The European Project: the future of the EU.

Trump decided that the trade war with the EU needed some further escalation.

Let’s take a closer look at the list of products at risk if the US does follow through on its $11bn tariff threats.

Just like the EU’s previous threats to hit American export icons such as Harley Davidson motorbikes, Levi jeans and bourbon whiskey, the US is targeting some symbolic European products.

Non-military aircraft top the list, in an obvious reference to the dispute’s origin in EU subsidies for Airbus. Airbus shares are down by 1.7% today, although it is worth noting that they are still up by more than 40% year-to-date, as US rival Boeing has been hit by the fallout from two air crashes which have led to the grounding of its 737 fleet.

Beyond aircraft though, there is a cornucopia of culinary delights on which tariffs could be levied. Swordfish steaks, salmon fillets, crabs, scallops, mussels, oysters, octopus, various jams and olive oil are on the list with 12 categories of wine to wash it down.

Some 40 categories of cheese are listed, including roquefort, pecorino, and Gouda, as well as British stilton and cheddar – even “american-type cheese” from the EU is included.

Other more unusual (and non-edible) products include ski suits, swimwear, hunting knives and even wind-up wall clocks.

The full list is here.

https://www.theguardian.com/busines...heese-wine-imf-debenhams-brexit-business-live

It does not really amount to much in the grand scheme of GDPs involved, but it is going to hit the more rural areas in Europe.

Part is an old heritage of the Boeing-Airbus global competition. If the WTO would grant victory in that mutual government aid quarrel, it perhaps does not happen. But yeah... beating the drums is what Trump likes to do.
There is a big cheese mountain as well in the US, but I guess Trump just likes to retalliate on typical symbolic European gourmet stuff.
 
Trump decided that the trade war with the EU needed some further escalation.



It does not really amount to much in the grand scheme of GDPs involved, but it is going to hit the more rural areas in Europe.

Part is an old heritage of the Boeing-Airbus global competition. If the WTO would grant victory in that mutual government aid quarrel, it perhaps does not happen. But yeah... beating the drums is what Trump likes to do.
There is a big cheese mountain as well in the US, but I guess Trump just likes to retalliate on typical symbolic European gourmet stuff.

Well, when his trade wars come back to bite him in the butt when commodity prices in the U.S. spike just in time to ruin his "running his for re-election with a good economy" statistic, he'll be eating Velveeta for the same jacked up price, and won't be laughing or congratulating himself then.
 
It‘s just silly, all that energy is wasted on figuring out which product should cost now what. In the whole logistics chain. I pity the guys who have to figure out the exact product numbers and write the laws and documents. That must be boring and completely pointless job to do. All the while Trump sits in front of his TV, tweets and just says „do it“ without having the faintest clue on what a huge machine his words start.

Even worse, the next administration will just need quite a lot of time to just clean up the mess before they can move on...
 
It‘s just silly, all that energy is wasted on figuring out which product should cost now what. In the whole logistics chain. I pity the guys who have to figure out the exact product numbers and write the laws and documents. That must be boring and completely pointless job to do. All the while Trump sits in front of his TV, tweets and just says „do it“ without having the faintest clue on what a huge machine his words start.

Even worse, the next administration will just need quite a lot of time to just clean up the mess before they can move on...

yeah
politics is having a dip in governmental responsibility thinking
a lot of avoidable waste
 
Because cutting government spending during crisis is so good for the economy... and the italians will love to hear it again.

There is as usual a difference of opinion between the EU and Italy on the forecasting of cost and benefits:
One of the tables included in the 133-page document shows the citizens' income — a €780 monthly allowance for jobseekers living in poverty — should help GDP grow between 0.2 percent and 0.5 percent over the next three years.
The pensions initiative — which allows certain workers to retire earlier than expected — will have no effect on GDP for this year and 2020, rising up to 0.2 percent for 2021 and 2022, according to the document.

