mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
A Fraying Union
Italian PM: Better French Inflation Now Than Le Pen Later

As Europe struggles to find its way out of its economic malaise, the Prime Minister of Italy, Matteo Renzi, came out swinging in defense of France’s violation of the EU deficit targets. In an interview with the Financial Times, Mr. Renzi said that while Italy had taken a different course, France may have been right to contravene the rules:

“Italy has a big problem of reputation so I prefer to respect 3 per cent to give a message of stability, of credibility,” Mr Renzi added. But the 39-year-old former mayor of Florence who has strenuously made the case for the EU to show more flexibility with regard to its tight budget rules since he took office in February, added that he “respects” France’s defiance.

“I prefer to have a France with 4.4 per cent [debt-to-GDP ratio] today than a France with Marine Le Pen tomorrow. This is very important for Europe,” he added, referring to the leader of the far-right National Front.

“We must give a message of comprehension for countries with problems,” Mr Renzi said.

Renzi’s statement was just the latest salvo in an ongoing north-south divide in the EU between deficit hawks, led by Germany, and countries who see a need to inflate their way out of economic misery, led by the so-called Latin Bloc of France, Spain, and Italy. As the EU lacks effective enforcement mechanisms to prevent moves such as France’s, this contest turns into a matter of political will — which is why Renzi’s comments are significant.

This comes on the heels of the garbled announcement earlier this week from the ECB on the steps they’re taking to tackle Europe’s plummeting core inflation. Forced in large part by German officials’ reluctance to approve any kind of aggressive action, the ECB agreed to limit the amount of “junk”-rated assets—largely Greek and Cypriot loan bundles—it was going to purchase in the next two years as part of its €1 trillion stimulus program. The ECB’s head, Mario Draghi, delivered his announcement in Naples while beyond the security perimeter Italian protesters clashed with riot policy in protest against European austerity.

The north-south spat seemed to have quieted down. But it has not gone and will not go away, because the underlying structural problems are unresolved.

Meanwhile, there is a certain irony to the ECB debate and Renzi’s comments. The Germans are highly resistant to pro-inflationary arguments in large part because they associate it with the hyperinflation that undermined the Weimar Republic and ushered in Hitler. Now, as Renzi perhaps rightly points out, there is a chance that this impulse might place a (quasi-)fascist in the Elysee Palace.

Features Icon
show comments
  • Jacksonian_Libertarian

    The world including Europe is 6 years into Great Depression 2.0. Economies go into a depression when debt levels get so high, that taking on more debt becomes unmanageable. The way to get out of a depression is to inflate the currency the debt is valued in, so that debt declines in value, becoming easier to service, and new borrowing can occur to take advantage of profitable opportunities that occur in a growing economy. To those who say look at the inflation in gasoline and animal derived food products, I say look at the government created supply bottleneck created by the mandated “alcohol in gasoline” boondoggle which has driven corn prices up over $6 a bushel from $2 a bushel all to fight the bogus “Global Warming”.

    • Lorenzo from Oz

      I would add the point about the Great Depression is that collapsing incomes were what made the debts unsustainable. The Bank of France, aided and abetted by the Fed, drove up the value of gold, which drove up the value of money (since gold was the medium of account) which drove down prices, which drove down incomes while drove up debt burdens.

      Rising prices mean rising (money) incomes and falling debt burdens: collapsing prices means collapsing (money) incomes and rising debt burdens–which is why “ugly” deflation is much more socially stressing than hyperinflation.

  • Andrew Allison

    For an actual example of quasi-fascism see, e.g. TAI’s penchant for labelling anything the the right of center-right as far-right or quasi-fascist is another example. Fascism has a very specific meaning, and it’s application by the left to anybody with whom they disagree is to be deprecated.

    • Tom

      Problem is that the inmates–excuse me, interns–are running the asylum. As college students, they associate “fascism” entirely with “racism+nationalism.” Result? If you think that perhaps people should take pride in their country and that perhaps the immigrants your country is taking in are not an unmixed blessing, you’re a fascist.

      • Andrew Allison

        Jonah Goldberg’s “Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning” makes the argument that fascist movements were and are left-wing. He argues that both modern liberalism and fascism descended from progressivism, and that prior to World War II, fascism was widely viewed as a progressive social movement with many liberal and left-wing adherents in Europe and the United States. It’s my own opinion that totalitarianism in any form (such as the example I gave and the refusal of, e.g. the LA Times, to publish comments questioning AGW orthodoxy), is fascist.

  • Pete

    Inflation is a hidden tax. It’s thief.

  • Lorenzo from Oz

    The Weimar hyperinflation had very little do with the rise of Hitler. The Nazis lost support over the following years. It was the Great Depression which brought Hitler to power, a disastrous deflation brought on by the tight money policies of the Bank of France and the Fed who turned the gold standard into an economic death march of deflation and ever lower levels of economic activity, So, the tight money folk are reproducing the conditions that brought Hitler to power, the monetary expansionary folk are trying to reverse that. (And those arguing over fiscal policy are so missing the point: it is monetary policy that counts.)

