The reason Italians voted for Berlusconi
What on earth are the Italian people thinking? That’s been the view of many in response to the strong showing of a dangerous comedian (and also Beppe Grillo) and the total rejection of Mario Monti in this week’s general elections.
Don’t they know that it was the heroic Monti that saved Italy from a bond market revolt in 2011 with his austerity and structural reforms? Don’t they know that it was Berlusconi (right) that led Italy into the mire in the first place?
What these questions miss is the divergence between calm in the financial markets last year and the parlous condition of the Italian economy.
True, Monti’s austerity measures helped his compatriot, Mario Draghi at the European Central Bank, to pledge to backstop the Italian bond market last summer, which has reduced Italian borrowing costs from emergency levels.
As this shows, when Monti slashed the structural deficit in 2011 and 2012 by around 2.8% of GDP, he sent the country into a severe recession.The Italian economy shrank by 2.2% last year. The European Commission expects it to fall by a further 1% this year. Unemployment has shot up from 8.4% in 2011 to 10.6%. Joblessness is expected to hit 12% in 2014 by the Commission.
Most of the Monti labour market reforms were necessary. Indeed, Italy needs more of them. But with external demand weak, this was no time for Rome to raise taxes. As Wolfgang Munchau has pointed out, Italy needed reforms alongside measures to sustain demand. Germany and the European Commission, with their balanced-budget obsession, insisted that Monti perform both at the same time. With predictably dire results.
So if people are scratching their heads over why the Italian people have voted for Silvio Berlusconi and Grillo in large enough numbers to deny the centre-left/Monti bloc a workable majority they should consider the real economy, rather than the bond markets – and also bear in mind that those two politicians alone explicitly challenged the Brussels/Berlin dogma which presents immediate and deep austerity as, in all circumstances, the elixir of recovery.Tagged in: Beppe Grillo, Silvo Berlusconi
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