Italy Wisely Becomes First G-7 Nation to Join China’s Belt and Road: Financial Predators Upset

March 7, 2019

City of London’s {Financial Times} Beside Itself over Italy’s Joining Belt and Road

The City of London mouthpiece {Financial Times} criticizes Italy for becoming, as they write, “the first G-7 country to formally endorse China’s controversial Belt and Road global investment drive, in a move that has drawn a sharp response from the White House and is likely to cause alarm in Brussels.”

{FT} has suddenly discovered that Italy is going to sign a memorandum of understanding during President Xi Jinping’s Rome visit scheduled for March 22-23. The daily quotes Undersecretary for Economic Development Michele Geraci, who says that “the negotiation is not over yet, but it is possible that it will be concluded in time for [Xi’s] visit. We want to make sure that ‘Made in Italy’ products can have more success in terms of export volume to China, which is the fastest-growing market in the world.”

{FT} then quotes U.S. National Security Council spokesman Garrett Marquis, who makes a not-so-veiled threat: “We view BRI [Belt & Road Initiative] as a ‘made by China, for China. We are skeptical that the Italian government’s endorsement will bring any sustained economic benefits to the Italian people, and it may end up harming Italy’s global reputation in the long run.”

Marquis further said that U.S. officials had raised concerns about what he called the negative effects of “China’s infrastructure diplomacy,” and urged “all allies and partners, including Italy, to press China to bring its global investment efforts into line with accepted international standards and best practices.” Marquis was brought into the National Security Council by John Bolton, for whom he had earlier worked as a spokesman at the Foundation for American Security and Freedom.

The {FT} goes on to allege that “Italy’s support for China’s BRI initiative would undercut U.S. pressure on China over trade and would under-mine Brussels’ efforts to overcome divisions within the EU over the best approach to deal with Chinese investments. Italy is a founding member of the EU.”

President Xi will visit Italy on March 22 and meet Sergio Mattarella, the Italian president, as well as Prime Minister Giuseppe Conte, and attend a military ceremony before traveling to Sicily.

The article concludes quoting National People’s Congress spokesman Zhang Yesui as saying this week that 67 countries had signed up to the BRI in the past year or so, bringing the total number of countries or international organizations that have formal endorsements to 152.  China takes the issue of debt very seriously and within a project the Chinese side never imposes things, nor, least of all, creates debt traps,” {FT} quotes Zhang. “Of course, like any international co-operation, some problems and challenges may crop up. With experience it will improve.”

Italy’s Geraci Rejects {Financial Times} Criticism of Italy Joining the Belt and Road Initiative

In an interview with the Italian financial daily {Il Sole 24 Ore}, Italian Undersecretary to the Economic Development Ministry rejects criticism raised by the City of London’s {Financial Times} and defends Italy’s sovereign choice to join the Belt and Road. “Sincerely, I am a bit surprised. I do not understand what it is, that is controversial,” Geraci said.

“I confirm what I said in an interview with this newspaper last Feb. 21st. I said the same thing to the {Financial Times}: We work every day down to the last detail. “It will be a framework agreement: Just the indication of some strategic sectors in which joint investments are promoted and orders by Italian firms are accelerated. We work on infrastructure, transport and highways, trade, industry, green economy. It will be up to private companies to choose whether to participate or not. If they do it, they will have guarantees in terms of protection from disputes and questions about rules.”

As for the U.S. position, Geraci stated:  “I wonder where such a big concern comes from. We will protect our know-how thanks to a ‘golden power’ rule we have in Italy, which is among the strictest in Europe. And we just fulfill demands from our companies to create for them more room in the most promising markets, such as China. Anyway, we have supplied the United States, as per normal exchanges we have with our main diplomatic partners, all insurances on the issue.”

