Newsgroup: it.politica
Titolo: Send in the clowns

http://www.economist.com/news/leaders/21572763-how-beppe-grillo-and-silvio-berlusconi-threaten-future-italy-and-euro-send
 
 
Send in the clowns
 
How Beppe Grillo and Silvio Berlusconi threaten the future of Italy and 
the euro
 
Mar 2nd 2013 |From the print edition
 
A SENSE of humour in adversity can be attractive, but it is not always 
useful. Confronted by the worst recession in their country since the 
1930s and the possible implosion of Europe’s single currency, the people 
of Italy have decided to avoid reality. In this week’s election a 
quarter of the electorate—a post-war record—did not even bother to show 
up. Of those who did, almost 30% endorsed Silvio Berlusconi, whose 
ruinous policies as a clownish prime minister are a main cause of 
Italy’s economic woes. And a further 25% voted for the Five Star 
Movement, which is led by a genuine comedian, Beppe Grillo. By contrast, 
Mario Monti, the reform-minded technocrat who has led Italy for the past 
15 months and restored much of its battered credibility, got a measly 10%.
 
This result is a disaster for Italy and for Europe. In Rome the 
centre-left coalition headed by Pier Luigi Bersani, the pre-election 
favourite who ended up getting only a whisker more of the vote than Mr 
Berlusconi, is now struggling to form a government: it is unlikely to be 
stable or durable. Meanwhile, financial markets across Europe swooned on 
the news. Share prices fell sharply almost everywhere. Sovereign-bond 
yields jumped across the Mediterranean countries, to levels touched 
three months ago, even as they fell in Germany, bringing the euro crisis 
back to centre-stage.
 
In fact the danger is less of break-up than of stagnation. This was the 
week, history may conclude, when Europeans made clear that they were not 
interested in reform. Nine months after the French ran away from change, 
the Italians sprinted past them. As many as two-thirds of Italians 
rejected not only German-imposed austerity but the entire reform agenda 
that was designed to improve their economy’s dismal record of near-zero 
growth. Follow that path, and it leads to the economic paralysis and 
political decline that Japan has endured for the past 20 years.
 
Change course or be like Japan
 
The election result is scarily reminiscent of the most recent occasion 
when the centre-left governed Italy, in 2006. Then a ramshackle 
coalition under Romano Prodi stuttered on, only to expire after less 
than two years. Mr Bersani could try to form a “grand coalition” 
bringing together elements from the centre-left and the centre-right, 
though that means dealing with Mr Berlusconi. Mr Bersani might do better 
to form a minority government with Mr Monti, sustained from outside by 
Mr Grillo’s Five Star Movement, a formula that has more or less worked 
in Sicily. The “grillini”, as Mr Grillo’s new deputies and senators are 
known, need to decide whether to be purely negative in seeking to 
overturn the entire political order, or whether to be responsible and 
support sensible reforms.
 
To complicate things, the new parliament also has to elect a replacement 
for the president, Giorgio Napolitano. The best candidate is a former 
centre-left prime minister, Giuliano Amato. But whoever is chosen, and 
whatever government is cobbled together, Italy will struggle to avoid a 
fresh election later this year. It would be better if that election were 
fought with new political leaders and under a new electoral system that 
makes a repeat of today’s gridlock less likely.
 
In the meantime, the worry is of no progress with the reforms that are 
desperately needed to restore vitality to an asphyxiated economy. To do 
nothing, as Italy’s voters seem to wish, is not the answer to the 
country’s problems. Italian GDP per head has actually shrunk during the 
euro’s first 13 years of existence. This performance has little to do 
with a lack of demand caused by excessive fiscal austerity, as some euro 
critics loudly claim. It has everything to do with year after year of 
steadily rising labour costs and falling productivity, which have 
undermined Italian competitiveness and exports. If Italy’s government 
cannot regain lost competitiveness and reignite growth through greater 
liberalisation of its labour and product markets and reforms to the 
country’s legal and welfare systems, the economy will suffer, and youth 
unemployment will climb even higher than today’s 36%.
 
Too big to fail or to bail
 
This is dangerous. It is hard to see Italy remaining in the single 
currency in such dire straits—and equally hard to imagine the euro 
surviving if it falls out. Italy is the euro zone’s third-biggest 
economy and, although its budget deficit is quite small, it has the 
biggest stock of public debt (at almost 130% of GDP). This makes it too 
big to bail out.
 
But without growth, Italy will not be able to service its debts. The 
possible pattern is clear: a series of crisis meetings, a few 
half-hearted efforts at reform to buy off Germany’s Angela Merkel, not 
enough growth, too much austerity, and then another crisis. The euro 
survives, but at immense economic cost. The euro zone becomes Japan.
 
Explore our interactive guide to Europe's troubled economies
It does not have to be that way. Italy’s political convulsions underline 
the need for Mrs Merkel to adapt her prescription. So far it has been a 
lot of austerity and some reform; it should be the other way round.
 
Deep recession and rising unemployment across the Mediterranean 
countries are triggering a popular backlash. Structural reforms continue 
to be essential if southern countries in the euro are to win back 
competitiveness and rekindle growth. But, given the voters’ response and 
the scale of recession, the pressure for continued fiscal austerity 
should now ease. Several countries — France is the most recent example — 
are expected to miss their budget-deficit targets this year. The 
European Commission should accept this if governments implement reforms. 
And northern members of the euro zone, especially Germany, should be 
readier to stimulate demand through tax cuts and spending increases.
 
The irony is that both of Italy’s clowns have got one thing right. Mr 
Grillo was right about Italy’s overpaid and corrupt politicians. Mr 
Berlusconi was right that austerity alone will not solve Europe’s 
crisis. Yet that does not mean Italians can run away from their 
predicament. If they continue to reject reforms, reality will catch up 
with them. Whatever the clowns may tell you, that is not funny.
-- 
Namib
.....
- God will take care of you. Whatever you need, God will give it to you.
- I need a shave. Am I next?
(Tom Kromer)

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