World from Berlin: 'Europe Can't Afford an Ungovernable Italy'

European leaders want Rome to remember Italy's commitments to the euro zone. Zoom
REUTERS

European leaders want Rome to remember Italy's commitments to the euro zone.

European leaders are nervous Rome might flout economic reforms and reignite the euro crisis as a result of the political stalemate which emerged from Italian elections. German commentators suggest that now might be a good time to consider policy changes on both sides.

With Italy facing political deadlock after this week's election, European leaders are on edge about what are likely to be negative effects on the currency union.

Financial markets and ratings agencies, the everyday harbingers of economic turmoil, have reacted negatively to concerns that despite a deep recession, much-needed reforms will not continue in the euro-zone's third-largest economy.

Though reform-minded Democratic Party head Pier Luigi Bersani's center-left camp managed a slim majority in Italian parliament, they were unable to gain the upper hand in the Senate didn't gain an edge against the center-right, led by anti-austerity comedian Beppe Grillo's Five Star Movement and populist Silvio Berlusconi and his followers. Meanwhile Brussels-backed technocrat and former Prime Minister Mario Monti garnered only about 10 percent of the vote.

With the center-left and center-right now pitted against each other, there is little to indicate that economic progress will be made in Italy. But that hasn't stopped appeals from European leaders for politicians to consider the consequences for the euro crisis, which many fear could now return.

German Finance Minister Wolfgang Schäuble said 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."

His Dutch counterpart Jeroen Dijsselbloem, who is also head of the Euro Group, said that regardless of who runs Rome, he expects them to honor Italy's commitments to Europe. "A stable government is important to the euro zone. To pull Europe from an economic quagmire, stable politics are required, also in Italy," he added.

European Commission President Jose Manuel Barroso urged Italy not to give in to populism. "We should be serious when we discuss economic policy and not give in to immediate political or party considerations," he said.

German commentators on Wednesday once again lamented the election result, and many say it doesn't bode well for efforts to end the euro crisis.

Conservative daily Frankfurter Allgemeine Zeitung writes:

"Governments that want to break down the state, economy and society to implement reforms incur the wrath of voters and must watch as their legitimacy crumbles. Instead, either radical forces or populists with irresponsible promises and no regard for consequences gain power. Austerity is unpopular. Even if drawing that conclusion is banal, it also has negative economic ramifications. Demands for an end to the austerity measures were to be expected, as was the renewed debate about euro bonds and debt union."

"This much is clear: European economies will continue drifting apart and their ability to compete will not equalize at a good level. … Great uncertainty weighs on this currency union once again."

Center-left daily Süddeutsche Zeitung writes:

The Italian election result "is a disaster for Italy and for Europe. Why did Italians do this to themselves and to the Continent? One answer is that many citizens no longer believe in the state or in universal prosperity. For decades, their hopes for reform have been disappointed. Whether they voted for the Christian Democrats, the Communists, Berlusconi or the reform-minded left, little changed in the bloated, ineffective and corrupt state -- except that taxes rose. Earlier, their frustrations with their own country led Italians to turn toward Europe. No other country showed as much enthusiasm for the EU. But Brussels is no longer seen as a lifeline. Rather, it is seen as a lead weight that is pulling Italy into the abyss."

"Monti's reforms have made the lives of many Italians worse. Young people are having increasing difficulties finding stable employment and the elderly can hardly live on their pensions. The economy is stuck in recession. The cool, reform-realism from Berlin, which typifies the EU's approach to the crisis, is seen as a hostile diktat. Monti and Bersani -- in addition to Berlin and Brussels -- were unable to convince many Italians that recovery would follow on the heels of shock therapy. Italy isn't the only place where hopelessness leads people to demagoguery."

The business daily Handelsblatt writes:

"'A race is taking place in Europe between those backing austerity and reform policies on the one side and the populists on the other,' a market trader said on Tuesday, getting straight to the point about the precarious current situation. Right now, the populists are leading by a nose. Political leaders in particular must be shuddering with fear after the Italian elections. Yes, it may be true that Italy was already considered to be ungovernable even before the crisis. … So it's not unusual that the country is already talking about the prospects of new elections. The difference this time is that the country's political stability has become far more important since the introduction of the common currency."

"If a new government in Rome, regardless of whether it is liberal or conservative, refuses necessary reforms in the long term, it will also have effects on the entire euro zone. Mariano Rajoy in Spain and François Hollande in France, both under enormous public pressure, could try to further soften their austerity and reform goals. And even Greece, which withstood a popular uprising by the skin of its teeth, could waver (on reforms). Last but not least: The EU fiscal pact pushed through by Berlin (requiring countries to implement a so-called debt brake in their constitution to limit annual deficit spending) would be worth less than the paper it is printed on."

Left-leaning daily Berliner Zeitung writes:

"Italy is an uncertain and polarized country rife with fear, resignation and anger. … (The election results) must be a political alarm for Brussels, Paris and especially Berlin. Europe can no longer afford for the euro zone's third-largest economy to be ungovernable for an extended period of time. And it certainly can't afford for Italy and other Mediterranean economies to be strangled by tough austerity measures, leaving an entire generation of young people from Malaga to Athens without a future. Shrill alarmism also won't help, as it only serves to accelerate the downward spiral on the markets. Instead, measures must be taken to give the lost generation prospects for the future. Only then will the EU have a chance to survive, both economically and politically."

Left-leaning daily Die Tageszeitung writes:

"Crashing head-on is the fate that awaits not just Italy, but the euro zone too. Italy faces a political deadlock. A stable government is nowhere in sight. Berlin should take at least one lesson to heart: Democratic majorities in favor of austerity measures that lead to deep recessions are hardly feasible. Either Europe changes course, or it's headed straight into a wall."

-- Kristen Allen

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1. Plan B.....
bertybobby 02/27/2013
The day of reckoning is coming for the Euro, might be a year or two away, but it is coming. Either:- a.the rich North accepts that it has to pool its finances with the poorer South and accept money transfers and mutualisation of debt forever in "solidarity" with the South - in which case the Euro survives - the "more Europe" option; or b.start thinking about how to conduct an orderly breakup of the Euro in the medium to long term they are the only stable solutions for the Euro. From the UK we just hope that whatever happens it is orderly, as we will go down with you if it all blows apart.
2. Grillo
donatoderosa@hotmail.it 03/04/2013
I think that italian situation is not a problem but it's to begining to think what EU did in the past.Why EU nations take euro without a homogenous cultural background??Grillo with his blog try to connect people to solve problems!!http://www.beppegrillo.it/en/
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