But discussing that will lead to nothing because we do not have the real details to say anything but theorethical about that.

Let's summarise it with:
The new Italian government got chosen because of these very appealing intentions.

Now the question to you:
Hidden behind this sympatic proposal the Italian government has decided another change and implemented that in its budget:
The existing individual income tax system goes like this:
23% 0 - 15,000
27% 15,001-28,000
38% 28,001-55,00
41% 55,001-75,000
43% 75,001 and over
http://www.worldwide-tax.com/italy/italy_tax.asp

The budgetted individual income tax system goes like this:
The government plans to go ahead with a flat tax, the document says. The plan envisages slashing the current 40 percent income tax to 15 percent or 20 percent for small businesses and owners earning up to €65,000 or €100,000, respectively.
https://www.politico.eu/article/ita...hat-may-provoke-brussels-european-commission/

In short:
The higher incomes do benefit much and much more from the changes than the lower incomes and the jobseekers. And this increases inequality.
=> a lot of hot air where this government "defends" its poor people, and ofc the EU the evil guy saying "it" is too expensive. A lot of hot air in the media about the EU against a member, against the people... austerity... tadidadida.
But reality is that under that cover this Italian government destroys the basic tax system of social redistribution, that has been in place in Italy since WW2.
Reality is also that such decisions are not the authority of the EU. The EU has been allowed by its members to critisese only the total budget-deficit.

So... on whose side are you in this issue ?
On the side of this Italian government... destroying its traditional social redistribution that had a progressive tax ?
 
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Well, when his trade wars come back to bite him in the butt when commodity prices in the U.S. spike just in time to ruin his "running his for re-election with a good economy" statistic, he'll be eating Velveeta for the same jacked up price, and won't be laughing or congratulating himself then.

Reality check: the US still controls world finance, and is in a far stronger position compared to the EU. This is a fight the EU can't win. Not now, and not with its many internal dysfunctions.

So... on whose side are you in this issue ?
On the side of this Italian government... destroying its traditional social redistribution that had a progressive tax ?

As if they won't destroy it if the EU harangues them over the budget. Cuts will be made in social services as usual.

I'm on the side of a genuine left with a genuinely alternative political programme. That which the EU effectively outlawed through its treaties, leading all "socialist" and "social-democratic" parties to destroy themselves electorally implementing neoliberal/ordoliberal policies. I'm on the side of the Lega being a small regional party and 5star not even existing. The present italian government is as much a creation of the EU (unintended) ans that phony Renzi was its intended creation.

The EU treaties are deliberately written to limit the spectrum of political choices and nullify democracy. The left fell for it, the pretend-left built it, far more than the right, and now people are voting for right-wing parties. And I do mean right-wing, not the rotten "center-right" that still hold power in Germany or in France with the little caesar.
This center, the EU, is what people are tired of, they want alternatives. And they will have them, if not of one type, then the other. Imo pretending that the EU is a barrier to the likes of Salvini is utter foolishness, or depraved manipulation. I do think you are being foolish in setting your hopes in the EU.

It's interesting how the EU brings out the worst, it's true face, during these crisis. Consider this piece from a Der Spiegel writer on The Guardian, two publications very much aligned with the EU.

Democracy is overrated – let the Queen sort out Brexit
Jan Fleischhauer
From Germany, it looks like the UK monarch is in the perfect position – after all, she has always responded to crises with dignity

Democracy is overrated anyway. The truth is, it only works reasonably well if the number of voters who have no idea (or perhaps worse: are convinced they do) are not too big on the day. Most commentators complain about poor turnout. If there are more people staying at home in Germany during an election than during the previous one, it is immediately said that democracy is in danger. The exact opposite is true: we owe the fact that our system is relatively stable to the fact that a not inconsiderable part of the electorate is incapable of getting out of bed on election day. So, let the Queen sort this one out.

Carl Schmitt and Leo Strauss are the real ideological guiding lights of the EU project... democracy is at best something to keep the public pliant while having no real say on political decisions. A problem to be worked around!
 
