The European Question, Part III: the truth is in the details

In politics, power operates on multiple levels, and what we are told is only the surface layer of something deeper. Absolute truth therefore seems unreachable, unless one investigates the details.

By Alessio Cardinale, CEO and editorial director of Patrimoni&Finanza

The truth about historical facts and the choices that shaped them cannot be found in newspaper headlines or in the official speeches of the leading figures of the Institutions. It lies hidden in the details, in the links between events, and in the dynamics that only a few have the ability (and the desire) to explore. Moreover, the search for historical truth is heavily influenced by two factors: the political will to disguise it and time. The closer we are in time to the events we want to investigate, the harder it is to identify the objective secrets that determined certain choices; the further we move away from the moment those events occurred, the clearer become the reasons that led the “decision-makers” of the time to prefer some choices over others that were, in theory, more useful and sustainable.

Absolute truth is always complex and elusive, because power operates on multiple levels and what appears obvious is often just the surface layer of something deeper. To get closer to truth, it is essential to put the pieces together, identify the connections that media never highlight, and work on the smallest details, which escape notice because they seem insignificant. The search for truth is therefore an exercise in reflection, in attention to detail and above all in logic; historical logic, in particular, comes to our aid when all the false hypotheses tied to the official narrative fall away one by one and leave open, at most, only one or two possibilities, often complementary and intertwined, but certainly plausible. More and more often, in fact, it is the historical results that follow certain choices that suggest the truth of the “why” (why those same choices were made), while often leaving concealed the truth of the “who” (who strongly wanted those same choices). By analysing the facts in this way, the details miraculously find their place, like a puzzle with missing pieces, and over time everything becomes clearer.

For example, when it comes to details, no one has ever pointed out the absurd decision not to issue banknotes of 1 and 2 euro, preferring coins instead. And yet, until the day before, in Italy banknotes of 1,000, 2,000 and 5,000 Lire were in circulation. With the “milline,” you could pay the illegal parking attendant, or buy a slice of pizza, an ice cream cone, a Kinder egg, 4 packets of Panini stickers, Big Babol, a can of Coca-Cola, a Mars bar, a tube of Smarties; with 2,000 lire, a cappuccino and a croissant, among other things; with 5,000 lire, you could fill up the fuel mix for your scooter and ride it for a week, to put it simply. In short, in real terms (purchasing power) and in cognitive terms, the use of banknotes of that value was inextricably linked to the purchase of everyday consumer goods for which, after just six weeks from the entry into circulation of the “coins”, it took exactly twice as much.

There is no doubt, then, that this “detail” of the coins, which went completely unnoticed – indeed, everyone was happy to buy the little euro purses for their pockets – was the cause of numerous cognitive distortions among citizens regarding the real value of the euro and, above all in Italy, it caused an increase in consumer prices induced, so to speak, by these distortions and by those who took advantage of them. The real question is: were the newly born European authorities and, above all, the so-called technocrats who “manufacture” decisions aware of this possibility and spectacularly failed, or is the retrospective interpretation of the detail wrong? According to the most authoritative economists, the switch from the lira to the euro created several perceptual distortions, and the decision not to issue banknotes of 1 and 2 euro certainly played a role in this process. In fact, neuroscience and behavioural economics show that the currency format influences the perception of its value. In other words, people tend to spend coins more easily than banknotes because coins are perceived as “small change,” and therefore as having less value. And so, when the euro came into circulation in 2002, many everyday items (coffee, newspapers, bread, etc.) that had previously cost the equivalent of 500 or 1000 lire were rounded up to 1 euro or more. This phenomenon – known as “unperceived inflation” – is due in part precisely to the fact that 1 and 2 euro were coins and not banknotes, making the increases less obvious and more readily accepted by consumers.

