Everything Is Broken Up and Dances by Edoardo Nesi & Guido Maria Brera & Antony Shugaar

Author:Edoardo Nesi & Guido Maria Brera & Antony Shugaar
Language: eng
Format: epub
Publisher: Other Press
Published: 2018-03-27T04:00:00+00:00

Guido

AFTER GREECE, in the meantime, Ireland and Portugal too are forced to throw down their weapons in the face of the markets’ onslaught, and they voluntarily surrender to the control of the troika — the European Commission, the European Central Bank, and the International Monetary Fund — which, in exchange for substantial loans (85 billion euros to Ireland and 78 billion to Portugal), demands that they approve the reforms required by the rules of austerity, namely a deadly cocktail of cuts to the social welfare safety nets and public spending and, at the same time, tax hikes on citizens and companies.

In the face of the slow but constant hemorrhaging of Spanish and Italian treasury bills, the European Central Bank — at the time headed by the Frenchman Jean-Claude Trichet — reacts with a surprising move: on April 8, 2011, the official interest rates of the euro are shifted a quarter point upward, rising from 1 percent to 1.25 percent, and on July 7, 2011, they rise even further, reaching 1.5 percent.

You ought to remember that date very clearly, Edoardo. That’s the day you won the Strega Prize.

While America floods its markets with liquidity, Europe restricts credit, making it even more expensive. It’s as if, aboard the Titanic, the captain had decided to solve the problem of the atrocious heat that the first-class passengers were complaining about by flooding steerage with ice-cold seawater.

Trichet’s idea is to counterbalance certain invisible inflationistic forces that every German government fears like the plague, and has feared ever since the years of the Weimar Republic. But the interpretation that the markets put on it — for that matter, the only interpretation possible — is that the countries with a liquidity crisis are going to be abandoned to their fate.

This is the moment when the attack on Italy and Spain and the euro is well and truly unleashed. After Trichet’s brilliant move, investors around the world start to buy German treasury bills and sell Italian and Spanish treasury bills — the same elementary and yet highly effective weapon that had already been turned against Greece. The spread between the treasury bills and the German Bunds experiences an immediate uptick, rising, in the month of July alone, from 180 basis points to more than 300, thus driving prohibitively high the interest rates on the bills Italy places on the markets every month in order to finance its current expenses. The same thing happens to Spain and its Bonos.

Ice-cold water starts to fill steerage, in other words, and during that sweltering hot summer I start to feel like a character in one of those apocalyptic American movies (I know it doesn’t make me the most refined of film connoisseurs, but I’ve always loved them: 2012, The Day After Tomorrow, Deep Impact, and even Armageddon), a character who knows about some impending catastrophe while the rest of mankind remains blissfully in the dark.

Of course, I can’t and don’t want to tell anyone. It wouldn’t change anything, and after all, we know what a bad end Cassandra came to.

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