Italy attempts to seek a role in the Greek tragedy
If Turkey is Greece’s neighbor separated by a sea, so is Italy. They both belong to the inner circle of the EU, the Eurozone, but they have recently been sharing similarly serious problems: A spiraling economic crisis and the never-ending flow of migrants/refugees, as both are entry points to Europe: Italy from Africa and Greece from Turkey.
But if the rest of Europe half-turned its back to the migrant/refugee problem faced by both countries leaving them to deal with it by themselves, it is not the same with their economic problems.
For Greece it has been almost a decade trying to survive with its worst economic crisis in its history, when its debt-to-GNP ratio reached 179 percent. It suffered a lot and its people lost almost 25 percent of their incomes. Successive bail-out agreements with the EU and the International Monetary Fund (IMF) tied to tough austerity measures caused political upheavals and a series of coalition governments were called in to implement the tough rules.
However, time has come for Greece to almost come out of the last agreed bail-out program; actually at the end of August. Under the leftist-led government of Alexis Tsipras it managed to reduce unemployment and the economy to grow by 2.5 percent, but Greece will be committed to pay at least 75 percent of its debt by 2060.
The story of Italy has just begun. Last week 17 million Italians chose an anti-EU populist right-wing coalition government of the 5 Star Movement and the extreme right Lega Nord, with the little-known controversial law professor Giuseppe Conte as prime minister. Italy has a new government that is ready to confront Brussels and Berlin, demanding basic policies of austerity and strict economic discipline. Instead, the new government wants lower taxes and higher wages.
Italy’s population is around 60 million, six times that of Greece’s. But both countries have got the worst sovereign debt in Eurozone-Italy, ranking only one level above Greece with 2.3 trillion euros representing 132 percent of its GNP.
Unsurprisingly, the German media lost no time to launch a fierce attack on the Italians. They had done the same thing with Greece. “If Greece was an explosive device, then Italy is a nuclear bomb” was the comment by the magazine Der Spiegel, which called the election campaign in Italy “particularly audacious.” “Greece was a poor country on the brink of bankruptcy and appealed for help from the Germans. But the Italians have more assets than the Germans and they are richer than the citizens of Latvia and Slovakia, who are called to carry the burden of a tax reform that would benefit the richer Italians,” commented the Spiegel writer.
There is no doubt that Brussels has currently got a lot on its plate. Brexit is still a long way before it is completed and the problem with the Italian economy — although known since 2008—may break out any moment under this right-populist government, which asks for debt relief and may decide not to service the country’s debts in order deliver on its election promises.
No doubt Brussels will try to obstruct such an attempt by means of hard persuasion at least. They did the same when the leftist-led Syriza government was elected in Greece three years ago under an ambitious ticket to say “no” to all austerity measures imposed by Greece’s creditors. In the end, Brussels managed to force the Tsipras government to abide by the rules of Brussels and Berlin.
If the new Italian government carries out its ambitious program, it will push the country’s debt up and will undermine the fundamental rules of the Eurozone. Because of the size of the Italian economy, it may also threaten the stability of the system and may lead to a new euro crisis. Ironically, although this is what the Tsipras government wanted to do three years ago by refusing to bow to the rules, it is not what it would wish for now. After choosing the road of compromise (some may call it a surrender), Athens, feels that any upheaval against Brussels by a much bigger rebel may have a detrimental effect on its plans.