Was the EU aware of this effect? It is hard to believe that economists and technocrats in Brussels were unaware of these psychological dynamics of consumption. Some studies on consumer behaviour had already highlighted the so-called “threshold effect,” whereby people are less sensitive to increases when the means of payment is less psychologically “heavy.” Moreover, even during the transition to the euro, people were already talking about the risk that retailers would take advantage of rounding to push prices up, which in fact later happened in several countries; but above all in Italy, where the lira had much higher nominal values and the exchange rate with the euro was particularly unfavourable (1 euro = 1936.27 lire).

However, there was no real European strategy to contain these effects. The EU, notoriously “suffocating” when it comes to the Union’s financial control policies, left the management of the transition to individual states, and in Italy there was no effective price control. In Germany and France, for example, information campaigns were stronger and controls on price hikes were tighter. Was it a mistake or a deliberate choice? Here lies the crucial point: if it had been a mistake, the EU should have corrected it in the following years, perhaps by introducing banknotes of 1 and 2 euro to mitigate the perceptual effect. If it had been a deliberate choice, then one could hypothesise that the induced inflation was considered an acceptable side effect, or even useful for speeding up adjustment to the euro and reducing the real value of wages without having to do so through unpopular reforms. It is difficult to have definitive proof, but the fact that the EU never intervened to correct this distortion suggests that it was at least an anticipated effect, if not actually a desired one. And that is what the “historical” logic used to arrive at the truth revealed by a simple detail tells us.

Was there a broader strategy behind it? Many knew, and the failure to fix the mistake, even afterwards, suggests a hidden hand working to weaken Italy, which at the time was the sixth largest world power, with a long-term strategy, and Italy’s current role on the international chessboard would be proof of it. This truth, which in 2000 would have seemed like the product of conspiracy thinking and perhaps would have been mocked, now reveals all its force and its solid logical foundations. Before the introduction of the euro, Italy was one of the world’s leading industrial powers, with one of the strongest manufacturing sectors globally and a production capacity that competed directly with Germany and France. Italy’s relative decline over the last twenty years could therefore have been not only the result of internal errors, but also of a broader project.

All this, however, should be proven with evidence that supports the hypothesis. Here are some:
1. the lira conversion rate was set at 1936.27 lire to one euro, a value that many economists considered overvalued. This made Italian exports more expensive than German ones, penalising the competitiveness of Italian industry. Germany, by contrast, benefited from a “weak” euro compared with the old mark, boosting its trade surplus;
2. Italy was among the countries most penalised by the EU’s strict budget rules (Stability Pact and Fiscal Compact), which prevented public investment and reduced the country’s growth potential. Germany, meanwhile, breached the same constraints during reunification without suffering consequences;

3. many large Italian companies were acquired by foreign groups (Fiat moved its headquarters to the Netherlands, Pirelli went to the Chinese, Parmalat to the French, etc.). Key sectors such as energy and telecommunications came under political and financial pressure to be downsized or sold. Italy has gone from being a manufacturing power to a country with an economy increasingly based on services and tourism, and with less strategic weight;
4. speculation against Italian government bonds (the 2011 spread crisis) showed how easily Italy could be put under market pressure, in an action that favoured the change of government. Technocratic governments and externally imposed reforms reduced political room for manoeuvre, consolidating Italy’s dependence on Brussels and the ECB.

These details, however, do not explain the motive: why weaken Italy? The answer is simple. If Italy had preserved its economic and industrial strength, it could have been a third pole within the EU, capable of balancing Franco-German dominance. Instead, with a weaker economy and greater dependence on the EU, its geopolitical influence has shrunk dramatically. In short, it seems to have been a long-term strategy in which several European countries benefited from Italian weakening:
- Germany consolidated its industrial dominance;
- France strengthened its economic presence in Italy;
- the European institutions found it easier to impose overly harsh policies by enforcing the rigid vision of the so-called frugal countries against southern Europe and, above all, against an Italy still militarily in the hands of the United States but industrially strong, ready to act as a possible counterweight. Now, however, we have passed the point of no return: Italy has no room to reverse this situation, and there are no internal or external forces (the USA) capable of allowing our country to react to an irreversible dependence on the EU and on the financial markets.
This is today’s final truth, and it is the worst of them all.