On the concern about Italy being the first G-7 country to sign a New Silk Road protocol, Geraci replied to the criticisms: “So what? Poland, Hungary, Portugal, Greece have done it and I do not consider them second-class countries in Europe. Those who think differently do not have a real European view. And the G-7 club may be a somewhat outdated concept: It no longer represents the real world economic powers, since it does not include either China or India.”

Italy is not “selling out” its ports, as some have claimed, he countered: “We do not sell, at most we give concessions to create greenfield investments, which means starting from zero. You cannot sell out things that were not there in the first place.”

China Responds to U.S. Attack on Italy Joining the Belt and Road

The Chinese Foreign Ministry today responded to the attack on Italy’s plan to join the Belt and Road by Garrett Marquis, a long-time ally of National Security Adviser John Bolton (who brought him onto the National Security Council).

An unsigned editorial in {Global Times,} titled: “White House’s Criticism of Italy’s Plan To Join BRI Ridiculous,” reports that Lu Kang, spokes-person of China’s Ministry of Foreign Affairs, at a routine press conference today, said: “Italy, as a major country and economy in the world, is clear about its interests. It could make its own policies and decisions.” {Global Times} added: “The BRI is an important inter-national public good that China contributes to global cooperation for common development. China and more than 150 countries and international organizations have signed BRI cooperation agreements, which witnessed more than $6 trillion in cumulative trade between China and participating countries, Yang Jiechi, a member of the Political Bureau of the Communist Party of China Central Committee, said at the 55th Munich Security Conference in February, the Xinhua News Agency reported.”

Greek Foreign Minister in Beijing To Discuss Intensifying Belt and Road Cooperation

Greek Foreign Minister Giorgos Katrougalos began a five-day official visit to Beijing on March 5, in which he co-chaired the 13 Joint Inter-ministerial Committee with China’s Foreign Minister and State Councillor Wang Yi and with Commerce Minister Zhong Shan.  On the margins of the meeting,

Katrougalos met Foreign Minister Wang Yi, Commerce Minister Zhong Shan, Vice Chairman of the National Development and Reform Commission Ning Jizh, and chief of the Development Commission He Lifeng, according to a statement by the Greek Foreign Ministry.The Greek delegation included Christos Lambridis, Secretary General of Ports, Port Policy, and Maritime Investment, and officials from the Hellenic Ministry of Agricultural Development.

“From all these contacts, both with my counterpart, the Minister of Foreign Affairs, as well as with the head of Foreign Relations of the Communist Party of China, and the economy ministers, the Minister of Commerce, the head of the crucially important Planning Commission of China, the conclusion drawn is dual in nature: First of all that Greece and China are seriously investing in their bilateral strategic partnership. This is not occasional, it has as its guide the ‘One Belt One Road’ initiative which the Chinese government is promoting at the moment, but there is a significant alignment of interests, precisely because we too endeavor that our country becomes a bridge between Europe, Asia, and Africa. The second thing that was affirmed is the observation that Greece has exited the economic crisis and offers significant opportunities for investment to the Chinese side.

Katrougalos also participated in the formal commencement of proceedings of the annual plenary of the National People’s Congress, ahead of which he said, “As you know, China has achieved a lot. It is on its way to becoming the world’s largest economy. It helped 700 million of its citizens out of complete poverty.”

Chinese Foreign Minister Wang Yi congratulated Katrougalos on assuming his new post as foreign minister, and expressed satisfaction that “Mr. Foreign Minister chose China as the first country to visit after taking office, which demonstrated with concrete actions his friendship with China and the importance he attached to China-Greece relations and that both countries are good friends and good partners.” He further stated that “as the birthplace of Mediterranean civilizations, Greece possesses profound cultural heritage and enormous development potential.

The Chinese side feels happy that Greece has overcome the influence brought by financial crisis and regained economic and social vitality, and is willing to, together with the Greek side, strengthen high-level exchanges, increase understanding and mutual trust, expand bilateral cooperation fields under the framework of the Belt and Road Initiative….”

