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By Conn Hallinan
On the eve of the World War I the British diplomat Sir Edward Gray is purported to have said, “The lamps are going out all over Europe.” In the wake of the recent Italian election one might reverse that phrase: after years of brutal austerity, collapsing economies, widespread unemployment, and shredding of the social safety net, Italians said “basta!” Enough!
And lamps are going on all over Europe.
Slovenians just turned out their conservative government and handed the reins to Alenta Bratusek, who compared austerity to “medieval medicine.” Tens of thousands of Bulgarian demonstrators forced their austerity-addicted government to resign. Support for the ruling parties of Spain and Portugal, which have overseen higher taxes and massive cutbacks, has dropped precipitously. German Chancellor Angela Merkel’s conservative Democratic Union took a beating in local elections. France’s Socialist Party rode an anti-austerity program to victory, and the leftist Syriza Party in Greece is now the most popular in Greece.
Nowhere in Europe, however, has the austerity policies of the “troika” -- the European Union (EU), the European Central Bank, and the International Monetary Fund (IMF) -- taken such a thorough shellacking as in Italy. Prime Minister Mario Monte’s government of technocrats, who piled on regressive taxes, cut pensions, slashed jobs, and dismantled social programs, was crushed, while parties running on anti-austerity platforms swept the field.
It was an odd grouping that ran the table in Italy. The biggest vote getter was the center-left Democratic Party (29.5 percent), followed by former Prime Minister’s Silvio Berlusconi’s right-wing People of Freedom Party (29.1 percent). The quirky Five Star Movement, led by comedian Beppo Grillo, which ran on a five-point platform that included a jobs program and a halt to pension cuts, came in third (25.5 percent). Fourth place went to Monti’s Civic Choice (10.5 percent).
In spite of the political differences among the three top voter getters, all ran on anti-austerity programs of one variety or other. So while there is little common ground between Berlusconi, Democratic Party leader and former Communist Pier Luigi Bersani -- most likely the next prime minister -- and self-described “wildman” Grillo, all agreed that two years of austerity had done nothing but impoverish Italians and throttle whatever life remained in the country’s fragile economy.
Rocking the Boat
In Europe’s corridors of power, however, the judgment by the overwhelming majority of Italians that austerity had been tried and found wanting was greeted by an avalanche of outrage, ranging from characterizations of Italy -- the third largest economy in the eurozone -- as a country of “clowns” and “children” to a few outright threats should any other countries dare follow in their wake:
“More than half of Italians voted for some form of populism,” complained the German newspaper Die Welt. “This amounts to an almost childlike refusal to acknowledge reality.”
German Finance Minister Wolfgang Schauble warned that “the onus is now on political leaders in Italy to…do what the country needs, namely form a stable government that continues on the successful path of reform.” Former Finance Minister Peer Steinbruck remarked that he was “horrified that two clowns won the election,” referring to Brillo and Berlusconi.
“We should be serious when we discuss economic policy and not give in to immediate political or party considerations,” sniffed European Commission President Jose Manuel Barroso.
Spanish Foreign Minister Jose Manuel Garcia-Margallo said the election was “a jump to nowhere with positive consequences for nobody.”
Moody’s Investors, which rates countries’ credit status, released a statement that the election “raised the risk that the structural reform movement achieved under the government of Mario Monte will stall, if not come to a complete standstill.”
The “successful path” and “reform” that the Monti government put into place has increased Italy’s unemployment rate to 11 percent -- 50 percent for youth -- shuttered 100,000 small firms, the heart of the Italian economy, and driven a million university graduates out of the country. Growth is a negative 0.9 percent, and the country is facing it second recession in four years.
It is not just EU officials and the continent’s mainstream media that have closed ranks to scold Italian voters for not doing what the troika wanted them to do. The U.S. media has taken much the same slant on the election’s outcome, led by the New York Times.
