Die Homepage wurde aktualisiert. Jetzt aufrufen.
Hinweis nicht mehr anzeigen.

The World from Berlin: 'Italy's Chief Problem Is Its Own Government'

Prime Minister Silvio Berlusconi blasted Standard and Poor's on Tuesday, saying its downgrade of Italian debt was politically motivated. German commentators tend to agree, but they say the real problem is Berlusconi himself.

Italian Prime Minister Silvio Berlusconi has denounced the S&P downgrade. Zoom
AP

Italian Prime Minister Silvio Berlusconi has denounced the S&P downgrade.

Who is to blame for Monday's downgrade of Italian debt? Is it Prime Minister Silvio Berlusconi, who has shown a marked hesitancy in implementing tough belt-tightening measures? Or is it Standard & Poor's itself? After all, the economic data cited by the ratings agency in its Monday evening announcement that it had decided to drop Rome's credit rating a notch was hardly new. The world has known for years that Italy was highly indebted.

The answer, of course, is that it may not really matter. The fact that investors are quickly losing confidence in Italy is hardly a secret: Interest rates on Italian sovereign bonds have been steadily climbing for months. Furthermore, should Greece become insolvent, as most believe it will, the state of Italy's finances may well pale in comparison to the economic waves coming from Athens.

Indeed, International Monetary Fund chief economist Olivier Blanchard likewise indicated that the global economy faces larger problems than how Standard & Poor's view Italy. He warning on Tuesday that the world is in a dangerous new phase and told reporters that "there is wide perception that policy-makers are one step behind markets." He said Europe "must get its act together."

Still, how Italy deals with its debt difficulties will be a major factor in European efforts to solve the debt crisis. And Standard & Poor's indicated it has little confidence in Berlusconi's leadership. The agency's report said the move "reflects our view of the Italian economy's weakening growth prospects and our view that Italy's fragile governing coalition and policy differences within parliament will likely continue to limit the government's ability to respond decisively to domestic and external macroeconomic challenges."

In Germany, representatives from Chancellor Angela Merkel's governing coalition downplayed the news or pinned the blame on the Italian government for not doing more. Reuters reported Tuesday that German Finance Minister Wolfgang Schäuble, in discussions with colleagues, said the downgrade showed Italy has a political system that is no longer considered sufficiently serious.

German commentators on Wednesday tend to agree.

The center-left Süddeutsche Zeitung writes:

"Italy's chief problem is its own government. Berlusconi and his team act as if they are being besieged from all sides: from judges, the opposition, and financial markets. That does not build trust"

"Everyone knows that [Italy] cannot be rescued in the same way as Greece, even if the political will were there. Therefore, the decision of S&P is also a declaration of mistrust of the European institutions as a whole, and the German government in particular. And here, too, the agency is illustrating the reality on the markets: Trust has long since been lost. Now time is running short to protect Italy and Spain from being infected with Greece's virus."

"In the meantime, it's become obvious that Greece cannot solve its problems without a debt haircut of almost 50 percent. In everyday language, that's called a state bankruptcy. Nevertheless, the bankruptcy chatter among politicians in Berlin is foolhardy. It is important to efficiently prepare for the debt forgiveness, so that the affected banks will have enough capital reserves, and to assure that European taxpayers won't be the only victims, but that the private creditors will also pay their share."

The center-right Frankfurter Allgemeine writes:

"Italian politicians are not up to the Herculean task of battling serious shortcomings with extensive reforms as the Greeks have done. Berlusconi lacks credibility, the largest opposition party is slipping further to the left, away from every austerity and reform program, and the center is offering only empty political rhetoric."

"No politician wants to admit that it is Italy's precarious situation that has transformed the crisis of smaller countries on Europe's periphery into a crisis for the entire Continent. Only warnings and alarm signals can help. Without external pressure, Italy will not make progress."

The Financial Times Deutschland writes:

"There are many reasons why the Italians should want another, better head of government. The question is whether or not it is a rating agency's job to determine that. They should refrain from mixing themselves into the domestic politics of a country."

"If one considers Italy's situation on purely economic terms, there is little reason for a new rating. Sure, the country's public debt, at 120 percent of GDP, is clearly too high, and the prospects for growth are dim. But that is nothing new. And Italy, unlike Greece, has produced a solid business model, with strong world-class businesses and banks that, thanks to little involvement in investment banking, were able to easily survive the crisis."

"Italy needs reform, both political and economic. But it doesn't take a downgrade by S&P to realize that. The ratings agency only hurts itself. It is opening itself up to accusations of wanting to become involved in politics. For a company that is being paid by its clients for its objectivity, this cannot be good for business."

The conservative daily Die Welt writes:

"Unlike Greece, Italy does not have a short-term liquidity problem. The Republic will be able to pay civil servants' salaries for more than the foreseeable future. But this country in the heart of Europe has a long-term debt problem, and one that could break apart the common currency."

"That is known, and was known to the ratings agencies. So why does the downgrading come now? Prime Minister Silvio Berlusconi gave the answer himself when he criticized the move as being politically motivated. It is, of course. Italy's biggest problem is the buffoon at the head of its government."

"National debt of 120 percent of annual economic performance, interest rates of 5 to 6 percent, and marginal economic growth, that is all good reason for worry that in the medium term, the country will be overwhelmed by its debt. Greece finally understood that the time had come when it was standing on the precipice. One would hope that Italy would not follow that lead."

-- Mary Beth Warner

Article...

© SPIEGEL ONLINE 2011
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH




Graphic: Steadily climbing bond yields. Zoom
DER SPIEGEL

Graphic: Steadily climbing bond yields.

Photo Gallery
Graphics Gallery: The Most Important Facts about the Global Debt Crisis


International Newsletter
Sign up for our newsletter -- and get the very best of SPIEGEL in English sent to your email inbox twice weekly.
Twitter
Facebook