Yanis Varoufakis gives a long view hypothesis as to how Italy could lead to breakup of the Eurozone ..... In the present , how the Pentagon takes advantage of the relative weakness of Italy ( as compared with Germany ) to turn Italy into its new European base of Operations !

http://www.nakedcapitalism.com/2013/10/how-the-eurozone-might-end.html

FRIDAY, OCTOBER 4, 2013

How the Eurozone Might End

Yves here. This post by Yanis Varoufakis gives a plausible scenario as to how the Eurozone could unravel. Most commentators believe the country that is most likely to rupture it is Italy. Italy has a primary budget surplus and also has a high saving rate, with the result that even under the gold-standard-like Eurozone, it still funds most of its debt issuance internally. Notice how quickly the Eurozone could fracture once one country exits.

By Yanis Varoufakis, professor of economics at the University of Athens. Originally posted at Europe’s World

Six years have passed since the Shanghai Crash of 2032, and Europe’s architecture is incapable of responding to its challenges in a way that offers hope of continental consolidation after 30 years of hideous fragmentation.

The reasons for its conspicuous failure can be traced all the way back to Europe’s mishandling of the crisis then, occasioned by the latter-day Wall Street crash of 2008.

Our predicament in 2038 began with modern Europe’s ill-fated second attempt at a currency union, the so-called eurozone; the first having been the similarly ill-designed 19th century Latin Union. Modelled on the Gold Standard, with the radical addition of common banknotes, coins and a European Central Bank (ECB), the eurozone proved just as incapable of sustaining shockwaves from the 2008 financial meltdown as was the Gold Standard after the 1929 Wall Street crash.

A central bank without a state to back it up, together with member states now without the chief instruments of a central bank to back them, once liquidity dried up with the near-collapse of the West’s financial sector Europe experienced a domino-effect insolvency of some eurozone banking sectors and states. The false choice that suddenly gripped Europe’s leaders was either to accept the awful truth that the architecture of the euro was faulty and that large banking losses and public debts had to cancel each other out, or to do what, sadly, they did. This was to “extend and pretend” by having the eurozone’s surplus nations pile huge new lo ans on the insolvent deficit states on condition that the latter agreed to reduce their national incomes, for that is what universal austerity accomplished.

For five years, Europe’s leaders stuck to their “extend and pretend” strategy. From 2011 onwards, and especially in 2013 when a banking union was proclaimed in name so as to prevent its implementation in practice, the writing was on the wall: the eurozone would disintegrate unless banks, debt and investment flows were somehow ‘Europeanised’.

The final stage of deconstruction began when the credit crunch reached its crescendo in the north of Italy and set in motion the process of “re-conversion”, as the eurozone’s disintegration was euphemistically called. The government in Rome, under immense pressure from businesses threatening to shift en masse their operations to the U.S. and to Eastern Europe, announced the introduction of an electronic unit of account in which tax payments would be made to the Italian state by businesses and households, allowing the government room to provide liquidity and tax breaks without the consent of either the ECB or, indeed, Brussels.

Amongst untold recriminations, Germany’s own central bank, the Bundesbank, told the ECB that unless Rome was reined in it, too, would create its own unit of account to safeguard German price stability. Almost immediately, an outpouring of capital from Spain to Germany caused Catalonia to threaten Madrid that unless Spain too created its own unit of account to lessen the impact of the credit on Catalonia’s exports, a unilateral declaration of independence would be on the cards.

Emergency summits of EU leaders led to fudges that left markets unimpressed. The capital flight from the eurozone’s periphery put enormous pressure on the ECB to activate its dormant bond-purchasing programme and to loosen its rules on the collateral to be held by commercial banks. Alas, a newly emboldened Bundesbank vetoed these moves. Meanwhile, the eurozone edifice was being tested daily by speculators, and Germany, the Netherlands and Finland announced they would issue a common electronic unit of account; the new currency that seven years later was to become the Thaler: a joint currency managed by the Bundesbank and commonly used east of the Rhine and north of the Alps, having been adopted too by Poland, the Czech Republic, Slovakia plus the three Baltic states.