A Times piece headlined “Inconclusive vote in Italy invites new wave of financial instability” uses phrases rarely seen outside the editorial pages: “political dysfunction,” “dashed hopes,” failure to form “a credible government,” and characterizing the anti-austerity outpouring as a “protest vote.” It scolded “mass movements” for having “no patience for missteps or difficult reforms,” and lauded Monti as someone who had “been praised across Europe, for his steady hand and willingness to try to reform the economy.” More ominously it warned that should the Greeks have the audacity to elect a government led by the anti-austerity, leftist Syriza Party, “European leaders” would kick Greece “out of the euro.”
Striking a New Balance
The “reforms” the Times refers to -- sometimes preceded by the adjectives “difficult” or “painful” -- are the austerity measures from which the IMF has begun to distance itself. A report released by the organization this past summer found that the lending organization had profoundly underestimated the negative impact that austerity programs would have on economies, particularly those in Europe. Indeed IMF chair Christine Lagarde recently tried unsuccessfully to get the EU to moderate its austerity demands on Greece and asked Germany to reduce the interest rate it was charging. The effort failed.
In a letter to the Financial Times, Emiliano Brancaccio, a professor at the University of Sannio, Italy, and Professor Guiesppe Fontana of Leeds University (UK) argued that the Italian election was “a democratic way to tell policy makers to change course.” They go on to point out the IMF study and the finding that “countries that have imposed harsh economic measures have suffered deep economic recessions: the harsher the measures, the deeper the downturn,” and that austerity has increased debt ratios, not diminished them.
Those massive debts were not the result of profligate public spending -- Italy and Spain had budget surpluses -- but the product of bank-driven speculation that led to huge housing bubbles. When those bubbles collapsed, economies all over the continent tanked, and taxpayers were asked to bail out the financial institutions that sparked the crisis in the first place. It was this formula of a free pass for speculators and austerity for the average citizen that fueled the anger behind the Italian elections.
How those elections shake down in the short run is unclear. The Five Star Party seems unwilling to join a coalition with the Democratic Party, in part because while the latter is considered center-left, it supported many of Monti’s policies. Berlusconi -- well, the moniker “clown” is not far off the mark for him if one adds the word “evil” in front of it -- is hardly someone with whom one would want to enter into a coalition, especially because it would include the openly racist, pro-fascist Northern League. In the end, it is possible that Italy will go back to the polls sometime in the coming year.
But the anti-austerity lamp is lit and putting it out will not be easy, because Italy is hardly alone.
“Portugal has entered a recessionary cycle that has no end in sight,” editorialized Lisbon’s leading newspaper Publico. “Social conditions are worsening and democracy is suffering…the program has failed and it has to be changed.” Portugal’s economy is projected to shrink 2 percent, and unemployment is at 17.5 percent.
The IMF predicts that economic growth in the eurozone as a whole will fall 0.2 percent in 2013.
Even Germany, Britain, and the Netherlands, countries considered “stable” -- read quiescent in the face of high unemployment, frozen economies, and widening economic disparity -- are not immune from the spreading anger at the EU’s prescription for economic crisis.
Probably the clearest voice of Europe’s anti-austerity movement is Alexis Tsipras, leader of Greece’s Syriza Party. “For our part” says Tsipras, “we are opposed to everlasting austerity as means for fiscal rebalancing on both pragmatic and ideological grounds. The subjugation of democratic process to the markets was the reason why we have the crisis today…we predicted from the onset, well before the IMF admitted to its predictive failures, that austerity-based policies would backfire.”
The Greek economy will contract 4.5 percent in 2013. The jobless rate is 27 percent, and a staggering 62 percent for young people.
Tsipras concludes, “For us, economic policy ought to be inextricably linked to social policy with a view to look after the social needs of the people, of social justice, of intergenerational solidarity and of environmental balance.”
Most of Italy, and a growing number of Europeans, would agree.
Foreign Policy In Focus, "Italy's Election: Lighting the Lamp "
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Italy's Election: Lighting the Lamp | News of the World