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Furthermore, I want to point out that as the EU centralizes power and attempts to ape its chosen model to rival its influence in the world, the USA, the one thing the EU has achieved is to become less that what was in the past the sum of its parts.

I don't place much value is macroeconomic statistics YoY, but looking at the EU's top three economies*, they "were worth" about 78% of the US's economy. That wend down to 66% in 1998, was increased back to a maximum of 72% in 2008 on the back of a (too) strong euro (leading to the EU having to depend on the Fed to save its banks), and then crashed down to 50% in 2018. Thus even in its own terms the EU has been a failure. More of the same won't make it a success.

* IMF database, current prices in USD
 
Reality check: the US still controls world finance, and is in a far stronger position compared to the EU. This is a fight the EU can't win. Not now, and not with its many internal dysfunctions.

Actually, you're mistaken. Big, internationally-operating mega-corporations with immense budgets and powerful government officials and organs (including in the U.S.) in their pockets control world finance, and THEY decide commodity prices. I'm afraid the power once wielded by the White House, the Kremlin, the Europa Building, and the Palace of the People has been scaled back, lost ground, surrendered to, or just acquired by malfeasance, or a lack of will to stand up to them, to a de facto plutocratic oligarchy with absolutely no constitutional responsibility to or mandate from any of the common people anywhere, even in legal theory.
 
No, I think you are wrong. The reason why I find Obama utterly despicable is that he had the power to smash the system. To actually produce change. He had the power to bankrupt Wall Street and reorganize the US on a new basis. Real wealth, real assets, were not threated by the 2007-8 financial crisis. He could let the banks collapse and rearrange the pieces, the ownership. It would have collapsed the same system in Europe.

He chose to back this system and keep it in place.

Politician's power is not unlimited, Trump was an excellent demonstration of that: unprepared and facing huge bureaucratic obstruction, he had to adapt and "fit in" enough. The real interesting thing about "russiagate" is that bureaucratic fighting against the elected politician. And the fact is that he still managed to avoid being destroyed, still got portions of his agenda through that the corporations were against: renegotiating NAFTA, sinking the TPP, starting trade wars and a new type of rivalry against China. Politicians have power. It doesn't matter that he was not some left-wing "radical", he was seen as an equally dangerous "populist" radical who threatened the status quo so much that high bureaucrats had to conspire against him. And failed! That is the useful lesson from this whole episode.
Obama lied when he pretend he couldn't change things. Clinton was a wussie or a outright sell-out when when replaces his original administration. Periodically these big crisis or big geopolitical realignments come up, and real power is exerted nearly unrestricted by one or a few people in office. Now slowly, like the EU had been built, but suddenly. Sometimes those are called revolutions, other times they're just changes in political systems (think Roosevelt's actions, albeit limited).

The mega-corporations do not have power over states. They have the illusion of power, and in politics that is enough most of the time. If enough people believe that "corporations control world finance" (and through it political power), they do. While people believe that. But they fully depend on states for real control. Even for their very existence as corporations. That is the reason why states that move to deny them power are targeted for destruction, those have been the international wars waged in the last few decades. They're still vulnerable to changes in the more powerful states, those that cannot be attacked militarily, that cannot be embargoes.

In Europe too politicians routinely lie about their "powerlessness". Their lack of "options". The big problem with the EU is that is was deliberately built this way to provide cover for these lies. So long as it exists these arguments will continue to be made: TINA. The goal of the international treaties, the tight web of treaties that were consolidated into the EU, is to convince people that the realm of the possible is reduce, because treaties. And treaties are sacrosanct, and there will be foreign retaliatins if they were to be broken. The moral authority and the violent authority, combined. So dies democracy.
If a state must choose between cutting wages to public servants (violating a past compromise, changing laws)or run an expansionist and inflationary policy (taking on debt on its own currency, why it must violate the fist commitment because the EU took out of the realm of the possible the second. If a state mush choose between devaluing currency (with a complex effect I don't want to discuss here and now) or do ware repression in order to balance foreign trade deficits, why it must practice wage repression because devaluing the currency is now verbotten. These are but two examples of what happened and they were not small stuff in the realm of political choices. Now suppressed choices. So dies democracy.
 