The end of the post-WW2 Franco-German axis was as painful as it was significant, turning the European Union into an empty shell. The French government’s attempts to prevent the splitting up of the eurozone were hampered both by the Bundesbank’s dogged refusal never again to share authority over monetary policy with Paris, and also by the Banque de France’s undermining of its own government. Paris, exasperated, attempted a new Latin Union with Spain and Italy by issuing a new currency that it named the écu, hoping against hope that it would once again lead to a revived euro. Meanwhile, following the so-called Cyprus model, capital controls were introduced between the new currency zones, the Schengen agreement on the free movement of people faded away and the Single Market was reduced to no more than a name.

The failure of Europe in 2038 to respond constructively to the crisis that began in China, pushing Europeans even further apart from each other, can best be explained by referring back to the deep fault line that emerged in 2017 along the Rhine that divided Europe between the deflationary Thaler-zone and the stagflationary rest-of-Europe. If only Europe had taken a few simple steps back in the early 2010s to consolidate its banking sectors, to manage centrally part of its countries’ public debt and to design a common investment policy, then Europe might have had a chance.

http://www.nakedcapitalism.com/2013/10/how-the-pentagon-is-using-your-tax-dollars-to-turn-italy-into-a-launching-pad-for-the-wars-of-today-and-tomorrow.html

SUNDAY, OCTOBER 6, 2013

How the Pentagon Is Using Your Tax Dollars to Turn Italy into a Launching Pad for the Wars of Today and Tomorrow

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Yves here. This report by David Vine describes how the US has been shifting its operations in Europe since 9/11 away from Germany and to the south, most of all to Italy. While geographic proximity to the Middle East is a superficial explanation for this shift, the bigger driver is that less wealthy countries are more compliant that Germany, which is becoming even more influential in Europe. Another factor could be that Germany imports most of its gas, and Russia is its biggest supplier. Russia is not only no longer a Cold War enemy, but some factions in Germany even favor cultivate closer ties to Russia.

But aside from the political calculus, this article also gives Americans a better sense of the sheer weight of our military spending abroad.

By David Vine, an associate professor of anthropology at American University and the author of Island of Shame: The Secret History of the U.S. Military Base on Diego Garcia. He has written for the New York Times, the Washington Post, the Guardian, and Mother Jones, among other places. He is currently completing a book about the effects of U.S. military bases located outside the United States. For more of his writing, visit DavidVine.net. Cross posted from TomDispatch

The Pentagon has spent the last two decades plowing hundreds of millions of tax dollars into military bases in Italy, turning the country into an increasingly important center for U.S. military power. Especially since the start of the Global War on Terror in 2001, the military has been shifting its European center of gravity south from Germany, where the overwhelming majority of U.S. forces in the region have been stationed since the end of World War II. In the process, the Pentagon has turned the Italian peninsula into a launching pad for future wars in Africa, the Middle East, and beyond.

At bases in Naples, Aviano, Sicily, Pisa, and Vicenza, among others, the military has spent more than $2 billion on construction alone since the end of the Cold War — and that figure doesn’t include billions more on classified construction projects and everyday operating and personnel costs. While the number of troops in Germany has fallen from 250,000 when the Soviet Union collapsed to about 50,000 today, the roughly 13,000 U.S. troops (plus 16,000 family members) stationed in Italy match the numbers at the height of the Cold War.  That, in turn, means that the percentage of U.S. forces in Europe based in Italy has tripled since 1991 from around 5% to more than 15%.

Last month, I had a chance to visit the newest U.S. base in Italy, a three-month-old garrison in Vicenza, near Venice. Home to a rapid reaction intervention force, the 173rd Infantry Brigade Combat Team (Airborne), and the Army’s component of the U.S. Africa Command (AFRICOM), the base extends for a mile, north to south, dwarfing everything else in the small city. In fact, at over 145 acres, the base is almost exactly the size of Washington’s National Mall or the equivalent of around 110 American football fields. The price tag for the base and related construction in a city that already hosted at least six installations: upwards of $600 million since fiscal year 2007.

There are still more bases, and so more U.S. military spending, in Germany than in any other foreign country (save, until recently, Afghanistan). Nonetheless, Italy has grown increasingly important as the Pentagon works to change the make-up of its global collection of 800 or more bases abroad, generally shifting its basing focus south and east from Europe’s center. Base expert Alexander Cooley explains: “U.S. defense officials acknowledge that Italy’s strategic positioning on the Mediterranean and near North Africa, the Italian military’s antiterrorism doctrine, as well as the country’s favorable political disposition toward U.S. forces are important factors in the Pentagon’s decision to retain” a large base and troop presence there. About the only people who have been paying attention to this build-up are the Italians in local opposition movements like those in Vicenza who are concerned that their city will become a platform for future U.S. wars.