    • Rick Johnson


      The Weimar republic’s money print caused hyperinflation, which caused it to crash. The Nazi were better organised than most, so they were able to pick up the pieces.

      Whilst the money expansion of today may not lead to hyperinflation, it is still causing long term damage. The sluggish growth since the North Atlantic banking crisis is testament to this failed policy.

    • Tom

      Yes and no. Yes, the Weimar Republic’s hyperinflation had ended years before Hitler took power. However, said hyperinflation had provided an excellent base for extremists to start from and build a power base in the mid-’20s (Nazis and Communists), while also causing Germany to not be able to really rebuild its economy after World War I.
      Which meant that, when the Depression rolled around and the Dawes Plan quit–things fell apart completely.

      • Lorenzo from Oz

        Support for both the Nazis and the Communists fell notably between the end of the hyperinflation and the onset of the Great Depression. I will agree that the hyperinflation did not help the legitimacy of the Weimar Republic, so perhaps weakened its ability to withstand the Great Depression, but the effect was entirely incidental without the Depression itself.

  • Bruce

    The central bankers have done a magnificent job of convincing people, including some very smart ones, that deflation is horrible. “Just horrible, I tell you. You can’t have your paycheck going further. That is a bad thing.” You don’t hear people whining about the deflation in computer memory prices. Why would they whine if food, energy and housing went down? When deflation results because of a depression, that is a bad thing, but it’s the depression that is the bad thing, not the fact that people with money can buy more with it. Now we have central banks panicking if inflation drops too much, even if it is still inflation, and the smart people going along with it saying, “Yes, currency must be debased. Price stability is a bad thing.” Debasing the currency via inflation is the immoral thing. Sound money isn’t. Don’t buy in to the central bankers. Inflation does not produce prosperity or even prevent recessions or depressions.

  • Rick Johnson

    Smearing Marine Le Pen as quasi-fascist demonstrates a lack of understanding of current and early 20th century European politics. This undermines your credibility as a political commentator.

    The Left have been very effective in creating the impression that there is a so called ‘left-right’ divide between fascist/Nazi and socialist/communist. There isn’t. Fascism, Nazism, socialism and communism are all much the same. They all oppose a liberal market democracy and favor some form of totalitarianism.

    Marine Le Pen, as far as I’m aware, isn’t in favor of overthrowing France’s bloated welfare State and replacing it with a dictatorship. She is raising legitimate concerns that democracies have to deal with. Branding her as a fascist is just a lazy attempt to shut her up because you don’t like what she is saying. Deal with her issues, don’t join the witch hunt if you want to retain your credibility.

    • FriendlyGoat

      I agree. So far, I have never been able to figure out what is so “far right” about Marine Le Pen, except that she is firmly against France being over-run by Islam through immigration of Muslims from the middle east, Africa and elsewhere.

      I think I’d swap out our Republicans for her most any time.

      • Nathaniel Greene

        Oh really? You admire a woman who is virulently anti-American?
        Marine Le Pen is apparently of the idea that the world is currently under threat from two evil types of global imperialism trying to subjugate France: American “euro-mondialism” and Islamism. In Le Pen’s view, both the Americans (with the European Union as an American tool) and the Islamists want to dominate the world and destroy France’s sovereignty and identity.Her view seems to be that there is moral equivalence between the U.S. and Islamism; that both are equally eager to dominate the world, and that sometimes they even cynically use each other to foster their own goals.

        • FriendlyGoat

          Do you follow American Republicanism? Maybe she knows something. Is she really saying that American LEFTISTS are trying to subjugate the world and ruin France in the process? Or is it some other influence in America that she is worried about?

          • Nathaniel Greene

            I’d follow “American Republicanism” if I had any idea as to just what it is. Do you mean Republicans? or Americans who believe in the republic? Le Pen thinks the US is out to destroy France just like the Islamic Fundamentalists and she sees no moral difference between the two. If that attracts you, God help the republic.

          • FriendlyGoat

            Le Pen thinks WHO is out to destroy France? American liberals? Or American Republicans?

          • Corlyss

            Geez! Just when I thought you were starting to get smarter, you had to go and spoil it with a typical swipe at Repulicans.

          • FriendlyGoat

            I’ll never stop. People who claim the moral high ground and then openly fib about everything under the sun get under my skin.

  • Pait

    You do know that what wrecked the Weimar republic was not hyperinflation, which had ended in 1924. but unemployment, deflation, and insistence on the gold standard after the 1929 depression, don’t you?

  • Corlyss

    One of these days the German voter is going wake up to the increasingly marginal value of their propping up the entire southern tier just so Germans can call themselves Europeans instead of having to admit they are Germans.

  • Corlyss
© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service