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As if they won't destroy it if the EU harangues them over the budget. Cuts will be made in social services as usual.

I'm on the side of a genuine left with a genuinely alternative political programme. That which the EU effectively outlawed through its treaties, leading all "socialist" and "social-democratic" parties to destroy themselves electorally implementing neoliberal/ordoliberal policies. I'm on the side of the Lega being a small regional party and 5star not even existing. The present italian government is as much a creation of the EU (unintended) ans that phony Renzi was its intended creation.

The EU treaties are deliberately written to limit the spectrum of political choices and nullify democracy. The left fell for it, the pretend-left built it, far more than the right, and now people are voting for right-wing parties. And I do mean right-wing, not the rotten "center-right" that still hold power in Germany or in France with the little caesar.
This center, the EU, is what people are tired of, they want alternatives. And they will have them, if not of one type, then the other. Imo pretending that the EU is a barrier to the likes of Salvini is utter foolishness, or depraved manipulation. I do think you are being foolish in setting your hopes in the EU.

It's interesting how the EU brings out the worst, it's true face, during these crisis. Consider this piece from a Der Spiegel writer on The Guardian, two publications very much aligned with the EU.

Let me repeat my simple question:
Do you support the Italian government in strongly reducing its income tax rates for the higher incomes ?
(and causing ofc increased government deficits, higher interest rates and even more money extraction from the public to the wealthy bond owners)

?




Imo the only way out for Italy to get out of the mess of wrong government spending (in this budget again hardly any investments in the economy)... the only way out is to tax the wealthy and spend properly.

Salvini had a big mouth on attacking corruption and taxing the wealthy... but now he is actually in charge, nothing much happens.
Here one of his original election plans on tax:
“An Italian solution to an Italian problem”?

What could happen then, if the government indeed had to revise its estimates downward and provide a rebalancing of its fiscal position (either through increased revenues or lower expenditure)?

Several signals point to the usual suspects: Italian residents, and their still substantial private wealth. On this, there is perhaps surprising agreement between the Italian ruling parties and some German views. Matteo Salvini, deputy prime minister and minister of the interior, has already suggested that tax cuts might be granted to Italians investing in domestic bonds.

Some form of so-called financial repression, i.e. a more or less gentle diversion of private funds towards public debt, is therefore on the table, as suggested by the Bundesbank economist Karsten Wendorff and explicitly assumed by Moody’s. The former advocates a national fund, financed through “solidarity bonds” that Italian households would be forced to purchase according to a fixed proportion of their net wealth (say, 20% in order to halve total government debt). The latter similarly motivates its stable outlook despite the Italian debt rating downgrade: “Italian households have high wealth levels, an important buffer against future shocks and also a potentially substantial source of funding for the government”.

Such funding might alternatively occur through a substantial one-off property tax, the so-called patrimoniale. This nation-centered approach is in sharp opposition to Banking Union and capital markets union, which aim to spread the holding of sovereign and credit risk across the entire euro area and move away from national concentration of sovereign debt holdings.

http://bruegel.org/2018/11/the-cons...creasing-dependence-on-domestic-debt-holders/

So far he did not got any further than blaming the EU and threaten the Eurozone stability (and especially France) with the suicide bomber approach.
Here the main bank exposures from Italian bonds only, being roughly 425 Billion Euro (not the bank exposures from Italian companies).
https://www.bloomberg.com/graphics/2019-italian-banks/
Do note that the amount for Ireland, Luxumbourg, Malta, Cyprus is in Millions and not in Billions.