Base Building

Most tourists think of Italy as the land of Renaissance art, Roman antiquities, and of course great pizza, pasta, and wine. Few think of it as a land of U.S. bases. But Italy’s 59 Pentagon-identified “base sites” top that of any country except Germany (179), Japan (103), Afghanistan (100 and declining), and South Korea (89).

Publicly, U.S. officials say there are no U.S. military bases in Italy. They insist that our garrisons, with all their infrastructure, equipment, and weaponry, are simply guests on what officially remain “Italian” bases designated for NATO use. Of course, everyone knows that this is largely a legal nicety.  

No one visiting the new base in Vicenza could doubt that it’s a U.S. installation all the way. The garrison occupies a former Italian air force base called Dal Molin. (In late 2011, Italian officials rebranded it “Caserma Del Din,” evidently to try to shed memories of the massive opposition the base has generated.) From the outside, it might be mistaken for a giant hospital complex or a university campus. Thirty one box-like peach-and-cream-colored buildings with light red rooftops dominate the horizon with only the foothills of the Southern Alps as a backdrop. A chain link fence topped by razor wire surrounds the perimeter, with green mesh screens obscuring views into the base.

If you manage to get inside, however, you find two barracks for up to 600 soldiers each. (Off base, the Army is contracting to lease up to 240 newly built homes in surrounding communities.) Two six-floor parking garages that can hold 850 vehicles, and a series of large office complexes, some small training areas, including an indoor shooting range still under construction, as well as a gym with a heated swimming pool, a “Warrior Zone” entertainment center, a small PX, an Italian-style café, and a large dining facility. These amenities are actually rather modest for a large U.S. base. Most of the newly built or upgraded housing, schools, medical facilities, shopping, and other amenities for soldiers and their families are across town on Viale della Pace (Peace Boulevard) at the Caserma Ederle base and at the nearby Villaggio della Pace (Peace Village).

A Pentagon Spending Spree

Beyond Vicenza, the military has been spending mightily to upgrade its Italian bases. Until the early 1990s, the U.S. air base at Aviano, northeast of Vicenza, was a small site known as “Sleepy Hollow.” Beginning with the transfer of F-16s from Spain in 1992, the Air Force turned it into a major staging area for every significant wartime operation since the first Gulf War. In the process, it has spent at least $610 million on more than 300 construction projects (Washington convinced NATO to provide more than half these funds, and Italy ceded 210 acres of land for free.) Beyond these “Aviano 2000” projects, the Air Force has spent an additional $115 million on construction since fiscal year 2004.

Not to be outdone, the Navy laid out more than $300 million beginning in 1996 to construct a major new operations base at the Naples airport. Nearby, it has a 30-year lease on an estimated $400 million “support site” that looks like a big-box shopping mall surrounded by expansive, well-manicured lawns. (The base is located in the Neapolitan mafia’s heartland and was built by a company that has been linked to the Camorra.) In 2005, the Navy moved its European headquarters from London to Naples as it shifted its attention from the North Atlantic to Africa, the Middle East, and the Black Sea. With the creation of AFRICOM, whose main headquarters remain in Germany, Naples is now home to a combined U.S. Naval Forces Europe-U.S. Naval Forces Africa. Tellingly, its website prominently displays the time in Naples, Djibouti, Liberia, and Bulgaria. 

Meanwhile, Sicily has become increasingly significant in the Global War on Terror era, as the Pentagon has been turning it into a major node of U.S. military operations for Africa, which is less than 100 miles away across the Mediterranean. Since fiscal year 2001, the Pentagon has spent more on construction at the Sigonella Naval Air Station — almost $300 million — than at any Italian base other than Vicenza. Now the second busiest naval air station in Europe, Sigonella was first used to launch Global Hawk surveillance drones in 2002. In 2008, U.S. and Italian officials signed a secret agreement formally permitting the basing of drones there. Since then, the Pentagon has put out at least $31 million to build a Global Hawk maintenance and operations complex. The drones provide the foundation for NATO’s $1.7 billion Alliance Ground Surveillance system, which gives NATO surveillance capabilities as far as10,000 miles from Sigonella.

