Beppe Severgnini: A word of advice for my nervous German friends

Italian journalist Beppe Severgnini asks the Germans to be less nervous in the Financial Times and the Corriere della Sera (in English).

I can see why the Germans are close to panic: they’ve never had it so good and they don’t want to lose it, because of some “lazy southerners”. They are not far from the truth but, conveniently,  they forget that they owe their wealth to the lazy southerners financing their well-being, by buying their products, among others. During a recent trip across Italy, I was struck by the high proportion of high-end BMWs circulating in northern Italy – probably the highest proportion of German luxury cars outside Germany. So, southerners may be messing up their own economies, but they spend a considerable proportion of their money with Germany, and not only on cars. From a strictly business point of view, it makes sense to help your best customers overcome temporary difficulties, particularly when it’s not going to cost you real money: contrary to what the German tabloids say, all these financial manoeuvres are loans, not donations. And they are not giving real money, which may enter the financial circuit, therefore there is little chance of fueling inflation.

As for calming down jittery markets, Switzerland performed a flawless manoeuvre a few weeks ago: the Swiss Franc was skyrocketing out of control, because the markets were panicking over the euro, making Swiss products too expensive for export. The Swiss central bank stepped in, announcing that it was going to make UNLIMITED funds available to lower the value of the Swiss Franc. They managed to get the situation under control in a matter of a few days: no speculator can afford to bet against a central bank, as it can emit unlimited funds in its own currency, for as long as it takes.

As far as I can tell, the German point of view is that they are not willing to help rescue countries whose finances are out of control and which refuse to conduct reforms, because it would only be a temporary measure. You could go on forever, pumping money into Greece, but if the Greeks refuse to get their house in order, there will never be a light at the end of the tunnel. Berlusconi’s resignation, in Italy, was a necessary step to start getting the budget under control. Governments have to make agonising, unpopular decisions but, like with surgery, the swifter the operation, the quicker the recovery: if you have to cut a gangrenous finger, there is no point doing it a millimetre at a time, because the gangrene will just go on spreading and you will have to repeat the painful operation countless times, with uncertain results: governments have to stop unproductive or downright harmful expenditure and focus their resources on forward looking, productive investments. Keeping unnecessary layers of administration, just to provide public employment, is not only a waste, it’s actually harmful. The spurious administrations generate unnecessary paperwork and compel citizens to jump through hoops for the simplest of things: you need a paper to certify a paper which will be used to obtain a licence: abolish unnecessary paperwork and licences and all the paperwork that goes with it, and spend the money on health, education and infrastructure, which sorely need it, while allowing businesses and individuals to get on with their work, instead of wasting time and resources queueing up and sucking up to (or bribing) surly civil servants.

In the end, the Germans have the unenviable task of playing the tough doctor, who has to tell the patients that if they don’t want to swallow the bitter pill, they won’t get better. Let’s hope that they don’t lose their nerve and let the populists take over.

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