Schermopname (2769).png


This imbalance is the reason Macron pushed hard the end of last year to have the Eurozone create a much bigger buffer than the current 410 Billion Euro (to rescue Italy in the same way as Greece, take over the debt, and let the debt mainly evaporate over inflation, would take for Italy 800-1,200 Billion Euro).
But the old France-Germany axis did not work anymore anno Domini 2018. The high risk appetite of some banks for higher profits (possible as long as nanny states pay every time the risks) have to stop in the opinion of many (smaller !) EU countries. Macron et Le Maire did not agree to pushing that risk back to their own banks, but lost the argument.
 
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Actually, you're mistaken. Big, internationally-operating mega-corporations with immense budgets and powerful government officials and organs (including in the U.S.) in their pockets control world finance, and THEY decide commodity prices.

Dude, the US Federal Reserve controls interbank clearing. Do you understand what that means?

It would have collapsed the same system in Europe.

This is correct, because of how exposed European banks were to the US mortgage-backed securities market.

No, I think you are wrong. The reason why I find Obama utterly despicable is that he had the power to smash the system. To actually produce change. He had the power to bankrupt Wall Street and reorganize the US on a new basis. Real wealth, real assets, were not threated by the 2007-8 financial crisis. He could let the banks collapse and rearrange the pieces, the ownership.

To be clear: all the major US banks were in a position of insolvency not very long into the crisis. Under existing US law the government could have taken them into receivership to resolve them: essentially, a temporary nationalization while the government decided which of the bank's creditors would take a haircut. Obama chose not to do this instead infamously promising bankers that he would stand between them and the public's "torches and pitchforks."

What is not entirely clear to me is whether this was a cynical ploy by Obama and he knew what he was doing, or whether he simply did not understand what was going on and was basically deceived by the likes of Larry Summers, Tim Geithner, and Ben Bernanke. Either way it is hugely disappointing.
 
Dude, the US Federal Reserve controls interbank clearing. Do you understand what that means?

The illusion of government power over big corporations is there, and the legal mechanisms should favour it. BUT, when push comes to shove, and the chips are down, the big corporations (who also have leverage over the U.S. Fed's board of directors directly, as individual members, anyways) almost always get their way. It wasn't just the big banks in 2008-2009. A bunch of oil corporations, several big contracting corporations (like Haliburton), and several big armaments corporations (the latter who wanted live field tests of their investments) DEMANDED a war in Iraq by the Bush Administration, and they didn't care what lies had to be told, what promises broken, what reputations, or who had to die - military or civilian - in such a war; it had to happen. And the expensive imported corporatist leather shoe was licked from a prostrate position, and it was done. As a classicalist using the metaphor of Roman Polytheism to describe the new order things said, "the power of Jupiter, who gives proper and rightful authority to rulers, the wisdom and justice of Athena, and even the hard and firm hand of Mars have all been upended, and they have all been bumped down in the ranks of the Jovian Pantheon, and now Pluto sits as Hierophant - the God of Wealth and Merchants, but also the God of Death and the Keeper of the Underworld, and this cannot be good." In a world of globalized capitalism, one should expect that capital will be king, regardless of whom law says has the legitimate power.
 
The capitalist class expends considerable effort in controlling the flow of information, controlling the issues in elections, controlling the legislative process, capturing regulatory agencies, buying individual politicians and regulators because they know, even if you don't, that the state has the power to challenge capital, to change the terms on which capital can be accumulated, or even to short-circuit the accumulation process itself.
 
The capitalist class expends considerable effort in controlling the flow of information, controlling the issues in elections, controlling the legislative process, capturing regulatory agencies, buying individual politicians and regulators because they know, even if you don't, that the state has the power to challenge capital, to change the terms on which capital can be accumulated, or even to short-circuit the accumulation process itself.

But for the government regulators to cripple the power of acquisition and flow of cash to the degree needed to curtail or reign in mega-corporate power entirely would also utterly destroy the fiscal and economic foundations of said nation and it's ability to realistically function - a "fiscal nuclear war," almost.
 