Beginning in 2003, “Joint Task Force Aztec Silence” has used P-3 surveillance planes based at Sigonella to monitor insurgent groups in North and West Africa. And since 2011, AFRICOM has deployed a task force of around 180 marines and two aircraft to the base to provide counterterrorism training to African military personnel in Botswana, Liberia, Djibouti, Burundi, Uganda, Tanzania, Kenya, Tunisia, and Senegal.

Sigonella also hosts one of three Global Broadcast Service satellite communications facilities and will soon be home to a NATO Joint Intelligence, Surveillance & Reconnaissance deployment base and a data analysis and training center. In June, a U.S. Senate subcommittee recommended moving special operations forces and CV-22 Ospreys from Britain to Sicily, since “Sigonella has become a key launch pad for missions related to Libya, and given the ongoing turmoil in that nation as well as the emergence of terrorist training activities in northern Africa.” In nearby Niscemi, the Navy hopes to build an ultra high frequency satellite communications installation, despite growing opposition from Sicilians and other Italians concerned about the effects of the station and its electromagnetic radiation on humans and a surrounding nature reserve.

Amid the build-up, the Pentagon has actually closed some bases in Italy as well, including those in Comiso, Brindisi, and La Maddalena. While the Army has cut some personnel at Camp Darby, a massive underground weapons and equipment storage installation along Tuscany’s coast, the base remains a critical logistics and pre-positioning center enabling the global deployment of troops, weapons, and supplies from Italy by sea. Since fiscal year 2005, it’s seen almost $60 million in new construction.

And what are all these bases doing in Italy? Here’s the way one U.S. military official in Italy (who asked not to be named) explained the matter to me: “I’m sorry, Italy, but this is not the Cold War. They’re not here to defend Vicenza from a [Soviet] attack. They’re here because we agreed they need to be here to do other things, whether that’s the Middle East or the Balkans or Africa.” 

Location, Location, Location

Bases in Italy have played an increasingly important role in the Pentagon’s global garrisoning strategy in no small part because of the country’s place on the map. During the Cold War, West Germany was the heart of U.S. and NATO defenses in Europe because of its positioning along the most likely routes of any Soviet attack into Western Europe. Once the Cold War ended, Germany’s geographic significance declined markedly. In fact, U.S. bases and troops at Europe’s heart looked increasingly hemmed in by their geography, with U.S. ground forces there facing longer deployment times outside the continent and the Air Force needing to gain overflight rights from neighboring countries to get almost anywhere.

Troops based in Italy, by contrast, have direct access to the international waters and airspace of the Mediterranean. This allows them to deploy rapidly by sea or air. As Assistant Secretary of the Army Keith Eastin told Congress in 2006, positioning the 173rd Airborne Brigade at Dal Molin “strategically positions the unit south of the Alps with ready access to international airspace for rapid deployment and forced entry/early entry operations.”

And we’ve seen the Pentagon take advantage of Italy’s location since the 1990s, when Aviano Air Base played an important role in the first Gulf War and in U.S. and NATO interventions in the Balkans (a short hop across the Adriatic Sea from Italy). The Bush administration, in turn, made bases in Italy some of its “enduring” European outposts in its global garrisoning shift south and east from Germany. In the Obama years, a growing military involvement in Africa has made Italy an even more attractive basing option. 

“Sufficient Operational Flexibility”

Beyond its location, U.S. officials love Italy because, as the same military official told me, it’s a “country that offers sufficient operational flexibility.” In other words, it provides the freedom to do what you want with minimal restrictions and hassle.

Especially in comparison to Germany, Italy offers this flexibility for reasons that reflect a broader move away from basing in two of the world’s wealthiest and most powerful nations, Germany and Japan, toward basing in relatively poorer and less powerful ones. In addition to offering lower operating costs, such hosts are generally more susceptible to Washington’s political and economic pressure. They also tend to sign “status of forces agreements” — which govern the presence of U.S. troops and bases abroad — that are less restrictive for the U.S. military. Such agreements often offer more permissive settings when it comes to environmental and labor regulations or give the Pentagon more freedom to pursue unilateral military action with minimal host country consultation.

While hardly one of the world’s weaker nations, Italy is the second most heavily indebted country in Europe, and its economic and political power pales in comparison to Germany’s.  Not surprisingly, then, as that Pentagon official in Italy pointed out to me, the status of forces agreement with Germany is long and detailed, while the foundational agreement with Italy remains the short (and still classified) 1954 Bilateral Infrastructure Agreement. Germans also tend to be rather exacting when it comes to following rules, while the Italians, he said, “are more interpretive of guidance.”

