Eurozone crisis deepens after Italy downgrade, highlighting folly of the whole enterprise
Italy has just become the sixth Eurozone country to be downgraded by a major credit rating agency as the consequences of reckless deep integration become ever clearer
If ever there was a case of “too big to fail, but too big to bail” that case is Italy.
According to data from the World Bank it’s the fourth largest economy in Europe and the eighth largest in the world. Last year, its national debt was a whisker below 120 percent of gross domestic product. Only Greece’s debt was higher.
Given the turmoil in Italian politics, where Prime Minister Silvio Berlusconi faces no less than four trials, the downgrade from Standard & Poor's can hardly be considered surprising.
The rating agency almost halved its estimate for average growth (2011-2014) to 0.7 percent and cut the country’s rating from A+ to A with a negative outlook, warning that, all things considered, there had to be significant doubts as to whether it would really be able to reduce its debt as planned.
Let’s be quite clear. If Italy actually defaults, no-one has got enough money for a bail out. We’re not at that stage yet, and hopefully never will be – if Italy goes down, the whole of Europe (including Britain) faces economic catastrophe.
But with six Eurozone countries having already been downgraded this year – Italy follows Greece, Ireland, Spain, Cyprus and Portugal – the notion that the Eurozone would converge into a coherent, well-managed currency zone emblematic of the benefits of “ever closer union” is clearly now in tatters.
It is not merely the profoundly anti-democratic way in which the whole enterprise was conceived – opinion polls consistently showed the Germans were against it, and if Brussels and Berlin had not ridden roughshod over the wishes of the German people the euro would have been a non-starter.
It’s also a lesson in how the fantasies of mindless (mainly leftist) bureaucrats can become so detached from reality and so dangerous to the well-being of ordinary citizens.
Because no-one can accuse the Eurozone’s critics of being wise after the event.
Crisis was both predictable and predicted. As far back as November 1997, William Hague, now Foreign Secretary, famously warned of the Eurozone as “a burning building with no exits”.
And, he added: “…if the nightmare of our experience in the ERM [Exchange Rate Mechanism] teaches us anything it is not to steer by the siren voices of a supposed consensus, but to exercise the independent judgement of a cool head.”
Thank goodness that cool heads did in fact prevail in Britain. Millions of Europeans must now be asking why their own politicians failed to follow our lead.
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