Let me repeat my simple question:
Do you support the Italian government in strongly reducing its income tax rates for the higher incomes ?
(and causing ofc increased government deficits, higher interest rates and even more money extraction from the public to the wealthy bond owners)

No, that is pointless in terms of stimulating the economy or improving people's lives. It may even be counterproductive as the wealthy will invest more into asset speculation leading to increased rent extraction from the rest of the population, as they seek returns.
But I disagree because of the above, not because "deficits are bad" according to the EU's holy writ.

Also, regarding Italy's economic history, this recently published piece is very much worth reading.
Italy can be the poster boy (girl?) of austerity, and has been so ever since the Euro was conceived, beginning in the run-up to it in the 1990s. The consequences is what the italians are living with now.

The way out does not require merely deficit spending, it requires directed investment by the state. An industrial policy, a development policy. And this is something the EU rules forbid.
 
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No, that is pointless in terms of stimulating the economy or improving people's lives. It may even be counterproductive as the wealthy will invest more into asset speculation leading to increased rent extraction from the rest of the population, as they seek returns.
But I disagree because of the above, not because "deficits are bad" according to the EU's holy writ.

Also, regarding Italy's economic history, this recently published piece is very much worth reading.
Italy can be the poster boy (girl?) of austerity, and has been so ever since the Euro was conceived, beginning in the run-up to it in the 1990s. The consequences is what the italians are living with now.

The way out does not require merely deficit spending, it requires directed investment by the state. An industrial policy, a development policy. And this is something the EU rules forbid.

1. that is imo in general a good article, fitting a lot with what I think as well... whereby they put imo too much weight on the financial-economic aspects of an economy (A), and (still) not enough weight on the industrious-business-economic aspects of an economy (B), and do not mention intrinsic economical differences from geographical-cluster effects (C) (only North Italy at adequate level, but drained by lack of clusters in the middle and south of Italy, also at the periphery of the continent).

The Eurozone only functions well for countries that have a similar kind of economy.
Whereby noted that Italy is a manufacturing country.

A. On those financial-economic effects.
As mentioned by me more than once: Italy should never have joined the Euro, and the negative effects from converging to the Deutchmark were already visible since the early 90ies. 1992 was a bad decision, 1998 was confirming that bad decision and writing it in stone. That decision was politics all over, colored by the arrogance of the economical makeability culture of politicians having no clue what happens on the ground. The general disconnect between politicians governing on financial economic top indicators, and the industry & companies doing their magical own thing. When a government forces itself to develop and maintain an industrial development policy, it exposes itself to inconvenient realities, but oh so needed realities to allocate public money better and steer their country. Countries with good geographics and clusters are less vulnerable for not having good industrial policies in place. Chinese exports now exposing that caveat, up to in limbo effects.
But the Italian population tired of the volatile inflation waves of the past (!) sought together with their political elites refuge and security in the Euro, as if that would solve the causes. And yes, France did not want to be the only country in the Eurozone with a history of strong inflation waves. Neither would France like bordering to countries (Italy, Spain) that would be very competitive to their domestic economy, because of continuous devaluations of the Lira and Peseta.
As minor remark: although it happened everywhere, the article does not mention that the Italian govt debt, the bonds, were in the post WW2 era owned by Italian wealth. Over time that % decreased strongly. Interests paid by the govt did not flow back anymore to Italian wealth, but flowed more and more out of the country.

