Latest posts by Clifford Thies (see all)
- It’s Eleven Years, Not Twelve - March 19, 2019
- Choice and Jordan Peterson - March 4, 2019
- The Negative Income Tax and Income Security in a Complex World - February 25, 2019
No single party or pre-election coalition received enough votes to enter parliament with a majority coalition, in the just concluded Italian general election.
- The center-right bloc (consisting of four parties) finished first, with the populist-right Lega (former League of Northern Italy) strongest.
- The populist-center party M5 finished second (and the strongest individual party).
- The center-left bloc, out of which the current government is composed, finished third out of three (i.e., last).
Among the possible governments that can be formed is a populist M5 plus Lega coalition. As to whether such a government would return Italy from the Euro to the Lira would be a concern.
After years of austerity, Italy is now running a Eurozone compliant deficit of 2 percent of GDP or less. But, balancing the budget has come at a high price in terms of unemployment. During the past ten years, the unemployment rate has only ticked down by a smidgen, to 11 percent.
Among the other PIGS of Europe, Ireland is in the best shape. It, too, has a Eurozone compliant budget deficit. And, unemployment – which rose to 16 percent following the Financial Crisis of 2008 – has fallen to 6 percent, which is arguably consistent with full employment.
Portugal, under a center-left government, appears to be in second place. Portugal, like Italy and Ireland, has brought its budget deficit under control, and the unemployment rate there has fallen from 17 to 8 percent.
Spain, buffeted by separatism as well as austerity, is not yet out of the woods. A budget deficit of 4 percent remains outside the Eurozone limit, and the unemployment rate remains high, at 16 percent, even though down by 11 points from its worst.
Now we come to Greece, once the poster child of fiscal irresponsibility. At one point, the country was awash in deficits and completely unable to borrow. It had to be bailed out time after time after time, each time on the premise that Greece would bring its deficit into Eurozone compliance. For eight years, the government tried mightily to avoid the obvious. It resorted to the old standbys of cooking the books and raising taxes that were being avoided. Anything but cutting the unsustainable rate of government expenditure.
A couple years ago, in what was described as “the final” bailout package, the government choked down labor market reforms, broadening the VAT, privatization and recalculation of pensions. The package was designed to raise revenue, restrain expenditure and spur economic growth. For passage, the government had to rely on votes from the center-right opposition to replace the many defections from its own ranks.
The results of this final bailout package have been remarkable. In particular, the deficit moved dramatically into Eurozone compliance. Still, Greece remains heavily burdened by debt, and the unemployment rate has only ticked down from 27 to 21 percent. So, a lot of work remains for this country.
Which bring us back to Italy’s election. On top of austerity and continued unemployment, the country suffers an influx of refugees from north Africa. Many of the cities of Italy suffocate from squalor and filth. Shantytowns are on the rise. Crimes from pick-pocketing to various forms of assault are having an impact on the vitally important tourist industry.
The argument for the European project and for globalization in general has to be that this is good for Italy, not that this is good for Europe or for the world. It is difficult to make this argument when budgets are constrained by austerity, unemployment runs in the double digits for a prolonged period of time, and the quality of life is on the decline.