JOIN USThe exit of Italian prime minister Silvio Berlusconi has been widely welcomed by the country’s political establishment and the people on the streets and in the wider Eurozone. It was not his sexual escapades and ‘bung bunga parties’ but the gross economic management, which has reduced Europe’s third largest economy to a shambles, that brought him down.
Italy was once notorious for political instability with the average life of governments measured only in months but in retrospect it seems the economy had not been too badly affected by it. Berlusconi was a survivor who was at the helm of the country for seven years in three terms, defeating no confidence bids against him 51 times in a single term, but the stability of tenure turned out to be worse for the country than the political uncertainties of the past. The 75-year-old media baron, in spite of his amorous and clownish image, knew well how to manipulate the fractious Italian political system to his advantage, but finally had to bow out under pressure, having lost his majority in parliament.
He has left Italy almost a basket case, with the economy virtually stagnant for many years. The poverty and unemployment rates are high, on a par with or worse than in many developing countries. The country is crippled by a debt burden of about 1.9 trillion, about 120 per cent of its GDP. The Eurozone countries which are struggling to solve the Greek debt problem would find that there would be a picnic if the Italian debt explodes in their face. The Greek virus has already infected others. A vicious debt domino starting with Greece and travelling through Portugal, Spain and Italy to France would be a catastrophe for Europe and the world.
Former European commissioner and technocrat, Mario Monti, who has succeeded Berlusconi, has a tough job ahead of him. He has accepted his job conditionally but all political parties, except one, have extended support to him. He may immediately have to go for harsh austerity measures, cutting government expenditure and raising taxes and that may result in much pain in the short term. The system is riddled with corruption, vested interests and poor financial regulation and disadvantaged by the demands of an ageing population. Monti will need a lot of political and popular support to turn the situation around.