War + Bases = $ 

The freedom with which the U.S. military used its Italian bases in the Iraq War is a case in point. As a start, the Italian government allowed U.S. forces to employ them even though their use for a war pursued outside the context of NATO may violate the terms of the 1954 basing agreement. A classified May 2003 cable sent by U.S. Ambassador to Italy Melvin Sembler and released by WikiLeaks shows that Prime Minister Silvio Berlusconi’s government gave the Pentagon “virtually everything” it wanted. “We got what we asked for,” wrote Sembler, “on base access, transit, and overflights, ensuring that forces… could flow smoothly through Italy to get to the fight.”

For its part, Italy appears to have benefited directly from this cooperation. (Some say that shifting bases from Germany to Italy was also meant as a way to punish Germany for its lack of support for the Iraq War.) According to a 2010 report from Jane’s Sentinel Security Assessment, “Italy’s role in the war in Iraq, providing 3,000 troops to the U.S.-led effort, opened up Iraqi reconstruction contracts to Italian firms, as well as cementing relations between the two allies.” Its role in the Afghan War surely offered similar benefits. Such opportunities came amid deepening economic troubles, and at a moment when the Italian government was turning to arms production as a major way to revive its economy. According to Jane’s, Italian weapons manufacturers like Finmeccanica have aggressively tried to enter the U.S. and other markets. In 2009, Italian arms exports were up more than 60%.

In October 2008, the two countries renewed a Reciprocal Defense Procurement Memorandum of Understanding (a “most favored nation” agreement for military sales). It has been suggested that the Italian government may have turned Dal Molin over to the U.S. military — for free — in part to ensure itself a prominent role in the production of “the most expensive weapon ever built,” the F-35 fighter jet, among other military deals. Another glowing 2009 cable, this time from the Rome embassy’s Chargé d’Affaires Elizabeth Dibble, called the countries’ military cooperation “an enduring partnership.” It noted pointedly how Finmeccanica (which is 30% state-owned) “sold USD 2.3 billion in defense equipment to the U.S. in 2008 [and] has a strong stake in the solidity of the U.S.-Italy relationship.”

Of course, there’s another relevant factor in the Pentagon’s Italian build-up. For the same reasons American tourists flock to the country, U.S. troops have long enjoyed la dolce vita there. In addition to the comfortable living on suburban-style bases, around 40,000 military visitors a year from across Europe and beyond come to Camp Darby’s military resort and “American beach” on the Italian Riviera, making the country even more attractive.

The Costs of the Pentagon’s Pivots

Italy is not about to take Germany’s place as the foundation of U.S. military power in Europe. Germany has long been deeply integrated into the U.S. military system, and military planners have designed it to stay that way. In fact, remember how the Pentagon convinced Congress to hand over $600 million for a new base and related construction in Vicenza? The Pentagon’s justification for the new base was the Army’s need to bring troops from Germany to Vicenza to consolidate the 173rd brigade in one place.

And then, last March, one week after getting access to the first completed building at Dal Molin and with construction nearly finished, the Army announced that it wouldn’t be consolidating the brigade after all. One-third of the brigade would remain in Germany. At a time when budget cuts, unemployment, and economic stagnation for all but the wealthiest have left vast unmet needs in communities around the United States, for our $600 million investment, a mere 1,000 troops will move to Vicenza.

Even with those troops staying in Germany, Italy is fast becoming one of several new pivot points for U.S. warmaking powers globally. While much attention has been focused on President Obama’s “Asia pivot,” the Pentagon is concentrating its forces at bases that represent a series of pivots in places like Djibouti on the horn of Africa and Diego Garcia in the Indian Ocean, Bahrain and Qatar in the Persian Gulf, Bulgaria and Romania in Eastern Europe, Australia, Guam, and Hawai’i in the Pacific, and Honduras in Central America.

Our bases in Italy are making it easier to pursue new wars and military interventions in conflicts about which we know little, from Africa to the Middle East. Unless we question why we still have bases in Italy and dozens more countries like it worldwide — as, encouragingly, growing numbers of politicians, journalists, and others are doing — those bases will help lead us, in the name of American “security,” down a path of perpetual violence, perpetual war, and perpetual insecurity.