B. The article outlines that Italy got stuck in a cheap labor, low grade product spectrum. And great that the article does describe that !
Adding to that: this diverge from NW European countries already happened in the 60ies, and in the 80ies they are imo already past the tipping point. Only plan-economy like measures would be able to reverse that diverge, to change that economical profile. But the opposite happened. More and more low grade products were "conquered" by Italian companies, snatched away from NW European companies. The lower transport cost, better motorways, etc, were on the one hand an opportunity for Italy, but on the other hand it encouraged NW EU companies to defend their turnover by improving their productivity with capital, capital utilisation and innovation. This part of the process happens throughout the 80ies and 90ies.
This also means for Italy that having lower grade equipment and cheaper labor becomes a perk... and a pitfall at the same moment. A profile is a profile... for good and for worse.
In the late 90ies and the years until the GFC the intiative of Italy is overtaken by the NW EU companies. No longer Italy is a threat to their turnover, but Italy is a nice industrial pocket to dump their low grade products, freeing up their more expensive labor and capital (equipment) for higher grade products. Partially complete products, partially components that go back in the value chain of products completed by the NW EU companies. That outsourcing of components is always tricky for the party that is the middleman. The business cycles, especially in the car industry, become more extreme. When the GFC did hit, components were withdrawn from Italy to protect the turnover from NW EU companies. As parallel development Turkey comes into the equation since the late 90ies. Turkey, being even cheaper than Italy, now in the role to snatch the lowest grade components and products from Italy, and NW EU companies doing directly capital investments in Turkey for part of their outsource spectrum. Italy in the sandwhich for the in between spectrum of components and products.
When China comes more and more in the picture, especially completed products of Italy get a further hit. Both for export as domestic.
It would be nice if you would give economy students standard a project to describe of some goods how their production (and their supply chain) wandered all over Europe during 1945-2018 up to Asia. Such case studies could be illuminating.
Not cars.. but products like corkscrews, transmissions for tractors, footwear (like cheap Italian shoes from the 60ies, looking great, but made from more paper as leather), clothing buttons, etc, etc. What Italy has as permanent perk is "Italian design". But that did not stop Turkey taking over a lot of high end leatherware and textile. After all you can buy "Italian design" and use it to produce in your own country.
This diverge is reality. The gravity effect ongoing. And saying in glossy govt papers: "more innovation to higher end, and higher value" is great. But is there enough market for an Italy to produce also Swiss watches ? And can it push out market share from Switzerland ?
Economy at the company level, including all interactions and effects, is a very complex animal. And macro ideologies from the Right and the Left seem imo both not to know how that animal ticks in reality. Neither do the Harvard Economists (so far).

C. The intrinsic economical differences from geographical cluster effects. I made already a post on that here in this thread. It is like the economy of scale effect of a certain product. For producing and selling paperclips (mostly packaging) you need not much, and not much scale size to be close to the max effciency potential. For producing cars or aircraft, you need a whole big high productivity cluster around you... with high spec manufacturing equipment and to utilise optimally the sinergy potential from that automotive cluster you need a whole range of other industrial and service activities closely connected (proximity). => you get a free ride for max effeciency of a whole range of other products.
And that means simply that countries like Italy are not able to follow countries with better clusters and cluster potential with the current set of techs and the techs going to be there in the next decades.
Each country in the EU has a max potential GDP per capita driven by history and geography. With some bandwidth from exceptional perks (like the Swiss watches, like Belgian-Dutch ports to big clusters, like London City services, etc).
That max GDP of Italy was in 1960, from the other set of techs available, at a smaller distance to for example Germany, than the max GDP and distance now with the set of techs of now.




If you want to determine how big the effect of the Eurozone is, you have to filter out the effect of C. And there are ofc second order effects as well like C influencing A and from there the degree you can mitigate effects of A.
A good industrial policy can do a lot of good there. But if the analysis is overwhelmed by shallow explanations of type A, and causes avoiding real truth seeking because of difficulty and inconvenient conclusions... I do not have much hope for Italy.
It is like playing the game CIV, and you have no access to iron or oil.... and blame other causes, instead of acknowledging where you are and adapt your strategy.
 
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I disagree, in that the article makes a point of showing that there was convergence between Italy and NW Europe in the 1960s and 80s. And Italy does have important industrial clusters. There is no inevitability of fate that automobile production should be concentrated in Germany. Fiat was and is a big company, and the italians managed to develop it and many other smaller companies because they had a industrial policy. Things faltered in the 90s because they abandoned that. Whereas Germany kept going with such a policy.

