The Duran Podcast - Meloni channels Liz Truss as Italy faces economic crisis

Episode Date: November 9, 2023

Meloni channels Liz Truss as Italy faces economic crisis

All right, Alexander, let's talk about Italy and the Italian economy, which is not doing too well. Maloney, what a, what a disappointment. It's, at least to me, from the outside looking in, maybe maybe people in Italy see things differently, but she hasn't turned out to be this positive force for Italy that many people, including myself to a certain extent, I thought she was going to make a change. But it doesn't look like it. Maybe the situation was just too hard to begin with, given Italy's economic situation before Maloney entered office. But anyway, what's the situation with Italy? Well, well, what Maloney is trying to do, and we're not going to specifically talk about is, you know, budget policies, because this is the key thing. What you're going to,

seems to me to be trying to do is she's trying to repeat in Italy the Liz Trust's experiment in Britain. She became Prime Minister of Italy making all kinds of various promises about increasing support for families, rebooting the Italian economy. A lot of people expected that she would come in as, you know, changing things, and that this would be a major shift in Italian policy. And what instead happened is that she turned out to be a completely loyal supporter of the European Union. She went along with all the policies on Ukraine, for example. And in terms of domestic policy, she didn't rock the boat very much with the European Union. But at the same time, she made all the European Union.

those commitments to the Italian people, which is what got her elected, which are basically incompatible with the fiscal policies that the Eurozone demands of her. So this year, she's the budget deficit, the EU, that the Eurozone permits, it permits a country to run a budget deficit of no more than 3% of GDP. This year it's likely that the budget deficit will be around 5.3% of GDP in Italy. She's overspending and she's just announced a 2024 budget which looks like it's going to overspend even more. Now she claims that the budget deficit will actually fall. to around 4.5% of GDP. But she's doing that on assumptions about Italian growth,

which may be achieved or they may not be achieved. What she wants to do is she wants to cut taxes, she wants to increase spending. She's trying to do very much the same kind of things that Liz Truss was trying to do in Britain last year. So Liz Truss cut taxes, if you remember, rather, Chancellor quasi-quoting cut taxes. and the result was that the budget deficit was set to grow

and the establishment, the various, the Bank of England, all of them worked together and that in the end failed and Liz Truss ceased to be Prime Minister of Britain very quickly. And it seems to me that Maloney in Italy is trying to carry out the same sort of set of policies as Liz Truss is in, did try to carry out in Britain. But Maloney is trying to do that within the framework of the Eurozone. And I can't myself see how that can work.

Maybe, you know, in a perfect world, cutting taxes, increasing spending, is the kind of thing that Italy needs to do. a time when its economy is basically stagnating. You know, you need to give it a boost. There's plenty of savings in Italy. You could argue that this is the right thing to do. But this is a very, very high-risk policy. She seems determined to pursue it. I'm not convinced that the Eurozone authorities will let her get away with it this time. On the contrary, all the indications are that the moved in Germany is not to loosen the fiscal. It's not to loosen the fiscal strings, but to start tightening them up again.

So she's taking very, very big risks. And of course, if those risks turn out wrong, if there is a bond crisis in Italy, and we've had problems with Italian bonds over the course of this year, it doesn't look as if the European Central Bank will bail out Italy this time, in which case both she and her government could be in very serious trouble.

Well, did she not monitor what, what happened with Liz Trust? I think Liz Trust lasted for how long a month? That's right. How long List trust lasted? Absolutely. I think it was the month, exactly. Yeah. No, she didn't monitor what happened.

