When in the fall of 2008 Lehman Brothers crashed, threatening the collapse of the entire U.S. financial system, the crisis was compared to that of 1929. An alarming comparison, since it reminded us of the harsh years of the Great Depression and its impact on Europe and on the rest of the world. But there was also a reason for reassurance. If you know the disease, its origin and development, you also know the risk involved and how you can fight it.

Now, it's been almost five years and we now know that, insofar as it relates to the Eurozone, the crisis has been fought with the wrong weapons, and the war was lost.The Eurozone is in the grip of a second recession after the initial one in 2009, with an explosive unemployment rate, which has exceeded 12% percent in early 2013, while in Spain and Greece it has exceeded the monstrous threshold of 25 percent of the labor force (see the article by R. Paladini Tales from Pig countries).

In this scenario, the case of Italy, more then others, might clearly reveal the absurdity of the European austerity’s policy.. Unlike Spain and Ireland, in fact, Italy did not have to deal with a specific bank crisis; caused by the burst of a housing bubble. And, on the eve of the crisis, unlike Portugal and Greece, Italy was registering a limited budget deficit of 1.6 of GDP, well below the fateful 3 percent prescribed by the Maastricht Treaty.
 

Sources: Eurostat, OECD, ECB; *Forecast **May 2012

As for the debt, while historically high, it had dropped to 103.2 per cent of GDP, the lowest level in the last 15 years. Then, when at the height of the crisis in 2009, the GDP suffered a fall of 5.5 percent, the budget deficit began to rise again, reaching 5.5 percent of GDP. But this was not critical, since that deficit was still lower than the eurozone average deficit (-6.4), Portugal (-10.2), Spain (-11.2), Greece (-15.6) and even France (- 7,5).

In any case, Italy has always showed a strong primary surplus (the difference between income and expenditure, net of interest) able to guarantee the payment of interest and a possible gradual reduction of the debt. But in a framework of stagnation the making of a primary surplus requires the sacrifice of investment and consumption, the outcome being a vicious circle. So, when the austerity policy struck all the eurozone, the stagnation become, through the 2012, a deep recession (-2.4). A general eurozone recession which, paradoxically, doesn’t spare even Germany, despite its worldwide unparalleled trade surplus (7 percent of GDP).

The absurdity of the austerity policy, which the axis Berlin-Frankfurt-Brussels imposes on the eurozone, is in striking evidence with the policy that Barack Obama adopted in the U.S with a 2009 stimulus plan of nearly 800 billion dollars – a plan that indeed the  progressive wing of the Democratic Party and several economists judged insufficient compared to 1.2 trillion deemed necessary, but in any case a measure not comparable with the perverse austerity policy adopted in the eurozone. This, even though timid, US fiscal policy, in conjunction with the hyper-expansionary monetary policy taken on by the Federal Reserve, fostered an initial recovery that allowed the gradual reduction of unemployment from 10 percent at the height of the crisis to 7.6 percent at the beginning of 2013. Just the opposite of the trend in the eurozone where the average unemployment  has kept increasing to more than 12 percent of the labor force.

As we can see, the contrast with the austerity policy in the eurozone could not be more stark. But here we must ask ourselves a question. If the catastrophic effects of austerity are obvious and reported by the majority of economists, why does the European leadership persist in this clearly meaningless and perverse policy?  To find out a reasonable explanation we must look at the other side of the coin. In fact, for the political elite that governs the eurozone, austerity is not the ultimate goal, but the means to push forward the so-called structural reforms, in other words the dismantling  of the detested European social model.

Indeed, behind the mask of austerity, the political and technocratic rightwing elites fight their modern unreported and unilateral class struggle in front of the working and the middle classes that the crisis has severely hit.
 In America, Warren Buffet, referring to the explosive social divide, stated with his frank ruthlessness, that the ruling class had won its class struggle. In Europe a sort of dominant hypocrisy  allows a relatively mild denunciation of  austerity, but leaves in the shadow the austerity’s ultimate target of dismantling the Beveridge’s and Social-Democrats’ welfare state, along with the annihilation of trade unions’ bargaining power.

The Italian story epitomises this. In the summer of 2011, the European Central Bank operated a comprehensive summary of the eurozone policy in a letter, initially unpublished, sent to the Berlusconi government. The letter was  signed together by the outgoing President Jean-Jacques Trichet and by the new designated President Mario Draghi. Its content was enlightening: in summing up the prescriptions which are at the heart of the “structural reforms”: A tougher pension’s reform, the reduction of real wages; the cancellation of the national collective bargaining, a substantial freedom in workers’ dismissals.

It is clear that the structural reforms  are the very strategic target of austerity. The contents of the letter, basically agreed with the Berlusconi government, is not different from the ordinary strategy imposed on all countries in the eurozone periphery (Greece, Portugal, Spain, and so on). When at the end of 2011, the incredible Berlusconi government was forced to retire, Berlin, Frankfurt and Brussels applauded the new technocratic government led by Mario Monti, a former and very admired Member of the European Commission in the 90s, and now ready to perform the requirements of ECB.

The result could not be worse, Italy has entered the longest recession of the post-war epoch. And unemployment that was 6.1 per cent before the crisis kept to increase reaching until redoubling at 12.2percent at the beginning of 2013 .
After the general election on February, Monti, strongly punished by the vote, disappeared from the political scene. Enrico Letta succeeded him at the head of a government based on an unnatural majority that unites the Democratic Party, to which belongs Letta, and again Berlusconi's Party of Liberties. A government the duration of which depends, on one side by Berlusconi - who desperately considers the government the last possible shield against the threat of convictions that pursue him -  and in Europe on the good will of Angela Merkel. A sad fate of a country that 55 years ago was one of the main founders of the European Union.