right, he could bring down the euro. But no one really knows if that's what he wants or not.

It could be that he's just along for the ride; just riding the crest of anti-government sentiment that's swept across the continent and lifted his party to power. The M5S was the main beneficiary of a massive protest vote deriving from the Italian electorates' disgust with the slate of corrupt and inept politicos on the ballot. That's hardly a ringing endorsement for the Grillinis, nor does it suggest that they are ready to govern. To govern, one needs ideas and a strategy for implementing those ideas. Grillo's team has neither. They are defined more in terms of the things they are against than things they are for. It's fine to want to "throw the bums out," but that won't put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

There is room for optimism, slight though it may be. For one thing, we're encouraged by Grillo's attack on the euro in an interview with Bloomberg in 2012. He said, "The euro is a rope around our neck. It is being drawn tighter every day."

Amen, to that. It's worth noting that in the three years since the EZ "debt crisis" began, the troika (the International Monetary Fund (IMF), European Commission and European Central Bank) has made countless decisions, all of which were tailored to meet the needs of bondholders, banks, corporations and establishment elites. To date, the troika has never implemented a policy that directly benefited the poor, the sick, the unemployed or Europe's shrinking middle class. 

Aside from the glaring structural problems in the composition of the eurozone that make it functionally unworkable, this other issue -- the issue of shaping policy to boost the profits of powerful constituents -- is why a break-up of the 17-member union is necessary. It's not possible to change the way that the EZ is governed because the union was in fact created to establish the primacy of banks and corporations. In other words, the EZ is operating exactly as it was designed to operate, as a free trade zone, where the movement of capital is unimpeded and where the captains of industry and finance control all the levers of political power. That won't change, which is why working people should act in their own best interests and support politicians and popular movements that demand an end to the euro and a return to national sovereignty. The nightmare has gone on long enough.

Still, it's hard to say if Grillo's attack on the euro reflects his determination to leave the union or whether he's simply grandstanding to garner more support for his movement. If he is sincere, then he will instruct his followers in parliament to refuse to pay the interest payments on Italy's debt, a move that would force the ECB to cut off its emergency funding, thus, plunging Italy and the entire eurozone back into crisis. This would pave the way to a break up of the euro. According to the Guradian, Grillo is commited to this approach. Here's an excerpt from an article titled "Is Beppe Grillo the bogeyman a disaster waiting to happen, or can his activist army heal Italy?": "What has spooked the markets is his commitment to hold a referendum on leaving the euro and a temporary freeze on interest payments on government bonds, which could lead to default."

Is this Grillo's plan? An excerpt from Grillo's blog on defaulting suggests that it may be. Here's the clip:

"The Italian public debt is close to 2,000 billion. ... The public debt has not been growing in recent years because of too much expenditure. Just in 2011 alone, the State had a primary surplus of 16 billion, but the interest payments, amounting to 72 billion ... have caused a deficit of 62 billion. It's an infernal mechanism. Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion), that we had to pay in that period, have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.

"Who are the ones who own our debt? To whom are we paying the interest that is destroying the State's budget? Only 15% are families, 40% are foreigners (and of those more than half are in France and Germany), 19% are finance funds and insurance companies, 20% are Italian banks and 6% the Bank of Italy (*). The public debt is regularly transformed into something for market speculation. When States sell new bonds to replace those that are coming to maturity, markets experience speculators who are contributing to price falls so as to bring about higher interest rates. It's the usurer's technique. Thus the debt becomes an opportunity to maximise earnings in the market at the expense of the nation. As a consequence social inequality increases. 11% of Italian families are living in poverty and 7.6% are at risk (**), from 2008 to June 2012 Italian families have been subjected to a hole of 330 billion euro (***). If financial powerbrokers use speculation to increase their earnings and they force governments to pay the highest possible interest rates, the result is recession for the State that's in debt as well as their loss of sovereignty. ...

"The spiral of increasing debt and interest rates is making Italy disintegrate, together with other European States. There are alternatives. These are being put into effect by some countries in South America and by Iceland. The burden of the crisis has to be distributed across creditors (mostly banks and financial institutions) and citizens. There has to be a really fierce attack on speculation...We are running into a wall and they are telling us there's no alternative. The risk is that we are going to reach default in any case with the devaluation of the debt and the Nation impoverished and on its knees." (Beppe Grillo blog)

Grillo's understanding of Italy's debt woes is reason to be optimistic. First of all, he rejects the idea that the debt is the result of profligate spending ("we have been really virtuous"). Instead, he pins the blame on speculators who are presently extracting more rent from Italy's coffers than can be reasonably managed.

Second, the growing burden of the debt is increasing inequality, insecurity and poverty. as well as putting a damper on growth.

And, finally, he sees the only remedy to the ballooning $2 trillion debt as some form of default which transfers the bulk of the losses to the speculators who risked their money betting on Italian sovereign bonds. It is these "banks and financial institutions" that must take haircuts, so that Italy can reduce its debt-load without foisting more red ink on working people who -- to this point -- have shouldered 100% of the losses from the financial crisis.

While Grillo's grasp of Italy's dreary finances suggests that he may push for a radical restructuring of the economy, the opposite appears to be true. Grillo is not Leon Trotsy nor does he oppose the organizing of society around profitmaking. The Movimento 5 Stelle is not Occupy; it is not movement that explains our present situation in terms of class relations. (1% vs 99%) In fact, Grillo is a multi-millionaire who diverts attention from his personal fortune with all kinds of trendy gibberish about the Internet, women in politics and the divide between old and young. It's all a smokescreen designed to conceal the underlying reactionary philosophy that guides the movement. Take a look at this excerpt from an article at Uruknet:

"Over the past three years, while other countries around the Mediterranean and more generally in the west have seen movements that are fighting against austerity and neoliberalism gaining in strength and, in some cases, taking root, here in Italy this has not happened. There have been... No indignados in our country; no Occupy; no "springs" of any kind; no "Je lutte des classes" against reforms to the pension system. We have not had a Tahrir Square or a Syntagma Square; we have not had a Puerta del Sol. We did not rise up as others have done elsewhere and, in some cases, are still doing. Why not?