Italy's are not limitations like lacking coal in the 19th century. There are countries that in the 0th lacked strategic resources but with improved transportations manged to have an incredibly effective industrial policy. Japan is one example impossible to ignore. Japan is also an example of a country that developed from a lower base, without the benefit of regional clusters, and led in the creation of those clusters. Korea is an example of how the focus of such clusters can change. Taiwan is an example of how portions can be thousands of miles distant. For all these reasons, there is nothing that "dooms" Italy (or any other European country) to be uncompetitive with NW Europe. Finance and governance, on an EU scale, are to blame for reinforcing regional asymmetries. Structural funds" deliberately target infrastructure but leave out industrial policy. There is modest funding for improving existing industries but none for starting new capital-intensive large ones. This is not accidental, it is so as not to enable challenges to the existing "clusters".

I do agree that France wanted Italy in the Euro, needs Italy in, for those reasons you mentioned. And that is one of the difficulties with disassembling the Euro starting with Italy. But it is a difficulty for France (and the wider EU), not for Italy.
 
I disagree, in that the article makes a point of showing that there was convergence between Italy and NW Europe in the 1960s and 80s

You mean convergence from macro financial economic indicators ?

EDIT:
I'll help you with the answer:
The typical top financial indicator in that article, shown first, is GDP per Capita:
And that one does indeed converges up to 1992.
(GDP per Capita is a following indicator)
Schermopname (2772).png


So let's go back in time and look at an leading indicator the Labor Productivity in Euro/hr in manufacturing:
And look what happens long before the Euro between 1970 and 1983 (an important moment for France).
You can see that the Labor Productivity diverges directly from 1970, but the difference stabilises around 1975.
Schermopname (2775).png

What happens in 1975 ?
You can see in this graph below, the Real Wage per hour of manufacturing, still from that same article of you, that in 1975 the real wage goes down and is kept at a slower decrease as the Euro-4 countries until 1982.
This is a real leading indicator, and a big brute force help to protect your domestic industry and increase your export. During that period of 1975-1982 the diff in labor productivity stops increasing (Fig 4 above). And all the time the GDP per Capita is catching up with France in the first graph Fig 1.
Schermopname (2773).png


All in all for that period 1970-1983:
* the economy of Italy is steadily losing labor productivity since 1970 compared to NW EU: the root diverge coming from the kind of industry and country setting.
* the counter measure is lower real wages in 1975
* This stabilises the diverge in labor productivity
* All this time the GDP per Capita is increasing
* Italy has manoeuvered itself in a cheap labor industry country position by 1982 for manufacturing.
* Italy can still benefit from that cheap profile for many years, the GDP per Capita going up, but was not able to get it's industry to higher value goods.

Back to my question at the start of this post.
The article outlines that Italy got stuck in a cheap labor, low grade product spectrum. And great that the article does describe that !
Adding to that: this diverge from NW European countries already happened in the 60ies, and in the 80ies they are imo already past the tipping point.

I disagree, in that the article makes a point of showing that there was convergence between Italy and NW Europe in the 1960s and 80s. And Italy does have important industrial clusters. There is no inevitability of fate that automobile production

That converging you mentioned... was that only related to that following indicator GDP per Capita ?
 
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Italy became less attractive for investors when occupation of Eastern Europe ended. Italy wasnt able to solve difference from south and north for the century, its quite unfair blame EU now. We can perhaps blame EURO, but do not forget that inflation of Lira was one of reasons why people were so attracted. Who would solve Italian problem will get Nobel prize.

Less regulations better economy is not a rocket science. My mom now needs to spend every day a hour of work because GDPR instead programming something useful for the company. These regulations of course give some people jobs, but communist hotel fridge openers made more values for society than these.
 
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