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Greek Politics Spreads to Italy

Few in Europe are happy to admit it, but Italy is looking disturbingly similar to Greece these days. Mass youth unemployment, an over-regulated bureaucratic economy and a shaky financial sector have crippled the fiscal health of both countries; both now face a future of austerity and stagnation. And the similarities became even more pronounced late last year, when technocratic governments (charged with implementing European policies) replaced popularly elected leaders in both countries, becoming caretakers until the next election.

For the Greeks, that election was chaotic. The center-right New Democracy party won a victory that wasn’t really a victory, failing to achieve a majority and setting the stage for fringe parties to gain even more in the next election. Greece faces the prospect of divided, fractious government for years to come, and investors are running scared.

Italy now appears poised to follow suit. The FT reports that the major parties of the center-right and the center-left lost seats in recent local elections to representatives of a motley assortment of anti-bailout, anti-Europe parties, ranging from fly-by-night novelty acts to hard leftists:

The local elections indicated that the Democrats, who also support Mr Monti in parliament, would be dependent on a coalition with smaller, more leftwing parties opposed to the technocrats if they are to win next year’s general elections.

This raises the worrying prospect for financial markets of a fractured left-leaning government divided over economic policies. Another possibility is that the weakness of the Democrats and Mr Berlusconi’s centre-right party could drive them in the direction of forming a “grand alliance” that would ask Mr Monti or a similar technocrat figure to take the helm.

Italy is a much bigger potential problem than Greece. If a Greek meltdown merely threatens to wreck the Eurozone and economies of its larger neighbors, an Italian collapse all but guarantees that outcome. Italy’s general elections are not until next year, but if the major parties continue to lose ground to the fringe, there could be some nasty surprises ahead.

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  • Steven Harbour

    And it’s reasonable for people to ask why we should spend so much of our money to provide a security shield for countries who refuse to carry their fair share of the common burden.

    What is the reasonable answer?

    Although the question should be phrased “it’s reasonable for people to ask why we should spend so much of our money to provide a security shield for countries who refuse to carry hardly any share of the burden of their defense.”

  • Will

    This piece
    ( from last November explains why the news is no surprise.

  • Pedro

    Serious question: why is there virtually no media coverage of the upcoming Italian election?

  • Walter Sobchak

    The difference between Greece and Italy is that Greece has no productive resources. If it leaves the the Eurozone, the Greeks will have to go back to peasant farming and running B&Bs. There is a portion of Italy that has first world economic skills. There is a portion that is Greece, but Roman Catholic, instead of Orthodox. Italy has a whole different dimension upon which to cause chaos.

  • Corlyss

    Under the skin of disparate languages and different contributions to western civilization, the Greeks and Italians are the antique twins of corrupt and criminal states plagued with indifferent populations who don’t care about anything as long as their perqs are delivered timely. I wish ’em luck, but don’t have much hope things will change just because they can’t go on like this much longer. Neither nation is lying in a pool of their own blood, metaphorically speaking of course.

  • SamC

    Humpty Dumpty and all the Kings Men and all the Kings Horses…

    The EZ is a wreck already.

    This is not a political problem. Even the ECB pulling a Bernan-Fed will not solve the problem. The problem is math. There is just not enough money to fix the problem and it cannot be solved by a US-Fed style liquidity injection.

    There are simply many more takers than makers.

    There is clearly a scenario that could implement a rational and somewhat controlled reversal of the EZ, which ironically could make the EU stronger.

    The EU was a great idea. It worked. The EZ was a step to far. The EU was like drinking a bottle of beer. The EZ is a barrel.

    Pedro, my cynical answer is that it does not matter what happens in the Italian elections. The Italians could elect the ’39 Yankees and the out come would be the same.

  • Mastro

    Walter Sobchak
    “There is a portion of Italy that has first world economic skills. ”

    We can probably name 100 Italian products we would like to own (FIAT-maybe not)

    Greece? Can’t think of one– other than an island vacation.

    If Italy was freed from the EURO they could compete with German and Swiss manufactured parts again- only politicians wanting cheap loans to pad their budgets wanted the EURO- not Northern Italians.

  • PacRim Jim

    The Roamin’ Empire?

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