Western Institutions Need to be Reformed

Major western political and financial institutions are in serious trouble. The Group of Seven and Wall Street are part of the old geo-political order that should be replaced by institutions that represent the “common interest” of all nations and all people. China’s Belt and Road Initiative is providing a new framework for strategic relations among nations

The steady demise of the Group of Seven

OPINIONS
By William Jones
2018-06-07

Editor’s note: William Jones is the Washington Bureau Chief for the Executive Intelligence Review, and Non-resident Senior Fellow of Chongyang Institute for Financial Studies, Renmin University of China. The article reflects the author’s opinion, and not necessarily the views of CGTN.

The failure of the G7 to resolve the 2008 financial blowout has given the lie to the “acumen” of these seven countries in keeping the economy on an even keel. With the trillions of dollars that were spent to bail out those “too big to fail” investment bank, the “bubble” has simply gotten bigger – and more dangerous.

And for most of the world, the G7 has simply been considered something of an “old boys’ club”, kept intact for the sole purpose of maintaining their positions – and that of the “moneyed interests” in power.

The lame attempt at integrating Russia into the G7 “club”, at least into their political discussions, lasted only a short amount of time before it was rescinded.

But the G7 no longer has the same weight it once had. The growing weight of the Asia-Pacific region, and particularly, China, has significantly reduced the clout of the G7 nations in world markets, and in world affairs. And the sorry state of the European economy, with the Brexit and the crisis in Italy, has critically undermined the “European factor” in the G7.

continue reading

________________________________________________________________________

WaPo Warns of “Mother of All Credit Bubbles:” Who’s Listening?

June 12, 2018—An extraordinary article by regular financial columnist Steven Pearlstein in the June 10 Washington Post warned that a surge in corporate debt has created “the mother of all credit bubbles,” and put the U.S. (and world) financial systems on the road to a new crash worse than that of 2007-8. The full-page spread featured charts showing that corporate debt, much of which is being used for stock buybacks, is increasingly risky, and that it is at record highs. Pearlstein adds that one in five companies have debt obligations exceeding their cash flow—i.e., they are zombies just waiting to die.

WaPo Warns of "Mother of All Credit Bubbles:" Who's Listening?

Washington Post on June 10, 2018

Much of what Pearlstein reports is not new to readers of more reliable financial reporters, such as Nomi Prins, Pam and Russ Martens, and others. This blog has reported on previous warnings by the U.S. Treasury’s Office of Financial Research, which Pearlstein mentions, and by former FDIC officials Thomas Hoenig and Sheila Bair. Pearlstein also does not stress, for example, the link between the new shaky mountain of debt, and the major banks, which are intimately connected to the so-called “non-bank lenders” involved in the current bubbles.

But Pearlstein’s summary of the current problem is sharp, and ironically, points implicitly at the solution. He writes: “Today’s economic boom is driven not by any great burst of innovation or growth in productivity. Rather, it is driven by another round of financial engineering that converts equity into debt… Rather than using record profits, and record amounts of borrowed money, to invest in new plants and equipment, develop new products, improve service, lower prices or raise the wages and skills of their employees, they are `returning’ that money to shareholders. Corporate America, in effect, has transformed itself into one giant leveraged buyout.”

How to reverse this process? We need the policies that do the opposite: that promote growth in productivity (credit for a revolutionized infrastructure and scientific frontiers), and convert debt into equity—specifically in the way that Alexander Hamilton transformed the debt of the fledgling United States into capital for the First National Bank. After taking away the rewards and incentives for speculative borrowing (by re-imposing Glass-Steagall), we need a new National Bank for Infrastructure into which certain categories of solid debt (such as Treasury and municipal bonds) can be traded in for capital stock, which will serve as the foundation for an investment boom in the real economy.

Is anyone in Congress or the Administration listening? When the mainstream media puts out a signal like this, continued inaction on the measures before them is foolish, if not insane