The fact that individual countries would give up their financial sovereignty and allow those with diverse cultures and different agendas to dictate policy still amazes me. The euro is the current epicenter of mild hysteria in the European Union. These are the same quislings who brought open borders to the continent and allowed their culture to be altered by the osmosis of illegal immigration. Italy and the Mediterranean countries with proximity to North Africa will tell you the pleasures of being overrun by masses of unwanted humanity.
Yes, it sucks for the refugees, but it is either they or you who will ultimately gain the high ground. Austerity has enabled Italy to pass its most recent EU financial litmus test, allowing it not to be penalized for another year.
However, this reprieve is only putting off the inevitable. The grim reality of Italy’s public finances remains unchanged. Its deficit is on course to exceed the EU’s threshold of 3% of GDP in 2020, its debt is sky high and, worst of all, it is plagued by a persistent absence of growth. The economic unrest has allowed voices on the right to arise and speak out against the EU. The Northern League, as it is known, is a party led by Matteo Salvini, whose populist rhetoric has stirred things up within Italy and the EU. The two-headed monster that Salvini and followers are fighting is the EU and illegal immigration. The EU, which he says is a “gulag” that imposes wretchedness, and the inflow of migrants from Libya, which he also blames in part on the EU.
The staggering debt that Italy is under is sounding the alarm bells in Brussels, where officials have taken to the Manneken Pis (Peeing Boy) statue for comfort. Noting Italy’s enormous debt to GDP ratio of some 132%, it sends an after-shock to anyone in the U.S. who cares about our own debt. As in the U.S and Italy, the debt floor is made of quicksand, and any adversity or disruption to the economy will be disastrous.
The Northern countries of the EU are vested sovereign brothers in Brussels, and are now wondering why they are giving more leash to Italy in the form of debt-to-GDP, as they did to Greece, their ancestors to the south. Italy’s current fiscal mess is rooted in decade-old socialist policies that have stymied growth in many sectors, and have made southern Italy essentially a welfare state. When lack of competition and bureaucratic loathing slow the economic pace, taxes dry up. However, you the Italian proletariat, will feel such austerity by having your pensions reduced. So much for helping the lower and middle class.
While always lurking beneath the surface, the threat of an accidental bond crisis never fully recedes. As such, it will affect, among other things, the euro, which in turn the world economy. A short-term fix will be more of the same. Eurocrats will allow Italy to continue to publically spend, and the Italian government must walk the tightrope between spending and growth. All of this will have Salvini and company waiting in the wings if Italy falls further behind.