A new crisis for EU

The results of Italy’s elections leading to a political stalemate are important, not only for Italy but for the eurozone, the European Union (EU) and the world. Although the Italian tendency to exaggerate was very much in evidence, the stark message to the EU and its most powerful member, Germany’s Angela Merkel, was crystal clear: Italy and other members of the eurozone, particularly on the southern periphery, were simply fed up with the kind of austerity that has been imposed under Berlin’s leadership.

The world’s reaction was equally clear. Markets around the world tumbled. The crucial question is: where do the eurozone and the EU go from here? While Europe digests the extraordinary nature of the results, let us look at what happened. Pier Luigi Bersani’s centre-left party barely managed to emerge with the largest number of seats in the Lower House. The old warhorse, Silvio Berlusconi, Prime Minister for various stints who had announced his retirement from politics, changed his mind and is ahead in votes for the Senate.
And surprise of surprises, the comedian Bepper Grillo came out of nowhere on an anti-austerity platform to win a quarter of the votes. He was characteristically immodest, freely abused the political class and blamed traditional politicians who have “led the country to catastrophe”. He declared, “We’ve started a war of generations.”
The party of the present Prime Minister, Mario Monti, barely made the 10 per cent cut. While horse-trading to form a coalition has already begun, Mr Berlusconi suggested that fresh elections — a distinct possibility in the event of a continuing stalemate — should be avoided. As an opening gambit, he said he was willing to do a deal with Mr Monti. But a host of questions remained unanswered.
In a sense, the Italian election results represent a grave crisis for the European Union. Despite widespread recent protests in Greece, Spain, Portugal and Italy against the austerity regime blessed by Germany, the conventional wisdom was that this bitter medicine was essential for the health of Europe and the world. Italians have now shattered this comfortable assumption because there comes a breaking point and members of the eurozone are saying through the medium of Italian elections that enough is enough. It is their belief that the medicine has now become poisonous.
Italy’s is the third-largest eurozone economy and there is an unambiguous message in a comedian running away with a quarter of the vote. He used social media and attacked the political class in public squares around the country. On the other hand, it comes as no surprise that Mr Berlusconi had offered to pay back to Italian voters new house taxes imposed by the authorities on returning to power. Although the billionaire former Prime Minister did not come out at the top, he performed remarkably well, with an Italian newspaper headlining the result as a “Berlusconi Miracle”.
Although events leading up to the elections and their outcome are worth a comic opera, few political pundits are fooled by the extravagant propensities of the country’s politicians. It is not a matter of merely trying to form another unwieldy coalition to muddle through. If nothing else, the entry of the wild card, comedian Grillo and his Five Star Movement, bring a totally new element to the electoral scene. How will he and his party react to the hardboiled game of electoral politics? No one knows.
Brussels and Berlin, the seat of the European Union, have a full-blown crisis on their hands. They will have to go back to the drawing board to see how to resolve a problem that could well get out of hand. The edifice carefully built on how the austerity regime would lead to salvation suddenly seems fragile. Clearly, the weight of the austerity measures has become unbearable for Italy, Greece, Spain and Portugal. In the end, the human element has reasserted itself because it is not merely a question of doing the sums on paper but also, crucially, an issue of counting the human costs.
It is all very well to say, as the main paymaster Germany is inclined to, that a country and a people must pay for their extravagances. But the EU is equally to blame for turning a blind eye to unsustainable expenditures and dodgy figures produced by states’ statistical authorities. Indeed, it took the persistence of the British Prime Minister, David Cameron, to get the EU to reduce a little, rather than increase, its projected next budget. But he was unable to dent the privileged position of the agricultural budget zealously protected by France.
More than a left-right split in Europe, Italy’s election outcome is a stark demonstration of how one of the most successful regional groupings in the world after burying the hatchet of two bloody wars and hatred of the 20th century, brought untold prosperity to the European continent. In recent years, the costs of continuing recession and new deprivation have hit European populations hard because the bulk of them had got used to post-war levels of prosperity.
The tasks before European leaders, particularly the wealthiest of the group, are clear. They must reinvent the European Union and the eurozone. It is not merely a question of tightening the eurozone rules to synchronise key elements of fiscal policy. It is essentially to undertake another leap of faith to take a new path to fiscal solvency without squeezing European populations to a kind of austerity that has become unacceptable. The EU journey has been long enough to yield a rich harvest of experiences.
Europe and the world will look up to Ms Merkel to strike a bold new line. She is, of course, operating within the German political system and has to win the next election. Sometimes the call of statesmanship is higher than that of electoral politics. The world will be watching to see whether she and her country will measure up to the new challenge thrown at them by circumstances and the responsibility of leadership.