Two months ago, when Mario Monti stepped down as Italy’s prime minister, The Economist opined that
“The coming election campaign will be, above all, a test of the
maturity and realism of Italian voters.” The mature, realistic action,
presumably, would have been to return Mr. Monti — who was essentially
imposed on Italy by its creditors — to office, this time with an actual
democratic mandate.
Fred R. Conrad/The New York Times
Well, it’s not looking good. Mr. Monti’s party appears likely to come in
fourth; not only is he running well behind the essentially comical
Silvio Berlusconi, he’s running behind an actual comedian, Beppe Grillo,
whose lack of a coherent platform hasn’t stopped him from becoming a
powerful political force.
It’s an extraordinary prospect, and one that has sparked much commentary
about Italian political culture. But without trying to defend the
politics of bunga bunga, let me ask the obvious question: What good,
exactly, has what currently passes for mature realism done in Italy or
for that matter Europe as a whole?
For Mr. Monti was, in effect, the proconsul installed by Germany to
enforce fiscal austerity on an already ailing economy; willingness to
pursue austerity without limit is what defines respectability in
European policy circles. This would be fine if austerity policies
actually worked — but they don’t. And far from seeming either mature or
realistic, the advocates of austerity are sounding increasingly petulant
and delusional.
Consider how things were supposed to be working at this point. When
Europe began its infatuation with austerity, top officials dismissed
concerns that slashing spending and raising taxes in depressed economies
might deepen their depressions. On the contrary, they insisted, such
policies would actually boost economies by inspiring confidence.
But the confidence fairy was a no-show. Nations imposing harsh austerity
suffered deep economic downturns; the harsher the austerity, the deeper
the downturn. Indeed, this relationship has been so strong that the
International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.
Meanwhile, austerity hasn’t even achieved the minimal goal of reducing
debt burdens. Instead, countries pursuing harsh austerity have seen the ratio of debt to G.D.P.
rise, because the shrinkage in their economies has outpaced any
reduction in the rate of borrowing. And because austerity policies
haven’t been offset by expansionary policies elsewhere, the European
economy as a whole — which never had much of a recovery from the slump
of 2008-9 — is back in recession, with unemployment marching ever
higher.
The one piece of good news is that bond markets
have calmed down, largely thanks to the stated willingness of the
European Central Bank to step in and buy government debt when necessary.
As a result, a financial meltdown that could have destroyed the euro
has been avoided. But that’s cold comfort to the millions of Europeans
who have lost their jobs and see little prospect of ever getting them
back.
Given all of this, one might have expected some reconsideration and
soul-searching on the part of European officials, some hints of
flexibility. Instead, however, top officials have become even more
insistent that austerity is the one true path.
Thus in January 2011 Olli Rehn, a vice president of the European
Commission, praised the austerity programs of Greece, Spain and Portugal
and predicted that the Greek program in particular would yield “lasting
returns.” Since then unemployment has soared in all three countries —
but sure enough, in December 2012 Mr. Rehn published an op-ed article
with the headline “Europe must stay the austerity course.”
Oh, and Mr. Rehn’s response to studies showing that the adverse effects of austerity are much bigger than expected was to send a letter
to finance minsters and the I.M.F. declaring that such studies were
harmful, because they were threatening to erode confidence.
Which brings me back to Italy, a nation that for all its dysfunction has
in fact dutifully imposed substantial austerity — and seen its economy
shrink rapidly as a result.
Outside observers are terrified about Italy’s election, and rightly so:
even if the nightmare of a Berlusconi return to power fails to
materialize, a strong showing by Mr. Berlusconi, Mr. Grillo, or both
would destabilize not just Italy but Europe as a whole. But remember,
Italy isn’t unique: disreputable politicians are on the rise all across
Southern Europe. And the reason this is happening is that respectable
Europeans won’t admit that the policies they have imposed on debtors are
a disastrous failure. If that doesn’t change, the Italian election will
be just a foretaste of the dangerous radicalization to come.
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