The elites didn’t revolt and the people didn’t take to the streets. What ended Silvio Berlusconi’s 17-year run as Italy’s most powerful man was the skyrocketing spread between Italian bonds and the German bunds. Had this stayed at under five per cent, Il Cavaliere would still be in power today.
Mr Berlusconi’s fall is another manifestation of the clash between global money and local politics. George Papandreou’s is another. Mixing the constrains of local politics with the demands of global money creates a witches brew whose effusions can topple governments and shape the global economy. Managing this tension is one of the major challenge of our time.
Money that moves at the speed of light, trade that moves nearby at the speed of cargo containers, governments that move at the speed of politics and labour that does not move much: this is Europe today. There are no easy solutions, no antidote to the problem. But if we are to try to avoid a repeat of the current crisis we must make local politics more attuned to global imperatives and make global finance more responsive to local needs. Continue reading »