Tremonti: Monti Has Failed, We Need Glass-Steagall
April 14, 2012 • 8:30AM

In an op-ed in Italy's newspaper of record Corriere della Sera on April 12, former Economy Minister Giulio Tremonti exposed the failure of the technocratic Monti government, and called for bank separation and an investment policy. Within hours of the publication of this article, Tremonti was dragged by the media into the mud of a scandal around the Lega Nord party.

Playing on the fact that the crisis of the Italian debt has re-emerged, Tremonti wrote: "For a technical government such as ours, there is, among other things, the specific risk of a 'technical' decline; the risk that confidence given to this particular government, demanded by the 'market,' created for the 'market,' at last obtained by the 'market,' such a confidence is eventually withdrawn not by voters but by 'market' itself, thus debasing ist fundamental raison d'être."

Tremonti blasts the European Central Bank's liquidity injections, which he calls "the Sindona decree" (from the famous mafia financier Michele Sindona, who used to rollover debts with debts), which has temporarily brought Italian refinancing costs down, but now they are up again. The therapy "acts downstream, on effects, and not upstream on the causes; mistakes the illness for the medicine. It is like curing an alcoholic with alcohol."

As for the Monti measures, the pension reform "forces cohorts of people with growing health problems to work, since life expectancy and health cannot be adjusted per decree and suddenly, but gradually and physiologically the tax increase has been and will be excessive, regressive and recessive. It is a waterfall of taxes on everything, from savings to gasoline, to home property, to be lethally crowned with the inevitable increase of VAT, included in the government bill."

But "the spell has been lifted: Spread and debt costs are suddenly again rising and, for domestic and external reasons, it is improbable that they will go down with non-marginal political problems: in opinion polls you can say yes to sacrifices in order to get stability, but in the money bag and in elections it is difficult to accept sacrifices without getting stability."

Tremonti calls for "financing public works" and "putting an end to the dominating power of finance: separating productive banks which collect private savings to finance business, families, communities, from speculative banks which are active in the financial casino. The latter, if they want, must risk their own money and not, as they have done so far, risk public money; i.e. our money. And last, ban the folly of speculative derivative contracts."

"I have been asked: 'Besides writing about it, why didn't you do it, when you were in the government?' Even Obama, though he understood it, was not able to do it. But now, with the crisis hitting ever larger layers of the population, the climate is changing. The paradigm must be turned upside down: it is not for us to win the confidence of the market, but the market must inspire our confidence, and it can be so only if States and Peoples get a higher vision, a communitary and social one, so that they will again be more powerful than finance."