I mean, you know, in, her political position is probably more stronger within Italy than Liz Trusses was in Britain to say it, to be, to be, to be, to be, to say that. But, you're quite right. Britain controls the currency. Britain controls. controls the currency. It only doesn't control the currency. Italy doesn't control the currency. And of course, if we're talking about Italian bonds, Italy got through the previous Eurozone crisis, because Mario Draghi, when he was then head of the European Central Bank, he bought Italian bonds, even though he went against Eurozone rules by doing that. It's most unlikely,

that they will do that again. So she's taking risks. She's taking risks. Now, a more perhaps ideologically coherent policy if she really did want to move towards a tax cutting, higher spending approach, would have been not to, you know, to have sought some way of leaving the Eurozone,

which is what Salvini was talking about. But that's not what she elected to do. She's trying to run that same policy from within the Eurozone. And, you know, I don't think it's going to work. I think it's going to turn out very ugly. That's my own personal view. It's not going to happen, especially now. I mean, you know, look at the state that Germany is in.

Look at the state that just about every EU country is in. I mean, they're all in, in one form or another. They're all in some sort of a recession. And things are going from bad to worse. So I don't see how she's going to pull this off now. Even five years ago, this would have been a very difficult thing to do. But given the dynamics today, it's not going to happen. Well, indeed, and she's made things worse because she has supported the EU sanctions against Russia,

which have deprived Italy of cheap energy. And Italy was a big importer of Russian gas. And remember Italy has a big manufacturing industry. So she's added to the costs of Italian business instead of reducing them, which again is the price you pay if you do what she did, which is work to present yourself as a loyal follower of the EU in what it is doing. So her policy, her policy, which I think disappointed her supporters, of being faithful to the EU, is now increasingly contradicting her domestic promises. And I think these are beginning to cause real strains.

By the way, I should say, I understand from people who know Italy that her policy of taking a very strong line against Russia is actually unpopular in Italy. Italy is a Russified country. And it is actually criticized in parts of the Italian media, including unusually in Europe, in the Italian television media. Yeah, the problem with Maloney is exactly what you said.

She, well, she presented herself as an Italy first candidate, her entire party. That's what they're anchored in as, you know, Italy above, above everything else. but that's not the case. So it's not consistent. It's not congruent with what the perception was of her party and of Maloney. She enters office and she puts Europe up Italy. Case in point, the sanctions against Russia. She should have taken a line like or bonded.

Exactly. Well, she didn't. Of course, that would have involved taking on the Eurozone. authorities taking on the EU, perhaps working towards moving away from the Eurozone, as I said Salvini and some of the people around him, were prepared to think about those possibilities, those options. Maloney wasn't. She didn't, she lacked the political skill and the understanding of politics, perhaps and the courage to do any of those things. And so she's now called him a trap, and I would not be surprised if next year, as I say, we see an Italian budget.

crisis with a bigger impact across the Eurozone and the way it's going to be solved is by leveraging Maloney out and recreating the Italian government but with perhaps another technocratic Prime Minister, another Draghi or someone like that taking over. I can easily see that happen next year. In which case, the whole Maloney experiment will have not only failed, but failed badly and demoralized opinion in Italy even more. And in terms of Italian governance and movement towards a real solution, Italy's problems, we'll be back to square one, but with an even more demoralized population in Italy than the one we've seen up to now. Yeah, remember, the election with the brothers party when it looked like they were going to win and ursula gave that

interview and she was concerned about maloney becoming prime minister and she said we have tools i remember that quote we have tools when she was talking about dealing with with italy right before the the election it's amazing that maloney seeing this and hearing this and the brothers party understanding that the EU is not Brussels, it's not their friend, that when they got into power, they went full into the Brussels fault. It's stunning. It's stunning. It is stunning. I mean, what I suspect happened was that what was that they got spoke, they got frightened. They were like, the proverbial, you know, rabid caught in the headlights of the car, they just, instead of changing their policies and changing Italy,

then, sorry, instead of working to work through their policies and changing Italy, and taking this head-on, which as leaders of a big EU country, which Italy is, they might have been able to do. They backed away. And of course with the EU, that is something you must never do. Now, sooner or later, one day,

someone will take on this combine, but clearly it's not going to be Maloney. It's not Maloney. Exactly. All right. We'll leave it there. The durand.com. We are on Rumble,

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